Can't believe that I beat Wirraway to this one!
It came from news.com.au which it appears has sourced it from the Sunday Telegraph in Sydney.
[b]Jetstar ends Virgin's ride[b]
By Chris Moriarty
March 21, 2004
COMPETITIVE advantage is doing something cheaper or better than someone else. Trouble is, no competitive advantage is sustainable; sooner or later, it goes away.
Virgin Blue held a big competitive advantage over Qantas. It was lean and mean.
Qantas couldn't compete, and Virgin Blue ate market share for breakfast, lunch and dinner. Virgin now has a 22 per cent share of the market.
Then the ride finished. Jetstar was born and Virgin Blue's competitive advantage dissolved.
Virgin Blue, now a bigger, more complex business, is no longer so lean and mean.
Its rampage is now reduced to a battle over $10. Jetstar, the new lean and mean player, has axed agent commissions.
Virgin Blue has blinked. If it axed commissions, all agents would book nothing but Qantas. It's now too big to rely on just Internet bookings.
Virgin Blue was once the revolutionary; now Jetstar is. Virgin Blue is now the one fighting for the retention of a traditional cost.
The high-growth days are over. Jetstar has wiped out Virgin Blue's cost advantage.
And Virgin Blue is now so big that continuing the high growth of the past is just not possible.
Sure, Virgin Blue has just announced the purchase of 50 new planes - but, as Macquarie Bank reports, the delivery period is over 10 years and almost all these planes will replace old jets due for retirement.
From this point, Virgin Blue will return to the pack. Airlines are complicated, highly leveraged, risky businesses. Margins are wafer-thin.
Virgin Blue founders Richard Branson and Brett Godfrey, along with suitor Chris Corrigan, have made a fortune out of Virgin Blue. And good on 'em.
Last December, they floated the company and capitalised a large slice of their profits.
Since then, Virgin Blue's share price has traded in a narrow band, slightly losing ground against the market.
If you invest in Virgin Blue, you are being exposed to the same risks as investing in any other airline.
And the upside is no longer so strong. Macquarie Bank analysts suggest Virgin Blue's market share will increase modestly, from 22 to 25 per cent, over the next two years.
The super profits have been made, and now it's down to the grind of daily business. Keep reality and hype in careful balance when making a decision to buy stock.
The Sunday Telegraph
(Edited to correct the thread title- Keg)