Virgin Blue To Ramp Up Australia Ops At Expense Of Qantas (Godfrey)

[Wirraway]

Dow Jones
Tuesday September 16, 4:10 PM AEST

Virgin Blue To Ramp Up Australia Ops At Expense Of Qantas

SYDNEY (Dow Jones)--Virgin Blue Chief Executive Brett Godfrey vowed Tuesday that Australia's second largest airline will continue to increase its market share at the expense of rival Qantas Airways Ltd.

Godfrey said Virgin Blue, which has built up its market share in the past three years to 30% thanks to its low cost model and the demise of Ansett Australia and Impulse Airlines, was in a good position to attract new business.

"We are now passing 30% market share - that's a big niche and more aircraft are coming soon," he said.

Last month, Qantas Chief Executive Geoff Dixon said Australia's dominant airline won't let its Brisbane-based no-frills competitor take more market share and that the "line in the sand" wouldn't be moved.

"The Qantas imposed 'line in the sand' must in my view shift with the tide," Godfrey told the National Aviation Press Club in Sydney.

"I am of the view that only about 10%-15% of traffic is hard to obtain under our business model, the rest is up for grabs," he said.

In 2001, Virgin Blue accounted for 9.3% of the Australian aviation market, a year later it had a 21.1% share, and at the end of June this year its slice of the market was 29.6%.

By March 2004, Virgin Blue forecasts it will be carrying 10.5 million passengers on an annualized basis, some 400,000 more than Ansett was carrying at June 30, 2001, Godfrey said. Virgin Blue will have a fleet of 40 Boeing planes compared to Ansett's 52 aircraft, which included a mixture of Boeing and Airbus planes.

Virgin Blue will publish its 'on time' performance figures on its website from next month, and has challenged Qantas to do the same, Godfrey said.

Over the last 12 months Virgin Blue's 'on time' performance, which is defined as arriving within 15 minutes of scheduled arrival, has been 88%.

"To me this is good, but not as good as I think we can be. We would like to regularly get the figure over 90%," Godfrey said.

He was tightlipped on Virgin Blue's proposed initial public offering after its two major shareholders, Virgin Group and Patrick Corp. settled a protracted ownership dispute last week.

A listing on the Australian Stock Exchange has been flagged by May 2004. The final decision on the timing will be made by the Virgin Group.

Separately, Godfrey attacked the Australian government about its lax airport pricing regulations following its A$5.6 billion sale of Sydney Airport last year.

"It is unfortunate that the government, which has been so proactive with regard to aviation security and tourism initiatives to name a few, has chosen to sit on its hands when it comes to airport pricing," he said.

Virgin Blue's landing fees have recently risen 53%, coming off the back of a rise of 97% in 2002, Godfrey noted.

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[Wirraway]

By March 2004, Virgin Blue forecasts it will be carrying 10.5 million passengers on an annualized basis, some 400,000 more than Ansett was carrying at June 30, 2001, Godfrey said. Virgin Blue will have a fleet of 40 Boeing planes compared to Ansett's 52 aircraft, which included a mixture of Boeing and Airbus planes.

If they pull this off it will be unbelievable, at that time I would guess it
will be under 3500 staff against when Ansett was about having 16,000,
only 87.5 staff per plane vs 307. Nerves starting to get jumpy about
holding my QF shares.

Wirraway

[FatEric]

can someone whip out a calcumalator and see how many seats were being flown by Ansett in 2001 compared to VB.

11 767's = 1.5 737's etc.

2 747's = 3 737's.

You get the point.

Godfrey cant bloody count.

[halas]

Ahrrrgghhh Wirraway,

Ansett had that many people because...

They paid for marketing
International operation
A holiday division
A complex reservation system (Like QF)
Many types of aircraft (Like QF)
A lot of subsidaries (Like QF)
A huge nation wide network (That VB will never replicate)
Business class
Golden wing
And service
etc, etc.

Hard to compare really!

Oh, and yes Mr Godfrey can't count

halas

[elektra]

Halas

The problem was, no-one explained to the average fare-concious passenger the need to pay for all those bells and whistles. VB has shown the enormous demand in the $100 to $125 per sector arena for point to point travel only. No extras. That was always there, just never exploited.

Ansett could have adjusted to this reality given time. Unfortunately time = money and in 1989/90 (against twin arch enemies the AFAP and Compass 1) Ansett management blew the several hundred million that they could have used to restructure.

[Al E. Vator]

Ahrrrgghhh halas.......do you think having way too many staff was a big reason AN went bust in the first place?

[Wirraway]

Wed "West Australian"

Virgin's success shows up Ansett
By Geoffrey Thomas

VIRGIN Blue would carry more passengers than Ansett on major domestic trunk routes this financial year with only a third of the staff, the airline's chief executive, Brett Godfrey, said yesterday.

In the most damming indictment of Ansett's lack of productivity, Mr Godfrey told WestBusiness his airline would carry 10.5 million passengers for the financial year to March 2004, compared with Ansett's 10.1 million in its last financial year.

In another important measure, Virgin Blue's revenue passenger kilometres (RPKs) - passengers multiplied by the distance travelled - should top 16.6 billion, well above Ansett's 16.2 billion in its last year.

And to do this Virgin Blue only needs 3300 staff, against Ansett's 10,000 for its domestic trunk route division. Ansett employed up to 16,000 staff when regional and international airlines were included.

Ansett was losing $1.3 million a day when it was grounded on September 12, 2001. By comparison, Virgin Blue trebled net profit in the year to March to $110.3 million.

With more than 30 per cent of the domestic market, Virgin Blue has Qantas Airways firmly in its sights.

"We are now passing 30 per cent market share - that's a big niche and more aircraft are coming soon," Mr Godfrey said.

This ambitious stand puts the airline on a collision course with Qantas, after Qantas chief executive Geoff Dixon declared last month it would fight to retain its market share.

"The Qantas imposed line in the sand must, in my view, shift with the tide," Mr Godfrey said.

"I am of the view that only about 10 to 15 per cent of traffic is hard to obtain under our business model, the rest is up for grabs.

"We truly believe that 50 per cent isn't beyond our grasp, but I'll be happy to consider stopping at 49 per cent as we are happy to remind consumers that we will continue to be the low-fare battler."

In 2001, Virgin Blue held 9.3 per cent of the Australian aviation market and, after the collapse of Ansett, that leapt to 21.1 per cent a year later and at the end of June this year its slice of the market was 29.6 per cent.

Virgin Blue is also upping the ante by challenging Qantas to match it by publishing its on-time performance figures from next month.

"Our on-time performance over the last 12 months has been 88 per cent but we can do better. I would like to see the figure over 90 per cent," Mr Godfrey said.

On-time performance is rated as a flight leaving within 15 minutes of schedule. According to Mr Godfrey, Quantum Market Research shows that the time factor is overwhelmingly the highest priority for business travellers.

"Our average fleet age is already under two years and our last 737-300 'classic' will leave the fleet in a matter of weeks, leaving us with 35 737-700/800 new generation aircraft," he said. "The brand new fleet is working for us with our on-time performance last month up to 91 per cent.''

By March, Virgin Blue will boast 40 Boeing 737s against Ansett's fleet of 52 767s, 737s and A320s.

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[Pete Conrad]

Heres a thought, DJ expand, get say up to 40% of the market. Godfrey and co decide it's a day and pull the plug, SQ come in and buy a ready made airline with a quarter of the staff AN had, thus giving them a cheap, low overhead airline on which to build and expand it's international market out of the Asia Pacific region.This is what they wanted in AN anyway, but now they get it for a steal, and it's making money.

The Singaporean shareholders of REX team up with the SQ management, build a strong regional feeding both the new Virgin, SQ international ops out of Australia, including the new SQ flights to the USA from Australia.

Australia returns to two main airlines with regional and international arms, both having low cost arms and business arms.

QF consolidate aircraft types to 737,767,747,A330 for mainline and International, with Dash and EMB 170/175 for regional jet feed. More 737-800's are purchased to operate where Impulse do. 737-300/400 series retired, all domestic ops, including regional feed that Impulse are doing now will be taken over by a large fleet of 737-800's,767's and EMB jets.

The new SQ/DJ/REX tie up operate 737NG,747,A340-500, while Silkair introduce Airbus to compete with Australian and Valuair and Air Asia out of Thailand. As there is about a 5 year window to get regional aircraft at the "right" time, REX eventually end up with a new turboprop fleet, supplemented by a small fleet of regional jets operating to large regional centers only, not replacing large jets on trunk routes like AN did with the CRJ, thus you have a low cost jet doing what it's intended for.

AirNZ come skulking back to SQ on the bones of their a$#e pleading for mercy to be part of a team, any team as they are reduced to nothing more than an airline the size of Air Pacific.

Thats where this is all heading - oh, and on top of all this, we all will be getting paid two thirds of what we are now, for working more.

[halas]

Hey l agree with you all, just pointing out that there is no comparison of the two.

Ansett managed to loose money from a plethora of businesses not just an airline.

Thats the difference - VB is an airline, full stop.

halas

[bitter balance]

Pete, there you go! I was getting worried that you lasted several posts without mentioning the DJ/SQ/Rex tie up. :ok:

[Buster Hyman]

That's a great result for DJ, pity there's 12000 less aviation related jobs for anyone interested in a career in this industry.:sad:

[FatEric]

The numbers being touted by Godfrey are not really reflective of the real situation.

Many of VB's work is done by outsourced companies - jobs that were done in house by Ansett.

Also, Ansett did a lot of third party work for other airlines that VB does not.

VB are successfull for sure - congrats.

But lets be a little more realistic.

[thumpa]

Geee Pete you have made my morning funny again.

I'm wondering do you really look as stupid as you sound?

Keep it up:ok:

[Pete Conrad]

Oh thumpa, you were quiet on the other two threads after your mates shot you down.If I were you, I'd be looking for another job.3 years was the word yesterday.Thats all you have left.Don't go scratching your bum thumpa, you may go getting a brain haemorrhage.

BB - I know, every once in a while I have a sudden rush of blood to the head.

[thumpa]

You better tell all your mates in Qantas to stop giving out privlieged information. Seriuosly I am LMAO:ok:

[Pete Conrad]

Privileged info? doubt it, you already know it, just that your rose coloured glasses have concentrated too much sunlight onto the reality portion of your alma matter.

[Douglas Mcdonnell]

Gee Pete you seem to be pushing your anti impulse barrow a bit these days. It is starting to sound a bit like a broken record. Have an axe to grind do you? I thought EAA was doing well.

[Pete Conrad]

DM, I wasn't being anti VQ on that last post, it was a thought on how it could turn out in the future involving ALL airlines, if I wanted to be anti VQ I'd come out and say it. We are all entitled to an opinion, I didn't sledge VQ in that last post, if it came over that way, I apologise.

The added bonus was getting thumpa to blow his butt plug again by winding him up though.

[The Enema Bandit]

Did I hear Butt plug??

[Yusef Danet]

just a minor thought, one Virgin 737 does not equal one Ansett 737 nor does it take 1.5 Virgins to make a 767.
Ansett 767: 211 pax,
Ansett 737: 128 pax
Virgin 737: 144/180 pax, most new ones the latter. I doubt they were piling 540 into a 747 to make you your estimate of 3 Virgin planes.

All counting done without a calculator... but I took off my shoes.

[Buster Hyman]

AN 733's had 110 pax on average.

[Z Force]

If they're going to want to expand, I would think they would need wide bodies for Sydney due to the limited amount of landing slots.