Bloomberg
Wed, 06 Nov 2002, 02:31pm EDT
Virgin Blue Gains Access to Sydney Terminals, Will Start Overseas Flights
By Margreet Dietz
Sydney, Nov. 6 (Bloomberg) -- Virgin Blue Airlines Pty. ended a dispute with Sydney Airports Corp. to gain access to more gates at the nation's largest airport, allowing Australia's No. 2 carrier to expand its fleet and start international flights.
The discount carrier founded by U.K. billionaire Richard Branson, which operates from a temporary Sydney terminal so small passengers sometimes line up outside, has gained priority access to six gates at Ansett Holdings Ltd.'s former terminal, and can get another six. The temporary terminal has five gates.
"This is what Virgin Blue really needed,'' said Albert Hung, who manages A$800 million ($449 million) at Tower Asset Management Australia Ltd.
Virgin Blue can now go ahead with an expansion of its 28 Boeing Co. aircraft fleet and raise its 18 percent market share by taking business from Qantas Airways Ltd. It's considering whether to add as many as 12 planes from Boeing or Airbus SAS.
The agreement "will allow Virgin Blue to fast-track its fleet expansion plans,'' Chief Executive Brett Godfrey said in a statement. "Virgin Blue can channel its resources into the international arena.''
Virgin Blue plans to start international flights at the end of the first half of 2003, Godfrey said.
Shares of Patrick Corp., which owns half of Virgin Blue, rose as much as 3.2 percent to A$15.07, and traded at A$14.60 as of 12:33 p.m. Sydney time. Macquarie Airports Group, the largest owner or Sydney Airport, gained as much as 7.2 percent to A$1.04. Qantas shares fell as much as 0.5 percent to A$3.81.
Pacific Routes
Branson will today release a tender document to solicit interest to help select the airline's first Pacific routes.
Qantas, Virgin Blue's largest domestic competitor with about 80 percent of the market, last month started operations of a new single-class international unit called Australian Airlines to lure budget travelers on flights to Osaka, Fukuoka, Nagoya, Taipei, Hong Kong and Singapore.
Brisbane-based Virgin Blue started operations in Australia in August 2000 with two planes and more than doubled its market share after the collapse of Australia's No. 2 airline, Ansett, in September 2001.
The discount carrier has moved into larger terminals previously used by Ansett at many of the nation's airports.
Virgin Blue plans to sell shares in an initial public offering next year.
Passenger Guarantee
Under today's agreement, Virgin Blue guaranteed it will have at least 4 million passengers pass through the former Ansett terminal, now dubbed T2, in the first year and at least 4.5 million passengers from the second year, Sydney Airports said.
A Macquarie Bank Ltd.-led group bought Sydney Airports from the government in June. After the purchase, Virgin Blue claimed Sydney Airports and its new owners reneged on an A$18 million agreement for access to some of the 18 gates at T2.
"Branson maybe helped a lot to make sure that the deadlock wouldn't hinder the progress of their expansion plans,'' Tower's Hung said.
The agreement is for 17 years and has annual charges comparable to those negotiated in April, Virgin Blue said. It will also allow the discount carrier to use its own information technology and baggage systems, the airline said.
Virgin Blue withdrew a lawsuit against Sydney Airports regarding access to the terminal, Sydney Airports said. Macquarie Airports said in a separate statement that revenue for T2 will be A$50 million for the year ending Dec. 31, 2003.
Bloomberg