Very interesting.
Now this has been done before, but my prediction for Virgin Turbo-props in 2011-12.
If it does happen, I hope Virgin have a rabbit to pull out of the hat, either that or virgin management are even more inept than I first feared. Frankly I don't think even they would be that naive or reckless. Why?
I'm assuming 15-20 aircraft would be to compete with REX and QLink on the East Coast and possibly SA. REX have 45 aircraft opperating on approx 90% monopoly routes. Qlink a similar number. Dubbo, Albury Balina, Wagga Wagga, Ad-PLQ, and Mildura are the only routes with competition. These prime routes are fully serviced by REX and/or QLink (except Ballina), and like most regional services the profit margins are fairly tight.
REX have arguably the lowest Debt/Equity ratio of not only any airline in Australia, but most other businesses as well! With almost total ownership of assets (aircraft included), REX posted a profit of around $24Mil last financial year. It is a very tight financial organisation.
Now, how much to set up a regional Turbo-prop organisation from scratch? What would be the cost of say 15-20 ATR72/42's? $200-$300 Mil? and that's with less than half the fleet size of just one of the competitors. Then there's training, Engineering, port infrastructure, additional terminal space at the capitals, not to mention the need for approx 200-250 pilots and flight attendants. How much will the initial set-up cost? What will the returns be?
Mind you VA has consumed around $250Mil of Virgin's cash reserves for nil profit, so maybe they're on to something!
I'm not sure why this rumour persists, but if what you say is true F111, I for one would like to know the rationale. If you are in the know, please share with the forum. Serious question, maybe I'm missing something, because IMHO such a move would be disasterous for all concerned!