Virgin Buai
From today's Oztralian ....
Virgin Blue expands reach to PNG
Steve Creedy, Aviation writer | September 04, 2008
VIRGIN Blue intends to take on Air Niugini as it expands its reach to Papua New Guinea.
The airline has applied to the International Air Services Commission for 900 seats each way, each week between Brisbane and Port Moresby, using Boeing 737-800s operated by Pacific Blue. It told the commission it wanted to start four services a week from November 1 and a fifth within a year. The new Pacific Blue service comes as the airline is expanding into Western Australia to take advantage of the resources boom.
It will also establish a jet crew base in Sydney, eventually basing about a third of its fleet there and creating up to 1000 jobs.
After a bleak period in which its share price fell from $1.16 to under 50c, the future may be looking brighter for Virgin.
Chief executive Brett Godfrey believes a share overhang from a distribution to Toll Holdings shareholders has cleared and oil prices appear to heading down, even if jet fuel prices appear reluctant to follow suit.
Airline stocks generally have been buoyed by the lowest crude oil prices in almost five months.
Virgin shares rose 4.5c to close at 55.5c yesterday while Qantas shares closed up 11c at $3.64.
UBS Investment Research, which rates Virgin as a buy with an 80c price target, said current fuel and currency spot scenarios would see Virgin's earnings move from a break-even position to a $38 million net profit.
UBS's published forecast assumes jet fuel prices of $US135 per barrel, compared to a spot price of $US125, and an Australian dollar at $US89c, compared with a current spot of $US83c.
The investment bank said both airlines had "reasonably similar" positions for currency and fuel hedging. It said the current spot prices would also see Qantas forecasts upgraded by 43 per cent and implied only a 25 per cent fall in profitability from the record 2008 financial year.
"Each further $1 per barrel fall in jet fuel equates to circa $25 million and $6 million additional pre-tax earnings for both Qantas and Virgin Blue, respectively," UBS analysts Simon Mitchell and Ramoun Lazar said.