Bloomberg
Branson keen to spread wings in other markets
Dec 11
Margreet Dietz | Bloomberg
Richard Branson, who turned a $10million investment in Virgin Blue into a discount airline valued at $2.8billion, says he's eyeing other Asian nations to replicate his carrier's success.
"We are in discussions with one or two people about either working with them on a low-cost airline they have already set up or setting up a low-cost airline," Sir Richard said. He predicted a decision in three to six months.
Sir Richard is entering a market in which discount carriers such as Malaysia's AirAsia are starting to flourish as governments relax traffic agreements to revive tourism after the outbreak of SARS.
He has also shortlisted five US cities as the base for a discount carrier called Virgin USA, prompting California Governor Arnold Schwarzenegger to lobby on behalf of Los Angeles.
The focus on new markets comes after Virgin Express in Europe cut its fleet to 13 aircraft from 23. Lowering fares amid rising competition caused profit at the airline to plunge 62 per cent to €1.7million ($2.8million) in the third quarter.
Mark Webb, an analyst at HSBC Securities in Hong Kong, said: "I would be hesitant to throw my hands up in the air just because Richard Branson said he might do something - he has had mixed success Any country with a large domestic market and leisure market provides prospects. There are already low-cost carriers in Thailand, Indonesia and the Philippines."
Sir Richard's company has earned about $750million from its investment in Virgin Blue, including $250million from the initial share sale on Monday. Its shares fell 0.4 per cent to $2.50 yesterday.
Potential partners in Asia may include Tony Fernandes, who plans to sell a third of AirAsia next year to raise as much as $300million. The Kuala Lumpur-based discount carrier plans to more than double its fleet of nine Boeing 737 aircraft to 20 by June.
Singapore Airlines has announced plans to set up low-cost Tiger Airways with two partners including Irelandia Investments, which is owned by the Ryan family, a stakeholder in Dublin-based discount airline Ryanair.
Thai Airways is also considering a discount unit and has approached Virgin Blue for advice.
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