Freighters for Virgin
Toll's Little set for air freight war
Geoff Easdown
October 27, 2006 12:00am
VIRGIN Blue is under orders to get ready for a freight war against Qantas and Australia Post.
Controlling shareholder Toll Holdings has told the airline to investigate the possibility of adding specially designed cargo planes to its existing all passenger fleet of Boeing 737 aircraft.
Paul Little, chief executive of Toll, said yesterday the instruction was given because Toll could not uplift freight on Virgin aircraft.
"At present all of our air freight business goes to the Qantas joint venture and we would much prefer that to go to Virgin," he said.
Mr Little outlined the air cargo plan to reporters after addressing shareholders earlier at Toll's annual meeting where he reported that revenue and earnings since June were ahead of the company's own forecast.
Toll shares rallied to a new high of $15.77 after the update, slipping to $15.59 to end the day 21 higher.
The decision to look at adding freighters to the 50-plane Virgin fleet comes at the same time that Qantas and Australia Post have upgraded their existing air freight business.
The partners are adding three newly converted Beoing 737 freighters to their Australian Air Express business which will be flown by 40 newly recruited pilots.
Toll's custom would seed a competitive freight operation for Virgin.
Yesterday Mr Little said: "The current (Virgin Blue) fleet is not ideal for air freight.
"We're talking to Virgin Blue management about more specialist planes and opportunities," Mr Little said.
Body: Among the types of planes the airline had been asked to investigate were quick-change models.
These dual role models can operate with passengers during the day and carry freight at night.
Toll, however, has yet to decide whether it will retain its 63 per cent stake in Virgin Blue, one of the spoils of its $6 billion takeover in May of Patrick Corporation.
Since the takeover Virgin Blue has contributed $700,000 in after tax profit to Toll's bottom line, Mr Little advised shareholders in his speech yesterday.
Mr Little made it clear that Virgin Blue was not about to join the $1.5 billion worth of assets Toll will sell in the coming months to comply with orders relating to the Patrick takeover made by the Australian Competition and Consumer Commission.
Referring to both the freight plan and Virgin's already announced desire to operate direct flights to Los Angeles, Mr Little said there would be no point selling the airline if that sort of value was to be created at a later date.
Addressing other shareholders issues, Mr Little said Toll had a shortlist of six potential buyers for the 50 per cent stake in the rail freight business, Pacific National.
PacNat, part of the asset package now up for auction, had attracted 45 separate bids from overseas and local interests, Mr Little said, adding that directors hoped to announce a buyer before Christmas.
He also said Toll was looking at a number of possible bolt-on acquisitions in China, to help compliment Toll's plan for a direct Asia-Australia freight link.
Mr Little said earnings had improved across all Australian divisions.
The only disappointment was that grain volumes handled by Pacific National had continued to fall due to the drought.