Wirraway
17th Nov 2004, 15:18
Thurs "The Australian"
Virgin to hit business class
By Steve Creedy
November 18, 2004
VIRGIN Blue business passengers and those on busy routes face fare increases as the airline tries to improve the profitability of its flights.
The airline has already raised some of its most expensive fares by as much as $40 one-way and has indicated more rises are on the way.
Virgin had capped prices as it significantly boosted capacity to cater for its rapid growth and, more recently, to shore up its market against the launch of Qantas low-cost offshoot Jetstar.
But with growth tailing off and the market absorbing the increased capacity, executives are now looking at ways of boosting profit margins.
Virgin chief executive chief executive Brett Godfrey said yesterday a wide-ranging review was looking at which routes could sustain higher prices.
He said it was fair to say these would be business routes, where demand was less elastic, rather than price-sensitive leisure routes.
"In the last three months we've been going through route by route, probably flight by flight, to see where we can play around to try and extract a greater yield premium," he said.
Business passengers make up about 40 per cent of Virgin's customer base, but the percentage is higher on busy routes such as those linking Sydney. Although the cost of lead-in leisure fares have dropped by about $10, Virgin has already increased flexible fares on its busiest flights from $199 to $239.
"The idea is to maximise the profitability of the aeroplane and I will say that if we get the chance to charge more on a business-related flight or peak, we'll do that," Mr Godfrey said.
"It encourages people who do need cheap fares to travel on a Tuesday or Wednesday or the after-hours flights."
However, Mr Godfrey said travellers would continue to see $39 fares as Jetstar and Virgin vie for leisure passengers. The Virgin review comes as the airline warned yesterday it faces an uncertain second-half as it battles factors such as rising fuel prices and increased competition from Jetstar.
The airline's first-half net profit fell slightly to $63 million despite a 39 per cent jump in passenger numbers to 6.2 million.
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Virgin to hit business class
By Steve Creedy
November 18, 2004
VIRGIN Blue business passengers and those on busy routes face fare increases as the airline tries to improve the profitability of its flights.
The airline has already raised some of its most expensive fares by as much as $40 one-way and has indicated more rises are on the way.
Virgin had capped prices as it significantly boosted capacity to cater for its rapid growth and, more recently, to shore up its market against the launch of Qantas low-cost offshoot Jetstar.
But with growth tailing off and the market absorbing the increased capacity, executives are now looking at ways of boosting profit margins.
Virgin chief executive chief executive Brett Godfrey said yesterday a wide-ranging review was looking at which routes could sustain higher prices.
He said it was fair to say these would be business routes, where demand was less elastic, rather than price-sensitive leisure routes.
"In the last three months we've been going through route by route, probably flight by flight, to see where we can play around to try and extract a greater yield premium," he said.
Business passengers make up about 40 per cent of Virgin's customer base, but the percentage is higher on busy routes such as those linking Sydney. Although the cost of lead-in leisure fares have dropped by about $10, Virgin has already increased flexible fares on its busiest flights from $199 to $239.
"The idea is to maximise the profitability of the aeroplane and I will say that if we get the chance to charge more on a business-related flight or peak, we'll do that," Mr Godfrey said.
"It encourages people who do need cheap fares to travel on a Tuesday or Wednesday or the after-hours flights."
However, Mr Godfrey said travellers would continue to see $39 fares as Jetstar and Virgin vie for leisure passengers. The Virgin review comes as the airline warned yesterday it faces an uncertain second-half as it battles factors such as rising fuel prices and increased competition from Jetstar.
The airline's first-half net profit fell slightly to $63 million despite a 39 per cent jump in passenger numbers to 6.2 million.
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