AAP
15:03 AEDT Sun 16 Nov 2003
New Qantas airline no threat: Virgin
Virgin Blue chief executive Brett Godfrey does not see a threat coming from the planned Qantas Airways Ltd discount airline believing it won't get below Virgin's costs structure.
Mr Godfrey said Virgin's no-frills model has the lowest operating costs and the lowest priced seats in the country.
"I'm pretty confident that even Qantas is going to find it difficult to get below cost our costs structure," Mr Godfrey told Channel Nine's Business Sunday.
Australia's flagship carrier Qantas is launching a new discount domestic airline next May to take on Richard Branson's Virgin Blue in a head-to-head battle for travellers.
"We've secured very, very long term and very, very good deals with Boeing on our fleet, not just for the next year or two, but for the next decade," Mr Godfrey said.
He said Virgin, with around 30 per cent of the market, had also locked in strong long term deals at the prime airports.
"My fundamental strategy is to make sure we maintain the absolutely lowest cost base of any airline in this country and I believe the revenues will still come," he said.
With Virgin Blue going public soon, Mr Godfrey said the appointment of Patrick Corp Ltd chief executive and Virgin part owner Chris Corrigan as chairman will not signal radical change.
"I don't think it changes too much - historically the management team have run this business," Mr Godfrey said.
"I think (Chris Corrigan) has said he doesn't think there is too much wrong with the business at the moment and so I guess, as far as I'm concerned, it will be business as usual."
Virgin's founder Sir Richard Branson is selling a substantial stake in the company in the float which is expected to raise around $500 million leaving Mr Corrigan as the biggest individual shareholder.
AAP
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Mon "The Australian"
Qantas can't match us: Virgin
By Michael Sainsbury
November 17, 2003
Virgin Blue chief executive Brett Godfrey does not believe Qantas can operate a new cut-price airline with a lower cost base than Virgin's.
Qantas chief executive Geoff Dixon said last week the company would unveil the new carrier within the next two weeks and that it would not have Qantas in its name.
But Mr Godfrey said Qantas would find it difficult to create cost structure as low or lower than the Virgin model, which had helped it grab about a third of the Australian market.
"They've talked about it entering on to the leisure routes," Mr Godfrey said.
"We don't make our money just on leisure routes. We've got 65 per cent of our capacity on the major routes, the triangle. We believe our model has the lowest operating costs.
"We have the lowest seats, the lowest priced seats in the country and the lowest costed seats in the country, and I'm pretty confident that even Qantas is going to find it difficult to get below our cost structure.
"We've secured very, very long-term and very, very good deals with Boeing on our fleet, not just for the next year or two, but for the next decade."
His comments back up those of Virgin founder Richard Branson, who has poured scorn on Qantas's plans.
"No other major airline in the world has successfully launched a discount airline," Sir Richard said.
In the year to March 2003, Virgin Blue posted a profit of $107 million on sales of $914 million.
In the prospectus for its forthcoming float, Virgin Blue forecasts that in the year to March 2004 revenue will be $1.386 billion with a profit of $150 million.
Virgin has gained its cost advantage by running a fleet with only one model of aircraft, having a new fleet which needs less maintenance and paying lower wages.
But observers argue that these start-up benefits will deteriorate.
Mr Godfrey, who stands to reap about $80 million from the float, claimed that money was not his motivation.
"I've always said that to me the challenge is getting up and doing better and better," he said.
Mr Godfrey said 85 per cent of the Australian market could be available to Virgin.
"I'm a very firm believer that there is only about 15 per cent of this market that we can't aspire to attain with our current model, so there is 85 per cent up for grabs," he said.
"Whether we get 30 or 35 or 40 per cent, ultimately, I'm not really too concerned.
"The important thing is to have profitable growth and maintain a significant enough margin which we have to our major competitor today."
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Last edited by Wirraway; 17th Nov 2003 at 03:00.