Virgin Blue wants US route: report

[Johhny Utah]

Here's an article taken from the e*trade website as of this morning.

Virgin Blue wants US route: report
07/07/2004 09:47:00 AM


Virgin Blue Holdings Ltd wants to compete with Qantas Airways Ltd on its highly protected route from Australia to the west coast of the United States, it was reported.

Virgin Blue has applied to the federal government to fly to Los Angeles and San Francisco, the first by the budget short-haul carrier to become a long-haul operator.

The Australian Financial Review said the plan involves the creation of a new international airline that would be 51 per cent owned by Virgin Blue.

Richard Branson's Virgin Atlantic, which wants to fly the lucrative London to Australia by the end of the year, could be a minor investor in the new airline.

[Aussie]

wonder what aircraft theyll want to use to fly this route?

[Tunguska]

Obviously not an aircraft requiring ETOPS!!

[elektra]

Great news for both the travelling public and those wanting an expansion in pilot job opportunities.

Have to choose the B777, the finest medium to long (or ultra long with 777-200LR coming) series of aircraft ever conceived and built.

On the downside though, no doubt QF already have a team of lawyers and PR spin doctors down in CBR explaining why this competition wouldn't be in the national interest.

Safe flying

[Wirraway]

AFP
Wednesday July 7, 10:52 AM

Virgin Blue considering challenging Qantas on Australia-US route

Discount airline Virgin Blue said it was considering flying from Australia to the US west coast, directly challenging flag carrier Qantas' monopoly on one of its most lucrative routes.

Virgin Blue spokeswoman Amanda Bolger said the idea was "embryonic" at this stage but the expansion was definitely on the airline's agenda.

"We haven't lodged a formal application with the government yet but we have expressed interest," she told AFP. "You have to get the ball rolling early with these things because they have such a long lead-in time."

Bolger said the idea of flying to the US west coast was one of about 15 concepts generated by a business development unit that Virgin Blue set up earlier this year.

"This one of the the long-term possibilities it's come up with, were also looking at opportunities in China, in India, were considering a lot of ideas," she said.

Flying to the west coast would ratchet up the already intense rivalry between Qantas and Virgin Blue, the low-cost airline that has snatched more than 30 percent of the Australian domestic market since it was set up by British tycoon Richard Branson in 2001.

Qantas hit back earlier this year with the launch of its own discount airline Jetstar.

The latest Virgin Blue proposal would see the airline taking on Qantas head-to-head in the international market for the first time.

It would also involve the airline moving away from its highly successful no-frills formula into full-service international flights and would require major investment in about six long-haul aircraft such as Boeing 747s or 777s.

The Australian government could also expect sharp questioning from Singapore if it gave Virgin Blue permission to fly the Australia-Los Angeles route.

Singapore Airlines has long sought to have the route included under an "open skies" arrangement with Australia but has been frustrated by concerted lobbying by Qantas in Canberra.

Australian officials most recently refused to break the Qantas monopoly last September, saying the airline industry had not yet recovered sufficiently from shocks such as SARS and the Iraq war.

Qantas shares were down eight cents or 2.25 percent at 3.47 dollars (2.47 US) and Virgin Blue was down one cent of 0.5 percent at 2.00 dollars in early trading.
Wednesday July 7, 10:52 AM

AFP

============================================

[Johhny Utah]

Supposing that they do actually go for the 777, how much will the endorsement set the guys & girls back?

And how many NZ$ will they be paid for the privilege of working for the great man himself....?:rolleyes:

Lastly, how long will it take them to get their ETOPs approval sorted....?

We'll no doubt see Godfrey doing some of these - :{ - in the press in regards to this latest project.

[The Enema Bandit]

And bang go my haemorroids!

[LetsGoRated]

Guess we now know where the Jetstar A340-500's will be deployed! :ok:

[The_Cutest_of_Borg]

I guess that may answer my question on another thread about VB breaking from their business model and getting another aircraft type.

QF shares down 11 cents today... time to go short again...yup yup yup....

Oh, but it is fun and games in the airline industry....;)

[Yawn]

Long time coming I would have thought.

Ok, let's say the the EU turn down HK to OZ - likely. Then wouldn't the answer be to:

1. Have an Australian airline that goes from BNE/SYD to HK and link up with Virgin Atlantic.

2. Merge Pacific Blue in VB - where are the advantages of the AUS/NZ agreement now anyway.

3. Continue to use the Pacific Blue brand as the international carrier to keep SQ happy (Can't use a Virgin brand on interantional ops without approval). Why take on SQ - you only have to spilt the profit anyway and since they feed into both ends (Virgin Express, VB, Virgin USA) they (VB management) will see this as unfair and they already have the equity required. Plus Dick and SQ have to split 49 percent - neither party likes to lose control.

4. Use Airbus A330 to HK (no ETOPs and no four engines for long haul) and A340 to San Fran that way there is synergies with Virgin Atlantic - pilot, FA and engineering training.

5. The start-up company would hire externally to VB to eliminate re-training costs.

Disadvantages; every paragraph of their propectus said, 'low-cost model this, low cost model that'. If it fails the shareholders will be out for boardroom blood.

Just a few thoughts...

[Wirraway]

Bloomberg

Virgin Blue Eyes U.S. Routes to Challenge Qantas (Update3)

July 7 (Bloomberg) -- Virgin Blue Holdings Ltd., which grabbed a third of Australia's domestic air-travel market in four years, may start flights to the U.S., challenging bigger rival Qantas Airways Ltd. on its most profitable routes.

Adding Australia-U.S. routes was among options proposed by Virgin Blue's business development team, spokeswoman Amanda Bolger said from the airline's Brisbane base. "It's a project we're working on,'' Bolger said in an interview. Shares of Sydney- based Qantas, Australia's biggest airline, fell 2.8 percent to A$3.45 at the 4 p.m. market close in Sydney.

The Australia-U.S. service "is a very profitable leg for Qantas,'' said George Clapham, who helps manage the equivalent of $310 million at ABN Amro Asset Management in Sydney. "Qantas has had high load factors on the route and competition has been limited.''

Adding the flights would give Virgin Blue a share of the A$1 billion in sales the route generated, according to an April estimate by ING Financial Markets' analyst Philip Wickham. Sydney- based Qantas and UAL Corp.'s United Airlines are the only two carriers that fly directly between Australia and the U.S. Hawaiian Airlines Inc. and Air New Zealand Ltd. fly the route, stopping over in Honolulu and Auckland.

"Whether it comes from Virgin Blue or someone else, it will impact on the profitability of that business,'' should another airline begin competing with Qantas between Australia and the U.S., Clapham said. Qantas has increased the number of flights to Los Angeles to 37 times a week to meet increased demand.

The Australia-U.S. route is Qantas's most profitable, generating more than A$1.5 billion of sales with more than 25 percent of profit margin, said Merrill Lynch & Co. analysts Simon Gresham and Trent Barnett in a November 28 note to clients.

Flight Attendants

Shares of Virgin Blue have fallen 17 percent since the stock was sold to investors in December last year. Qantas shares have gained 0.3 percent over the same period. Virgin Blue shares fell 1 cent to A$2 today.

Qantas's share price has also been hurt by a possible strike that international flight attendants may hold after Dec. 18. The attendants want to stop the airline from basing another 400 cabin crew in London, a relocation aimed at saving Qantas A$18 million a year.

The success of Virgin Blue in Australia's domestic aviation market could be repeated in an international venture, ABN Amro's Clapham said. "It's probably worth them pursuing this opportunity,'' he said.

Virgin Blue Chief Executive Brett Godfrey plans to add Pacific Island destinations such as Fiji, Vanuatu and the Cook Islands to routes flown by the airline's Pacific Blue international unit this year and has said he's considering a low- cost carrier in Asia.

Virgin Blue started with two planes plying Australia's domestic routes in August 2000.

Long-haul routes such as the Australia-U.S. service look increasingly attractive as an increasing number of airlines fly shorter distances. On the Australia-New Zealand route, Emirates, Singapore Airlines Ltd. and Pacific Blue are competing with Qantas and Air New Zealand.

New Airline

Virgin Blue hasn't yet applied to the Australian government's International Air Services Commission for air rights to the U.S.

"We've expressed interest in doing so,'' Bolger said.

The Commission, which is responsible for granting air rights from Australia, had been informed of Virgin Blue's long-term operational plans but hadn't received an application for air rights to the U.S., the government body said in a statement e- mailed to Bloomberg News.

"Until such time as an application has been lodged with us, we cannot speculate on their reported plans,'' the Commission said in its statement.

Virgin Blue's U.S. routes would be operated by a new airline 51 percent owned by Virgin Blue, the Australian Financial Review reported, citing unidentified documents. Bolger declined to comment on whether a new airline was under consideration.

"We've talked about Asia, we've talked about things like frequent-flier programs -- these are the things the business unit was set up to do, to identify potential growth opportunities,'' Bolger said.

Virgin Blue today announced it will double the number of flights between Melbourne and the Sunshine Coast in Queensland to 14 a week by September.

To contact the reporter on this story:
Barbara Adam in Melbourne at [email protected]

==============================================

[Pinky the pilot]

The _Cutest_of_Borg; Oh, but it is fun and games etc
Mate, do you get the feeling that the ancient Chinese curse repeated below could not be more applicable here?
May you live in interesting times.

You only live twice. Once when
you're born. Once when
you've looked death in the face.

[The_Cutest_of_Borg]

Interesting times?... if that is true then the Australian aviation scene has been cursed for many years now.

I can't help but get the feeling that this is some kind of spoiling manoeuvre by VB, shades of retailiation for Jet*? You cr@p in our nest, we will cr@p in yours?

maybe..

I'd would be interested to see how they would get slots in SFO, unless they use some held by Virgin Atlantic. Last I heard QF were number 56 in line for a slot there. That was pre-Sep 11 though.

[Cool banana]

Will there be another airline called Virgin Pacific set up then to fly the Pacific route. But sound like there is a bigger part of the Virgin network as San Francisco is going to be the base of Virgin USA.

Why is QF interested in going back to SFO when they moved out off there 10 years ago even selling the airbridge and gate in a fire sale. Sound like qf management still havent there lessons ??

[InitRef]

I'd would be interested to see how they would get slots in SFO, unless they use some held by Virgin Atlantic

SFO is not slot-controlled. AFAIK there is nothing stopping QF starting service to SFO, apart from their own desire to concentrate on LAX.

[The_Cutest_of_Borg]

I.R? Isn't there some restriction on the gates then? Don't tell me a rumour I heard is ACTUALLY FALSE??!!?

[HAMO]

Take a number and join the queue Godfrey ...

SQ, EK, and CX are way ahead of DJ in lobbying for fifth freedom rights from Oz to US of A ..

This is one battleground where DJ's famous whingeing and whining is not going to get them the results they want - you are up against the big boys on this one!!

[Cool banana]

Isn't Air NZ flying up to SFO soon ?

[scud_runner]

I though SFO was slot controlled but could be wrong.
QF management unbelievably pulled out of there in the 90's only to hand their competitor a monopoly on the SFO-SYD route. They were trying to get back in there in the late 90's but no avail.

So what are VB going to offer on this route?? Dodgey seats and no inflight entertainment aren't going to work on a 13 hour sector. So essentionally they are going to be just like everyone else. In flight entertainment, business class, first class, food, etc etc etc

Not quite sure what the point of this is for Virgin Australia. Why not just try and get Virgin Atlantic to do it, at least then you'll have a world wide product.

[Allan Partridge]

THE REASON THEY WILL USE VB AND NOT
VS IS BECAUSE VB IS AUSTRALIAN OWNED??????

LESS RED TAPE.......THAT'S THE POINT

[Wirraway]

Thurs "The Australian"

Virgin eyes US options
By Steve Creedy, Aviation writer
July 08, 2004

VIRGIN Blue yesterday rejected claims it had applied for the rights to fly to San Francisco and Los Angeles but confirmed it was exploring the possibility of US services.

Reports of the airline's interest in the lucrative Pacific route helped wipe 2.8 per cent off the value of Qantas shares, which dropped 10c to close at $3.45.

Qantas shares may also have been hurt by increasing indications the flying kangaroo faces a stoush with flight attendants over plans to base 400 long-haul cabin crew in London.

Virgin flagged its interest in the US in May as one of 15 possibilities being explored by the unit as it tries to identify expansion opportunities.

The airline has also indicated an interest in expanding into Asia.

Other possibilities are understood to include a freight airline, a ground handling business or regional operations.

Virgin's interest in the US comes as foreign carriers like Singapore Airlines and tourism interests are pressuring the federal Government to open up the Pacific to more competition.

The low-cost carrier confirmed yesterday it had written to the Transport Department canvassing options for US services. But officials said the inquiries were preliminary and "a lot more analysis" was needed before there was a concrete proposal.

"Much water has to pass under the bridge before this project would grow into a real airline," said Virgin chief executive Brett Godfrey. "It's one of many opportunities and it's still very embryonic.

"You would appreciate that because of the long lead time you need to get the ball rolling and have the business development unit modelling and analysing the opportunity."

Mr Godfrey said the US proposal was no different from Virgin Blue's examination of opportunities in Asia.

"Sometimes you have to turn over a few stones to find a few gems," he said.

Three carriers - Qantas, United Airlines and Hawaiian Airlines - fly directly from Australia to the US but Air New Zealand competes strongly on the route via Auckland and several airlines offer competitive packages through Asia or the Pacific.

=======================================

Thurs "Sydney Morning Herald"

Virgin tempted by flights to LA
By Scott Rochfort
July 8, 2004

Qantas's stranglehold over the Australia to Los Angeles route was under fresh challenge yesterday after Virgin Blue confirmed it could launch an airline on the route.

Virgin Blue said it was engaged in "advanced work" on setting up a new airline, from investigating landing slots at Los Angeles airport to now lodging an "explor-atory document" with the Australian Government.

"It may be a good idea or it may be a bad idea," said David Huttner, Virgin Blue's head of strategy. "It's not going to happen before Christmas, put it that way. It's going to take a while but we'd be very silly if we never looked at this thing."

Mr Huttner said the airline would not be restricted to flying to the US West Coast, but could fly to destinations such as London, Johannesburg and into Asia.

Given Virgin Blue's lack of expertise in running full-service long-haul operations, there are suggestions it could part-own the airline with its so-called sister airline, Virgin Atlantic.

The mere talk of Virgin flying to the US sent Qantas shares tumbling 10c to $3.45, given that the Flying Kangaroo makes about one-third of its international profits from the LA route.

With Singapore Airlines' plans to enter the route still being blocked by the Australian Government, Mr Huttner said it would be prudent to look at it before it was finally opened up.

"Why would you give away to these guys before you explored all your options?" he said.

But there is talk that Virgin's new airline could represent a more covert way for Singapore to enter the Los Angeles route, given it owns 49 per cent of Virgin Atlantic.

"Singapore Airlines know they might be banging heads with governments for quite a while to get permission to fly from Australia to Los Angeles," said one analyst.

"If you can't crack it one way it could crack in another way."

But some suggested it could be payback for Qantas ruffling Singapore Air feathers with its plans to set up a low-cost airline at Changi.

If so, Singapore Air could give the new airline favourable leasing arrangements on the spare fleet of five 747-400s. Singapore Airlines spokeswoman Samantha Stewart declined to be drawn on the issue, only to say the airline still wanted to fly trans-Pacific flights from Australia.

"In this particular case, this is all speculative and a hypo-thetical and we don't get into hypotheticals," Ms Stewart said.

Despite Qantas's insistence that the route was competitive, the airline controls more than two-thirds of direct flights to the US, which in turn attract most of the high-yielding business traffic.

The financially crippled United Airlines is its only direct competitor on the route.

Eight months after angering Qantas for noting there was "a compelling case for additional airline activity between Australia and the US", the Federal Tourism Minister, Joe Hockey, welcomed the proposed entry of Virgin and "any opportunity to increase competition".

"But do put in the proviso that Qantas have responded," he said. "Since my comments, Qantas have responded by increasing the number of flights to the west coast of the US."

After recently introducing its first direct service from Brisbane to LA, Qantas now flies 28 direct services a week to the US.

========================================

[Lodown]

This is and will continue to be fun to watch play out. Branson may have himself a true World airline very soon. If he can grasp a good international market on the US West Coast with assistance from SIA, then he will have a huge impetus for a US domestic startup. A couple of US majors will be shaking. United Airlines has just failed to get a government loan guarantee and can't have too many options left to get out of bankruptcy.

I don't suffer from insanity. I am enjoying every minute of it.

[InitRef]

The only slot-controlled airports in the US were LGA, JFK, ORD, DCA (circa 2000)

I am pretty sure that JFK & ORD are no longer slot-controlled, and DCA has onerous restrictions about range of flights etc.

The other restriction maybe the US-AUS bilateral airservices agreement but again, my understanding is that its very liberal, and in any case, if UA can operate SFO-SYD, so can an Aussie carrier. Didn't Ansett plan a SYD-SFO service connecting to UA's hub?

The new Intl terminal at SFO has expanded gate availability (and seen a drop in flights since 9/11)

[elektra]

HAMO

Fifth freedom rights apply to carriers other than those from the State where the flight is to originate. In other words Emirates et al might be in a queue but an Australian owned carrier only has to have the required AOC etc and work within the Australia-US bilateral agreement. And since QF voluntarily gave up their rights SYD-SFO they would have a hard case to argue that VB shouldn't use it. I don't know all the fine print of the bilateral and it may be that there's some global limit on AUS-US capacity. If thats the case then QF may have to relinquish some capacity to allow fair competition. I doubt that's the case though. Far more likely that VB would simply apply, as Ansett did and would get the rights it wants. Qantas can't preach how ultra-competitive it is and yet sit on lucrative rights that in the end are publicly owned. We all know that the route is underserved.

And the new terminal at SFO seems to have room for more use, at least that's how it seems every time I operate there.

I have no special interest in seeing VB on the route other than the jobs it will create for younger pilots and cheaper fares/direct SFO services for the passengers. That seems enough for the policy makers to work with.

[Reflex10]

HAMO

Godfrey as an Australian operator would be using third and fourth freedom rights not fifth.

He would be be at the head of the Queue !