Fri "West Australian"
Virgin Blue puts on full throttle
By Geoffrey Thomas
VIRGIN Blue has announced massive expansion plans with an order for up to 50 Boeing 737s worth $5.4 billion at list prices.
Analysts are tipping more intense fare wars as Virgin Blue strives to double its market share and Qantas defends its turf.
The first part of the order for 10 Boeing 737-800s will be delivered between August this year and March next year and will be configured with extra leg room for east-west flights.
Speaking in Sydney yesterday, Virgin Blue chief executive Brett Godfrey said the new aircraft would also be used for Virgin Blue's first international flights to be launched later this year.
The new 737s will be able to fly to Bali, Fiji, New Zealand, Singapore and Samoa. On Virgin Blue's radar are Perth-Bali, Sydney-Melbourne-Singapore, Sydney-Fiji as well as New Zealand flights.
Virgin Blue will convert the additional 40 options to firm orders over the next eight years but insiders say those aircraft will be all in the airline's fleet within five years. The 50 aircraft will take Virgin Blue's fleet to 80 737s.
Aviation analysts believe Virgin Blue will take delivery of about 10 new aircraft each year. The order ends a 10-month evaluation which pitted the Airbus A320 against the 737, which was already in the Virgin Blue's fleet.
Virgin Blue extracted an extremely good deal from Boeing, which has suffered many cancellations in orders in the wake of September 11 terrorist attacks.
"This is the best deal I have ever seen, which is great for our passengers," Mr Godfrey said.
Virgin Blue may also opt for an even bigger model. "We are looking at the 737-900X which can seat over 200 passengers," he said.
The order now sets the stage for an intense battle for market share as Qantas Airways introduces the new 300-seat A330 on Australian routes this month.
Qantas has said it will defend its market share of over 70 per cent while Virgin Blue has made no secret that it wants to double its current market share of about 20 per cent.
Those conflicting goals will mean even lower fares for passengers, analysts say.
In stark contrast to the Ansett fleet which was for the most part well over 10 years with some aircraft 20 years old, the Virgin Blue fleet, with the new aircraft, will be no more than three years old.
"This order is a win for the Australian travellers who will have further proof that flying on brand new state-of-the-art aircraft does not mean higher fares," Mr Godfrey said. "This 737-800 is a superb aircraft and the most modern in Australia."
The order also clears the way for a public offering of shares in Virgin Blue. While Mr Godfrey would not set an exact timetable, it is understood that an offering will be made in the first half of the year.
Virgin Blue is to acquire the planes, not lease them as it has done in the past, with $20 million of its funds and a further $200 million supplied by a syndication of banks.
The balance of the money will be sourced from the Export-Import Bank of the US.
Sir Richard Branson, through his Virgin group of companies, has a half share in Virgin Blue with Chris Corrigan's Patrick Corp holding the other half.
-with SYDNEY MORNING HERALD