Patrick slams Virgin

[Wirraway]

news.com.au

Patrick slams Virgin
By Kaaren Morrissey
February 03, 2005
From: AAP

PATRICK Corp chief executive Chris Corrigan today said his company would be happy to take a controlling stake in Virgin Blue, saying the airline needed to change its model to better deal with competition from Qantas and Jetstar.

"We are satisfied with a controlling stake," Mr Corrigan said after announcing financial results. Mr Corrigan declined to comment on whether Patrick would have to increase its bid for Virgin Blue after Richard Branson said last week the offer was too low.
He said the two parties clearly disagreed on what was fair value for the airline but he would not be against Mr Branson remaining on board at Virgin Blue.

"I welcome him to stay on as a shareholder," he said.

Mr Corrigan said he felt strongly that Virgin Blue should adapt its model to deal with the threat of Qantas' low-cost airline Jetstar.

"We need to adapt this model to the Australian environment," he said.

"We underestimated the impact of Qantas (Jetstar)."

Virgin results disappointing

Mr Corrigan took a swipe at Virgin Blue's so-called "Happy Hour" $1 airfare.

"Clearly you are not making any money from a $1 airfare," he said.

He said the rapid fall in airfares seen in the market since Jetstar began operations needed to stop.

Mr Corrigan said at the meeting that the airline's September half profit and the profit downgrade in January were disappointing.

"Profitability hasn't been as good as hoped," Mr Corrigan told shareholders.

"Since Jetstar the operating environment has been much more competitive."

He said the aviation industry was still adding too much capacity for the level of demand, while fuel levies on ticket prices was also having an impact.

"Fuel levies and higher airport charges are now slowing demand," he said.

Patrick's operating profits for the quarter to December, 2004 were in line with expectations, excepting the equity accounted results for Virgin Blue.

Patrick described its result for the year to September, 2004 as "satisfactory", adding that it represented the company's sixth consecutive record profit.

It said revenue from operating activities increased 14 per cent to $1.25 million, excluding equity share of associates.

Total earnings before interest, tax and individually significant items increased 22 per cent to $253 million.

Virgin Blue's contribution to total earnings was $48.9 million, down four per cent on last year.

Pacific National's contribution totalled $45.8 million, an improvement of 56 per cent on the year.

"These financial results reflect strong organic growth of the Patrick businesses combined with a continued focus by management on cost control and productivity improvement across the group," the company said.

AAP

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

[Icarus2001]

Patrick slams Virgin
By Kaaren Morrissey

Well Kaaren with two a's. A nice snappy journalism school headline but I cannot see any slamming of Virgins going in.

[Wirraway]

Business Review Weekly

Fed up, Corrigan makes his move
Patrick Corporation has lost patience with Virgin Blue's management.

By Adele Ferguson
BRW. 03 February 2005

Events on December 16 and January 19 will go down in history as the trigger points for Patrick Corporation's $1.90-a-share bid for the low-cost airline Virgin Blue. On the first of those days, Brett Godfrey, the chief executive of Virgin Blue, sold five million shares at an average price of $1.88 - never a good message for a chief executive to send to the market. And on the other day, he informed the Australian Stock Exchange that the airline's full-year results would be 10-15% below last year's.

The result was a 12% crash in the share price and renewed speculation of tensions between Godfrey and Virgin Blue's largest shareholder, Patrick Corporation.

Patrick owns 45.4% of Virgin Blue and on January 28 chief executive Chris Corrigan decided he had had enough of not being in control of the board and strategy, and bid for the remaining 54.6%. It looks likely that Virgin Blue directors will reject the offer, because the other key shareholder, Sir Richard Branson's Virgin Group, bought five million shares on the day Patrick made the bid, at an average price of $2.06. It is now up to the regulator to decide on the price. But on the basis that Godfrey thought $1.88 was a good price at which to sell his shares in December a few weeks before he warned of a profit downgrade, it would be hard to justify the offer as too low. If Patrick wins control of Virgin Blue, it will have a big effect on the airline industry, and on Patrick.

Virgin is one of the most profitable low-cost airlines in the world, but it is struggling to find new areas of growth and efficiency. If Corrigan wins control of the company he will apply economic rationalism to improve efficiency and cut costs. One of the first people he will contact is Geoff Dixon, the chief executive of Qantas. Qantas and Patrick already have a joint-venture engine shop, so it makes sense for Virgin aircraft to be put through this operation. It also makes sense to investigate sharing other back-office facilities such as maintenance and catering. This could then be extended to other airlines, such as Air New Zealand.

This is not the first time the airline industry has talked about combining their back-office functions in areas such as engineering and maintenance. Talks were initiated many years ago between Qantas and Ansett Australia but went nowhere because Ansett management could not agree on who would have control. Corrigan is no sentimentalist and will move heaven and earth to make such a deal work, and in the process save the airline many millions of dollars a year.

Control of Virgin Blue will change Patrick's earnings profile. If it wins 100% it will push its gearing from 8% to 103%, including Virgin's off-balance-sheet debt, according to Citigroup Smith Barney. It will also skew Patrick's earnings towards the volatile and risky airline sector.

In typical Corrigan style, the bidder's statement reveals very little of Patrick's plans for Virgin. It says it will change Virgin Blue's balance date from March 31 to September 30, keep the existing business as a passenger airline, and look at ways to reduce operating costs. It also says: "At the present time, and based on the information available to it, Pizen [the Patrick subsidiary bidding for Virgin] intends to retain the services of the senior management, operational management and other employees of Virgin Blue." Pizen also says it will conduct a review of the business and find ways to maximise the airline's operating performance.

But a company does not make a takeover bid to change the reporting date and conduct a strategic review. Patrick will no doubt look at whether to move Virgin Blue's head office from Brisbane to Sydney, revisit ways to capture the corporate market through loyalty programs that pay for themselves, and examine synergies with Patrick's stevedoring and rail businesses.

In aviation, there are few secrets. It has been widely reported that Corrigan has become disillusioned with the way Virgin Blue is being run. He is understood to be angry at the arrogance of some people at Virgin Blue, who said that if Qantas ever started a low-cost airline it would fail because it would not be able to get its cost structure as low as Virgin Blue's. But Jetstar did, and the cost structure has come down, resulting in Virgin Blue cutting ticket prices and lifting capacity to a point where it has hurt earnings.

Tensions between Godfrey and Corrigan are believed to have intensified after the sale of Godfrey's shares and Virgin Blue's second earnings downgrade in less than six months.

At Patrick's annual meeting on February 3, Corrigan will outline in detail his strategy for the company's three divisions: ports, rail and air. Although he will not go into detail about his plans for Virgin Blue if he wins control, he will face a barrage of questions from the floor about his intentions.

Patrick's web site says the company's mission is to be the first and only truly inter-modal transport company in Australia. It says Patrick is a focused transport company specialising in the loading and unloading of ships and the land-based collection, distribution and storage of cargo for import, export and within Australia. "We own and manage an integrated chain of complementary businesses: this enables us to eliminate inefficiencies along the chain and offer our customers comprehensive transport logistics solutions." If it wins more than 50% of Virgin Blue, Patrick will be able to do these things a lot more effectively than it has so far.

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

[Icarus2001]

...keep the existing business as a passenger airline, and look at ways to reduce operating costs. Okay you VB guys, where is all this fat that they are going to cut away to reduce costs? Isn't that the point of an LCC, low operating costs?

My two cents is this is about two things: 1) A clash of egos and 2) Changing the VB model so that QF go longer squeeze them from both ends of the market; that is the full service QF product and the budget carrier Jetstar product. VB is in the middle ground right now. They are making money but have no where to grow.

Virgin Blue Pacific?

[go_dj]

Hmmm, When Corrigan gains control of the board I can imagine

1. 1st 4-5 rows converted to business class

2. Frequent flyer program implemented

3. Convert the now 'Blue Room' back to 'Golden Wing' type lounges for business travellers.

4. Join the Star alliance

[ur2]

Yep, and we all know were that will end up.:ouch:

[Icarus2001]

Yes. As a hugely successful second major airline and a real competitor for Qanthais.

Best of luck to them.

[PureRisk]

I agree Icarus. As we have all said on here many times. A corrigan/Patrick controlled VB can only mean bad news for Q. That will all but seal the deal to start Virgin Pacific (corrigan has said many times over he wants into that market). Add to that he is much more business aware than Godfey and ruthless too, it can only be a good thing for investors. OH and a bad thing for Godfrey's future.....

[The Enema Bandit]

I decided to be intellectual tonight and watch the 7.30 Report. They had Corrigan on it and he was less than impressed by the way Virgin is run and they also pointed out how Branson has a reputation for seeing the value of his companies shares go down. Then some gonzo share analasyst (I like the first four letters of that word!) said they had better watch themselves otherwise Virgin won't be around. Mind you he was the only one who said that, so I wouldn't worry too much.

[SilverSleuth]

No I wouldnt worry too much either. A company that didnt exist 4 years ago making a $160 million odd profit, isnt to bloody bad at all. Infact any company making that would be pretty happy im sure. Lets put it into perspective. Easy jet were quoted as making around a 60 million proft (Approx?) BEFORE tax and are considered one of the most successful.

I watched the 7.30 report story also. Wasn't quite the doom and gloom as you percieved. I have known many a stock analyst in my time and depending on what view they want to have, when they read particular results, is generally the view they have no matter what.
I think the main thing here is that as long as ALL airlines learn the leasons of the Ansett era then things will be fine. If anything was demonstrated in the story, it is that Corrigan is a very smart buisness man, and as a majority shareholder he wont let things drift down those roads. If anything he will be more sound at everything.
A lot is said about the Q's profits but break it down to just domestic and even more so on routes that they are in direct competition on, and I think a lot of people would be surprised. A lot could change in the coming 12 - 18 moths there. A possible investment in singapore that may not return what they hope
(i dont think the singapore government will ever let it be what they hope.....there backyard -- their rules!), plus a new full class (Ozzie) carrier, VP, on one of there most profitable routes. SY- LA.
Well who knows. As someone else said. Corrigan knows where the profits are and how to do things so it will be very interesting when he takes full control.

[Don Esson]

I wonder if Corrigan is talking in code and saying to Qantas something like "we'll pull our heads in if you pull in yours"? Collusion is out but shrouded messages are not. Interesting times. eh?

[Buster Hyman]

December 16 Brett sells shares.
January 19 DJ announces profit drop.

:hmm: I don't punt on the sharemarket, but don't they call that insider trading?:confused:

[sinala1]

Could the share price drop not be a reaction to the CEO of a company offloading shares in his own company? Surely (surely?) brett is not stupid enough to go down the insider trading path, especially after the Rene Rivkin debacle....

interesting... :confused:

[Ron & Edna Johns]

I totally agree with you, Buster. I cannot believe more hasn't been made of Godfrey's trade in the media. If he has sold those shares as a result of knowledge that was not available to the market, then he could be in deep doo-doo.....

[Taildragger67]

go_dj's idea makes sense. Growth is limited in the Australian domestic market, so it will have to come from elsewhere. And ur2, having some hard-nosed management, working with an existing low cost structure might avoid the fate which has befallen others.

The traditional LCC model has been limited to short-haul. Even in the wider Aust/NZ/Pacific market, growth prospects are limited (Aust being by far the biggest chunk of that, so if it fills, you aren't going to get much incremental anywhere else).

So, they must look outside the back yard. Hence going long-haul has to be an option at some point.

No existing LCC has made the move from short-haul to including long-haul.

Maybe VB will be able to be the first. However, L/H pax want more than what the S/H LCCs can give them - hence the cost base has to rise.

TTBOMK, there have not been any LCCs which have made that shift. However, once again possibly starting from a LC base might make that transition easier than a FS carrier trying to go the other way; no-one's tried it yet.

DJ has marketed itself as giving punters the fair go; stopping the rip-offs, etc. but that can be a narrow corner to paint yourself into. VS kicked off with similar noises, but quietly dropped them to charge similar fares to BA and all the other competitors on its routes. Just because you have a low cost structure, doesn't mean you have to charge low prices (inby definition, shareholders would prefer you didn't).

So... we shouldn't get wedded to the idea that the LCC model can't be modified; for a LC company in a very finite market, it will have to be.

PureRisk... "bad thing for Godfrey's future" - mate if I had increased my net worth like he has, in the time frame he has, I don't think I'd give a rat's if a pink slip arrived in the post!!

[Wirraway]

Fri "The Australian"

Jetstar threat real: Corrigan
Steve Creedy, Aviation writer
February 04, 2005

PATRICK boss Chris Corrigan yesterday criticised Virgin Blue for failing to respond adequately to the threat of Qantas low-cost offshoot Jetstar, saying the takeover target now needed to modify its business model and concentrate on its domestic operations.

He also confirmed he was prepared to settle for a majority stake in the airline if he failed to take full control and had no problems with Virgin boss Richard Branson retaining his 25.1 per cent stake.

And he urged shareholders to accept his low-ball $1.90 per share offer as a "pretty fair offer in the context of the value that's placed on airlines".

Speaking after Patrick Corp's annual meeting in Sydney, the ports boss targeted the airline's falling profitability as an area of concern and warned it needed to urgently address the threat of Jetstar.

While he expressed confidence in Virgin Blue's approach to date, he warned the airline was now facing a more competitive environment.

He said Virgin Blue was caught between Jetstar's "lower fare, lower service" offering at one end and the higher fare, higher service Qantas mainline at the other.

Virgin now had to respond to those pressures and adapt its business model to the market environment. This included attracting more business travellers, and the airline was looking at a range of issues, including a frequent flyer program.

"I don't think we've done that to date as well as we could have," Mr Corrigan said. "I think we've underestimated the competitive forces that Qantas has brought against us, but I have every confidence that we can do it going forward."

His comments contrast with views expressed last week by Virgin Blue chief executive Brett Godfrey that the effect of Jetstar on the airline's recent profit downgrade had not been as great as big capacity expansion last year.

There have been suggestions of disagreements between the two executives, but the Patrick chief yesterday endorsed Mr Godfrey, saying he expected him to remain in the chief executive's seat if the logistics company took control.

He said the Virgin co-founder had done "a brilliant job in terms of bringing the airline up to a level" and he intended to work with him to bring Virgin into the new environment.

"I think he's done a fantastic job and I think he's going to be able to adapt to operating the airline in a much more competitive environment in the future," he said.

Mr Corrigan denied that the fact he did not consult with Virgin Group boss Richard Branson on the bid meant there was acrimony between the two.

"There are good legal reasons why you don't consult with anybody before you announce a bid and that was the reason," he said.

"We've worked quite successfully with the Virgin Group over the years and expect to go on doing so if they remain shareholders."

Asked about Sir Richard's purchase of 5.1 million shares, Mr Corrigan described it as "an investment banking trick that he thinks might involve us paying a bit more than we might otherwise have paid."

The parties are awaiting advice from the Australian Securities & Investments Commission about whether Patrick is bound by rules that could force it to match the $2.06 price paid by Virgin Group.

Mr Corrigan said it did not make sense for Patrick to raise its bid, and that having a beneficiary of its offer determine the price was "so absurd it's almost ridiculous".

He denied he was opposed to the airline's expansion into Asia, but said "the big picture is right here in Australia". "The principal business is the carriage of passengers domestically and that's the area that needs 99.9 per cent of our attention," he said.

==========================================
Fri "Melbourne Herald-Sun"

Virgin sounds the retreat
Heath Aston
04feb05

THE days of super-cheap domestic airfares appear numbered.

With words that will disappoint the growing army of domestic air travellers, Virgin Blue chairman Chris Corrigan yesterday signalled a retreat from the price-slashing scrap it is locked in with Qantas's budget offshoot Jetstar.

However, Virgin Blue will not abandon the low-cost approach it pioneered in Australia under the guidance of billionaire Virgin boss Richard Branson.

"We just don't want (fares) going down at the catastrophic rate they have been going down," Mr Corrigan said at the Patrick annual meeting.

Experts said if Virgin Blue opted out of the price war it was likely that Jetstar, which has offered $9 pre-tax fares, would also hike its prices.

Ian Thomas, a senior consultant at the Centre for Asia Pacific Aviation, said Virgin was more exposed to price-cutting than Qantas.

"Jetstar to date only accounts for a small part of Qantas's domestic operation," he said.

"That gives Qantas the confidence to continue this sort of strategy. That may mean that Jetstar imposes these sort of prices for a prolonged period . . . (but) if Virgin raises prices the encouragement will be there for Jetstar not to discount quite as heavily."

The damage done by Jetstar since it landed in the market last year has forced Virgin Blue to slash its profit forecast this year.

Mr Corrigan has since launched a $1.1 billion takeover bid for Virgin Blue on behalf of major shareholder Patrick Corporation.

"We have underestimated the competitive threat that Jetstar brings. We need to address that very urgently."

Mr Thomas said Virgin Blue would probably have to minimise its "fun culture" if swallowed by Patrick, a ports and rail specialist.

"Corrigan is a far more pragmatic business person, far more focused on the bottom line. I'd expect him to extract greater returns out of non-core areas of the business, perhaps freight," he said.

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

[cunningham]

I wish I was Patrick.

[Z Force]

What's the moral like at Virgin at the moment?

[ur2]

Don't worry, we all have that "Virgin Flair" or is it Flares ?
Anyway that will get us through.

[esreverlluf]

How long has Virgin had a "moral"?

[30/30 Green Light]

......How long has Virgin had a moral........? Why forever of course,that's why it's Virgin.Now morale,that is a completely different story!

[Wirraway]

AAP

ASIC bid decision a concern: Virgin
February 04, 2005
From: AAP

RICHARD Branson's Virgin Group was concerned by a decision by the corporate watchdog that allowed a $1.90 bid for airline Virgin Blue by Patrick Corp to go ahead as it stood, Virgin said today.

The Virgin Group head of public relation, Asia Pacific, Danielle Keighery, said Patrick, which holds 45.4 per cent of Virgin Blue, had made much of its assocation with Virgin Group, which effectively holds 25.1 per cent.

"The law is clear – Patrick made a mistake and the law had to be changed to fix it," she said.

"They have made a lot of the association (with Virgin Group) and they should not be able to decide when and where they don't use that.

"That is a concern," Ms Keighery said.

"It's Virgin Group's view that Virgin Blue holds much greater value than indicated by the price being offered by Patrick Corp."

The bid by Patrick was challenged by Virgin Blue after Sir Richard bought up shares for as high as $2.06 on the day the offer was announced last Friday.

His activity raised the prospect that the Patrick bid could be defunct, because under corporations law a bidder must match the price paid by any associate in the preceding four months.

But, after four days of deliberations, the Australian Securities and Investments Commission (ASIC) has determined that Virgin Group's share acquisition had no effect on the Patrick offer.

"Today's decision by ASIC means the attempt to force Patrick to increase its bid price from $1.90 to $2.06 has failed," Patrick said earlier today.

"It is unfortunate that this tactic has distracted shareholders from considering Patrick's offer, which will be sent to all Virgin Blue shareholders shortly."

Patrick reiterated its view that its offer of $1.90 a share fully values the company.

Virgin Group pointed out that Virgin Blue was "a very good and profitable company".

"At the same time it has brought to the Australian people great, competitive, airfares which they previously did not have," Ms Keighery said.

"That is what Virgin Blue is about, that's why it was born and that's how it will continue to be with Richard Branson's influence in it."

Virgin Blue shares were down 5c to $2.07 at 1515 AEDT.

Patrick was up 10 cents to $6.17.

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

[Icarus2001]

The view of RB and the VIRGIN GROUP meets REALITY.

Any entity is worth what someone else is willing to pay for it. End of story.

If BG was happy to sell at, was it $1.88, then $1.90 is pretty good considering the recent fall to $1.65 - $1.70."The law is clear – Patrick made a mistake and the law had to be changed to fix it," she said. RB is ALWAYS the first to cry foul, rather like a spoilt little boy.

Have a read of this and you will see what I mean...http://images-eu.amazon.com/images/P/1841154008.02._PE20_SCMZZZZZZZ_.jpg

[Eastwest Loco]

Going waaaaay back to go_dj's comments, all that you mention can only be a positive. The rat has left a gaping hole in full service markets by chucking in Jetscar, and people (apart from he cro magnon bus market) are totally over it.

Providing business class, dedicated lounges and for $5.00 per passenger sector providing catering on a basic level would do them a world of good. It would also pace them in the forefont considering the rat is going to a 1% commission, and add your cost model.

Australia badly needs a Star Alliance carrier to fight the QF Gpbal explorer/one world fares particularly out of regional centres. Rex needs to be brought on board for the same reasons.

All DJ needs to do to walk all over the rat is to go full access and IATA for ticketing in the Global Distribution Stystems, such as Sabre, Amadeus and Galiloe, They can have a similar segment rebate disclaimer as Qantas does, but that will also allow overseas agents to sell their services through their GDS rather than have to sign up for a website. It would be a total win for DJ. It is a major cost item, but it would set them apartfrom other low cost operations and make them much easier to compare and sell.

JQ is doing everything not to make themselves user friendly, despite the excellent ex Impulse crews, and the hole left in the market for embracing the general industry is the perfect opportunity for DJ to grab the ball and run like buggery with it.

Best all

EWL

[Kaptin M]

If Corrigan is as airline savvy as he believes he is, he ought to start his own airline from scratch.

Virgin Blue has done pretty bl:mad:dy well to date -WITHOUT his interference.
Obviously it appears Corrigan would like to see the airline go one way, but the VB's "birth Father" sees it going another.

IMO, Corrigan seems too impatient to see immediate returns - he may well be right.

Looking at another aspect, I believe Patricks are probably involved in VB from a political point of view, and are anxious to tackle the various factions of the ACTU and TWU that represent workers in all of Australia's airlines.
Watch out!

[Wirraway]

Sat "Weekend Australian"

Corrigan wins first Virgin round
February 05, 2005

A PUSH by Richard Branson to get Patrick Corp chief Chris Corrigan to increase his offer price for Virgin Blue failed yesterday, opening the way for a fresh stoush between the pair over the future of the airline.

Virgin Group, which effectively holds 25.1 per cent of the low-cost carrier, said the decision by the corporate watchdog to allow the port operator's $1.90 a share bid was a cause for concern.

It also faced up to criticism of the airline's airfare strategies by union buster Mr Corrigan, saying it would remain a competitive low-fare pioneer under Sir Richard's consumer-savvy influence.

Virgin Group head of public relations, Asia-Pacific, Danielle Keighery said Patrick, which holds 45.4 per cent of Virgin Blue, had made much of its association with Virgin Group in regard to Virgin Blue.

"The law is very clear and Patrick should have applied for an exemption prior to making a takeover offer," Ms Keighery said.

"They have made a lot of the association and they should not be able to decide when and where they don't use that. That is a concern."

The low-ball bid by Patrick was challenged by Virgin Blue after Sir Richard bought shares for as high as $2.06 when the offer was announced a week ago.

His activity raised the prospect that the Patrick bid could be defunct because under corporate law a bidder must match the price paid by any associate in the preceding four months. But, after four days of deliberations, the Australian Securities and Investments Commission yesterday determined that Virgin Group's share acquisition had no effect on the Patrick offer.

"The decision by ASIC means the attempt to force Patrick to increase its bid price from $1.90 to $2.06 has failed," a Patrick spokesman said.

Virgin Group now has the choice of not accepting the offer and remaining a 25.1 per cent Virgin Blue shareholder - but ceding strategic decisions to Patrick - or mounting its own bid.

Virgin Blue shares closed down 5c at $2.07, but off a day's low of $2.03. Patrick ended up 10c at $6.17, off a high of $6.20.

AAP

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

[MIss Behaviour]

EWL

I think the reason DJ use the web as its distribution network is because a GDS would charge DJ USD5.00 per segment booked and this would be too costly for a low cost carrier.

Also plenty of travel agents make bookings in anticipation of getting a sale (you know the ones I'm talking about), then don't bother to cancel it resulting in ghost bookings and higher noshow factors on flights.

When carriers such as DJ use the web, whether it's a punter or agent using the industry site, every seat sold is paid for at the time of booking so the only noshows they get don't affect the carrier's bottom line as they've already got the bucks for the ticket.

Cheers
MB

[Wirraway]

Sat "Sydney Morning Herald"

Branson fails to force bid rise
By Scott Rochfort
February 5, 2005

Richard Branson's attempt to force Patrick Corp to raise its takeover bid for Virgin Blue has failed after the corporate regulator ruled on Friday that the recent increase in the British billionaire's stake in the airline would not affect Patrick's offer.

A Virgin Group announcement last weekend that revealed Sir Richard had bought an extra 5.1 million shares in the airline sparked speculation that Patrick could be forced to raise its $1.90 a share offer to $2.06. This is thanks to a section of the Corporations Act requiring takeover bids to match the highest price paid by an associate of the bidder.

Virgin Group and Patrick are seen as associates because of their longstanding shareholder agreement regarding the airline.

But to the relief of Patrick's managing director, Chris Corrigan, the Australian Securities and Investments Commission has ruled Patrick is not required to match the $2.06 Sir Richard paid for Virgin Blue stock the previous Friday.

Patrick issued a statement after the ASIC ruling reiterating that it had no "knowledge [of] or involvement" in Virgin Group's decision to snap up $10.1 million worth of Virgin Blue stock and lift its stake in the airline from 24.6 to 25.1 per cent.

"It is unfortunate that this tactic has distracted shareholders from considering Patrick's offer, which will be sent to all Virgin Blue shareholders shortly," the statement said.

The transport group also repeated comments made by Mr Corrigan at Thursday's annual meeting that the $1.90 offer was fully valued in light of the recent profit downgrades by Virgin Blue. Patrick noted the price was 14 times the airline's projected earnings.

Virgin Blue shares took a hit on the ASIC announcement, falling 5c to $2.07. They are still well above Patrick's offer price.

The ruling appears to have finally brought the tension between the reality TV-loving Sir Richard and the more private Mr Corrigan out into the open.

Sir Richard was unavailable for comment, but Virgin Group's Asia-Pacific public relations director, Danielle Keighery, said Patrick was to blame for the confusion following Virgin Group's purchase of Virgin Blue shares the previous week.

"The law is clear that Patrick Corp made a mistake. They should have got this done prior to making the bid," she said.

Some observers said Sir Richard could have forced Patrick to lift its offer price even higher than $2.06 had the ASIC ruling gone the other way.

"We would have hoped that sanity was going to prevail and it has, because Richard Branson could have come along and offered $10 [a share]," Macquarie Equities analyst Paul Huxford said.

Despite market expectations Patrick might have to lift its offer to around $2.10 to secure a majority stake in Virgin Blue, Mr Huxford said Patrick would be in no rush to raise its bid.

"When the dust settles the risk is the heat will come out of the Virgin [Blue] share price and that it will head back towards the Patrick offer," he said.

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

[schnauzer]

Virgin Blue has done pretty bldy well to date
Perspective. VB has only done well due to the demise of a great airline and an aussie icon.

To those of you who saw VB as a "saviour", and a company who really "kept the air fair", just remember how close to the abyss they came. It was either Ansett or VB, and Ansett ran out of gas first, largely due to our brothers from across the pond.

Anyone else notice how ominously silent young Bretty has been lately? No doubt spending his money, before ASIC steps in and shoves him in jail with Rene.:mad:

[Eastwest Loco]

Miss Behavior

I know exactly what agents you are referring to. There is a simple fix for that. Apply a $50.00 nosho fee by ADM (agency debit memo) via IATA for a domestic nosho. That will cure the problem immediately. Sabre has a system whereby you can set a booking to self destruct if not paid by a specified date and time. I am sure Gal has a similar input and as Amadeus is also IPARS based it must also have the same facility.

USD5.00 on top of a fare is not a huge addon cost and one that can be easily worn by the punter concerned.

The flow on benefits from being easily available worldwide far outweigh the cost per sector for a GDS booking. If a punter will pay $29.00 for a sector, then they will pay $37.00 for the same fare. There would no doubt be add on costs via IATA/BSP as well, but atleast you could combine them on a published international fare on the same ticket, be it E Ticket or physical. The convenience factor does make them very very appealing if they choose the mainstream path.

I can see no negatives in DJ going msindtream.

God knows, we need them to.


Best all

EWL

[VH-Cheer Up]

Chris Corrigan was quoted in Friday's Age as saying (http://theage.com.au/articles/2005/02/03/1107409984936.html) "The airline is heading in the right direction, but could be on the wrong runway"

The article goes on to explain how he thinks that Virgin is hemmed in at the bottom end of the market by Jet* and at the top by QF. He says DJ (which, btw, he's been chairman of for a few years now) should have a new strategy which will get it more revenue.

Obviously just jacking up the prices won't help.

SO, what do people here think Virgin should be doing to change their business or go-to-market model to make them more attractive to the fare-paying SLF?

e.g.: Business Class?
Free Meals?
Frequent Flyer Scheme?

I can't help but think a $5 IFE won't be the one thing that makes the difference.

Jet* has an taken identical low-fare position, so that spot in the marketplace is at best shared.

QF has the full-service, mostly higher-fares option.

Sure it's $368 to go MEL-SYD versus $240 on DJ ($270 in the Blue Zone) but then I get food and drink, sort of, plus a few drinks in the Club which my company pays, preferential seating (QF Club) and so on.

Flying QF makes business passengers feel better treated, well, sometimes anyway. Don't give me the cabin crew from hell stories, that's not what the thread is about.

So if Brett Godfrey gave you the reins for three months, how would you change Virgin Blue so it would make more money?

Cheers

VHCU

[Eastwest Loco]

Hi VHCU

Here is my 2 bobs worth.

1/. Open up sales to GDS based systems and adjust prices accordingly by about $7.00 Australian on a one way or return fare. The punters will accept that with no problem. DJ is already resident in Sabre for inventory management so this would be very easy. This will allow agents to quickly and easily identify cheaper DJ alternatives over itineraries that require 3 or more sectors in each direction.

2/. Open up interline agreements via IATA to allow DJ to be sold in conjuntion with international carriers as part of journey starting in regional Australia and continuing overseas from there.

3/. In conjunction with #2/. - go full IATA so services can be sold as a part of journeys beginning anywhere in the world. Thi is money forjam, as overseas Agents/Airlines would most likely not know Virgin Blue from a hole in the ground.

4/. Allow acceptance of paper tickets for those that are for now on physical documentation and have yet to embrace the IATA requirement on E ticket by 2006.

5/. Instigate interline E ticket with all major carriers.

6/. Keep paying commissions at current levels to keep the travel community onside.

7/. Introduce a J class cabin - only has to be one to 2 rows.

8/. Join Star Alliance. I would not like to see a frequent flyer scheme however, as they are a little like herpes - once you have them they cannot be gotten rid of. If it is a requirement of Star Alliance, then do it anyway.

9/. Virgin premium (or similar) lounges on an annual pay scheme, much like QF Club and the former Golden Whinger lounges.

10/. Just keep on doing things the way they are. Kind to passengers, just taken to the next level.

There are no major quantum leaps in what I have suggested, just refining of a product that works and has heaps of support from the travel and flying community.

DJ need to treat JQ as irrelavent, as their passengers are generally either stuck with them or the shallow end of the gene pool that normall catches a bus. They are not wanted or needed, as the only time you will see them is when the fares are $5.00 plus taxes.

Juts my 2 bobs worth VH.

Best regards

EWL

[Buster Hyman]

OK, I'll add another 2 bobs to Barbaras before me!

It ain't broke! My opinion of DJ is that they are doing okay as they are. AN tried being "reactionary" to external forces and it cost them big time. DJ should stick to the market it has aimed at from day one! Screwing around with the product will just drive their core passengers to Jet* & the business flyers will be wary of them for a while.

Tampering with your image and public spats between Corrigan & Branson in the media will be doing more damage than QF & Jet* combined!

Back to you Barbara...:ok:

[Eastwest Loco]

Love that Buster - good call.

I dohowever believe that DJ could enhance their maket positin over the trunk routes and conteste JQ shared routes ny running J class seating, going "real time" in Sabre and most of the other things I have mentioned.

By doing so they would stomp JQ into oblivion with the medium to high yield traffic which is what every airline needs.

Right here and right now they have a chance to bury Jetscar, and at the same timetake QF mainline to task.

It will be intersting to see if they have the goolies to do just that. With QF commissions due to drop to 1% on July 1, I can see an absolute bonanza for DJ if they handle it right.

Best all

EWL

[bob_bowne]

The sooner Virgin fails the better !
Then Singapore Airlines can move on in and give the bloated Q a lesson or two. Goodbye good Riddence!

[Eastwest Loco]

Despite the fact that I ran DJ down badly in the early days, I tink you will fnd they are here for the long run mate.

Best

EWL

[rescue 1]

Virgin has suffered from "taking there eye off the target" and expanding internationally. Corrigan has the right idea - get back to basic's.

EWL - think your right, they should enter the res systems and get the Agencies on board. Not so sure about the business class though.

[Eastwest Loco]

J class is an otional in my view rescue, but if you are running an average 0f 77% load factor, you can afford one or 2 rows of J to attract the higher yoeld passenger.

GDS involvement is a non negiotiable good idea though. They are there and live already and only need to go one step further to be direct connect enabled.

Now would be good.

Best all

EWL

[Wirraway]

Sat "Australian Financial Review"

Corrigan Flies Into Biggest Battle
February 5th, 2005
The Australian Financial Review - Tansy Harcourt

The corporate raider may finally have met his match in Richard Branson.

If Richard Branson set out to get right up Chris Corrigan's nose, it looks like he's achieved it. The British billionaire's response to Corrigan's $1.1 billion takeover bid of discount airline Virgin Blue has been cunning and unexpected exactly the sort of move Corrigan may have used if the roles were reversed.

"Richard's a colourful character," Corrigan says, choosing his words carefully. "He's come up with a sort of investment banking trick. We'll just have to see how that works out."

The irony is if anyone knows the tricks of corporate raiding, its Christopher Darcy Corrigan. The mercurial dealmaker has spent a lifetime taking on foes much bigger than himself. But this week, perhaps, he finally met his match. "They are both world class operators," says a man who's crossed swords with both, Sydney Airport Corporation boss Max Moore-Wilton. "Both have different strengths and weakness. They will fight it out."

It's been a long time since Corrigan got his hands dirty in a good, old-fashioned hostile takeover. But the stoush with Branson is just one of many the managing director of transport giant Patrick Corp and the former investment banker has had in the past year or so. He's come to blows with governments in Victoria, NSW and Queensland over his expanding transport empire. He's also recently had a slanging match with old business partner Graeme Samuel, now head of the Australian Competition and Consumer Commission.

The theme that runs through these altercations is Corrigan's use of his new-found market power. He has set out to dominate the transport industry on the ports, freight rail and in the air but there are mounting concerns about how he's using his influence. Supporters of the man who almost single-handedly built the Australian arm of Bankers Trust see nothing wrong with what he's doing. It's just business, they say.

"He wouldn't back away from, and nor should he, the proposition that he's focused on doing good things for his shareholders. That's his job," former federal workplace relations minister Peter Reith says.

Reith, who now works at the European Bank for Reconstruction and Development, helped organise Corrigan's aggressive union busting tactics in the 1998 waterfront dispute.

"Branson's got his own credits but, from an Australian perspective, and when it comes to delivering services to Australians, I'd prefer Chris Corrigan any day," Reith says. "He's a person of very high level intelligence and he's got a strong streak of common sense. That's a powerful combination in the business world."

Samuel is less effusive. The competition regulator was once a merchant banker with Corrigan and worked with him in the 1980s to force open the closed-door stock broking fraternity.

But today they are on opposite sides of the fence. The ACCC chairman is the game keeper and he has Corrigan in his sights, particularly on the wharves where he has accused him of resisting competition and trying to protect a "cosy duopoly".

"Chris and I are long-standing professional associates. I wouldn't say we're long-standing close friends. Far from it," Samuel says. "We've had very little contact over recent years. "

Corrigan, 58, has never backed away from a fight. In NSW, the state Labor government has accused him of trying to stonewall a proposed expansion of Sydney's major container terminal at Port Botany aimed at allowing a third operator to open shop. Presently, Patrick operates the country's busiest container dock in a duopoly with P&O Ports.

In Queensland, where Patrick is trying to expand its rail operations, he's fighting the Beattie government for increased access to the freight rail network. But, in Victoria, where Patrick controls the rail system through its Pacific National joint venture, he's doing the opposite trying to stop the Bracks government from forcing him to give increased access to other rail users.

"[In this industry] it's hard not to come into contact with government," Corrigan says. "I don't think it's unhelpful to point out sometimes when you're frustrated and when you think things could move faster."

While the managing director of Patrick Corp has come to blows with state Labor governments, he's had a much closer relationship with the federal Liberal government. After all, it was the Howard government that partnered his efforts on the docks with balaclava-clad security guards and Alsatian dogs.

So far, the government has stayed out of the Virgin Blue stoush. "We view the matter as entirely one for the shareholders," says a spokesman for Deputy Prime Minister John Anderson.

But there's little doubt Corrigan is still a favoured son of the conservative establishment. "I don't think people realise how much he turned over the financial sector in Australia in the 1980s," Reith says.

Right now, Branson may not agree. After months of bitter stouches with port corporations and state governments over transport reforms, Corrigan has made a hostile offer for the 54.6 per cent of Virgin Blue he doesn't already own.

But, in contrast to the days when he was running investment bank Bankers Trust where he learnt the cut and thrust of deal making Corrigan is now crying foul and accusing Branson of dirty tricks.

Branson's clever move was to lift his stake in the company a manoeuvre he hoped, under a strange twist in the Corporations Law, could force Corrigan to raise his $1.90 a share offer.

At stake is control of Virgin Blue, the airline founded by chief executive Brett Godfrey and Branson in late 1999. Just over a week ago, Patrick lobbed what fund managers describe as a cheeky and opportunistic bid to seize control of the discount airline at a time when two profit downgrades had sent its stock to a record low.

Whether Corrigan was just trying to grab enough to control the company or whether he thought Branson would sell out on the cheap is unclear.

What is clear, however, is the plan has so far backfired. Instead of caving in, Branson almost immediately increased his shareholding to 25.1 per cent, enough to block special resolutions that Corrigan, as Virgin Blue chairman, might try to introduce.

To make matters worse, Branson paid as much as $2.06 for the shares and, because Patrick is an associate of Virgin Group, the British entrepreneur hoped the Australian Securities and Investments Commission might force Corrigan to increase his offer to at least that level. Of course, Corrigan didn't see it that way.

"It's almost bizarre that someone who's going to be a beneficiary of our offer can determine the price we have to pay," he says. "It's so absurd that it's almost ridiculous."

Late on Friday, the corporate regulator effectively agreed, granting Patrick Corp a waiver from the rule stating a bidder must match the price paid by any associate in the preceding months.

Insiders say Branson's swift and strategic response to try and stop Patrick marching off with Virgin Blue took Corrigan by surprise and further strained the relationship between the two men.

That their relationship has soured does not surprise fund managers who describe their style as chalk and cheese. Corrigan is seen as the cold, hard numbers man and Branson as the man unafraid to don a lycra bodysuit to publicise his brands.

"You've got two strong willed personalities," 452 Capital fund manager Peter Morgan says. "One hasn't liked the direction the other is taking the company and has tried to tighten its control and the other has kicked back. "

Corrigan's decision to make a hostile bid for Virgin Blue relates to his increasing dissatisfaction with the way chief executive Brett Godfrey has been handling the aviation market. Under Godfrey's guidance, Virgin Blue moved from start-up to controlling more than one-third of the domestic travel sector in just three years.

But since trying to go beyond the 30 per cent "line in the sand" set by Qantas chief executive Geoff Dixon, Virgin Blue's strategy of putting on more flights and cutting fares has failed. The result: two profit downgrades in five months.

When Qantas launched its rival discount carrier Jetstar last year, Corrigan was not too worried. But things have changed. "We clearly have under-estimated the competitive threat that Jetstar brings and we need to address that very urgently," he said after Patrick's annual meeting in Sydney on Thursday.

"What Qantas have done is they've essentially surrounded us. They've got a lower fare, lower service offering at one end and a higher service, higher fare offering at the other. We're caught in the middle and have to work out how better to deal with [that]."

For 30 years, Corrigan has been taking on the establishment and busting cartels. But now he's facing off against someone from a more similar mould to himself.

For all their differences, Corrigan and Branson have a lot in common. Both are self-made entrepreneurs used to fighting battles publicly and both are used to facing off against foes much larger than themselves. This is going to be quite a battle.

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

[HGW]

Eastwest Loco
I agree with your ideas for the way forward for VB. The VB (Southwest) model was competing against a full service QF offering a definate chioce difference. QF has forced the target to shift from them to Jetstar so no matter how much money Jetstar makes (or loses) it is worth it. IMO QF have pulled a brilliant one with this and I take my hat off to GD. VB didn't "take their eye off the target" QF diverted their attention.
I agree totally with the res ansd ticketing system being aligned to Amedeus, etc and you are right with the the interline agreements. The current system being used creates the very strange anomoly of not being able to book a ticket LHR to ADL using VS and DJ as the systems don't talk to each other.
To change would incurr a large cost in infrastructure and more importantly, training. I am not sure they will want that.
The irony of all of this is that VB sought an Australian partner (Patricks) to get the rights to fly the Pacific. Not really worth it in the end, don't you think.

[Eastwest Loco]

Actually HGW, DJ are already resident in Sabre and saleable there, even if the booking gets kicked fairly quickly. This must be for yield management/inventory and load control purposes, but the are there already. It would be very simple to throw a switch and become live resident.

As for the Pacific, they would have been better served staying onshore. Taking on NZ and the rat is one thing. Going head to head with EK is yet another. They have the deepest pockets there are.

Best regards

EWL

[HGW]

EWL
I agree with your sentiments on going against EK. The NZ routes will always remain due to VB receiving huge on-carriage from PB. AN used to get about 30% with VB getting 60% + which is a huge amount even if the loads are light somewtimes. VB also supplys around the same percentage to PB. The PER - WLG is a substantial market from the figures I have seen.
VB needs to be able to 'talk' (ticket wise) with the rest of the world. They are about to introduce WorldTracer which is a good step in the right direction.

[Eastwest Loco]

HGW

I am not aware of World Tracer.

Would you be so kind as to explain what it is, on what systems (web or GDS) it is based and how it works?

Best regards

EWL

[HGW]

WorldTracer is a SITA based system that tracks all lost baggage. If a bag is lost the tag number is logged. The pax can access the system on the web to check the staus of their bag search/location. Almost all international carriers use this as it links their baggage services with all participating airlines via the SITA link. It is similar to the Post office using Post Trak.
The important thing is that as an LCC they will be linked to the rest of the world and is must to have for any interline agreements. Training is carried out in Atlanta USA. VB are about to start using it.

[VH-Cheer Up]

Thanks EWL, HGW, Rescue 1 for the ideas...

So far most of the suggestions have been around distribution and booking systems, not looking at the product itself.

True, keeping the Southwest model keeps it simple and low-cost, but Southwest entered the market with three key attributes:

1. Low prices - competing with Greyhound, not American/USAir/United etc
2. Simple, no frills service. Soda, nuts, that's it.
3. Serving secondary airports where the costs were lower - and no-one competed alongside.

In some ways, Jetstar might be closer to the Southwest model than Virgin Blue.

There aren't too many opportunities to fly between secondaries in Australia. Least, none that would make sense if you play with 737's. And VB passed up on an opportunity to fly between a key secondary pair using a fleet of 32-seaters.

So if the main game stays focussed on primary airports, what else can be done with the product? Would Virgin do better attacking QF in its business heartland by providing something better than economy, with meals service thrown in, slightly wider seats, slightly more legroom than zoo class?

If they restructured the first few rows using a 2 x 3 seat configuration, rather than the conventional 737 J class 2 x 2 seats. and added say 6 inches to the legroom, they would lose far fewer seats than a conventional J class addition.

I think their current seat pitch is 31 inches, they could take out the first twelve rows, replace them with ten rows of slightly wider seats at 2 x 3, offer free meals and drinks, and at 300 a one-way ticket, make around 25% more revenue off the floorspace than if they sold the first twelve rows at an average of $200 per seat. (Thinking Mel-Syd ticket prices here).

Only problem I see is a slight dogleg in the aisle where the config change occurs, but didn't Ansett have that in the 767s without any real problems?

Result would be Virgin offering a "sort of" business class at 20% less than the QF full flexible Y class fare. I reckon all the business people I know would go for that.

The Virgin Blue lounges also need a fix. The current lounges are gross, often filthy, poorly stocked, very noisy, and highly priced. A business version of the lounge (snobs lounge?) might be quiet, offer wireless connectivity, telephones, etc.

Your thoughts, fellow PPruners?

VHCU

[Eastwest Loco]

Thanks HGW - I do know the system It used to be called Bagtrack and was resident in the SITA system going way back to the East West days. Very effective too. We used SITA for a period of time after Australian lost their happy thoughts about us.

Good Univac based systems. IPARS does not cut the mustard for me, although it is easier to use as a ground level ebtrant, particularly with a quickres front end.

My spaniel Meggie could probably make bookings on quickres, but she is a clever girl.

Thanks for the clarification HGW.

VHCU - QFlink and AWA ran 146s with multi class with a dogleg with little or no problem. The easiest way would be to remove one row - throw out the seat pitch over 3-4 rowns and introduce the old TN "Morganiseable" seats that can be used as a 2 or a 3 depending on demand. Simple matter of having a LAME reconfigure on turnaround, and with the extended seat pitch, these could be sold as "blue Zone" seats if the J class demand was not there. One row removed would be all it needs.

Best regards

EWL

[VH-Cheer Up]

EWL - Must admit I was think more of dedicated seats, but reconfigurable seating would give greater flexibility. I seem to remember those seats were a bit unfogiving if you got the centre one in a Y config. Not the go for a trip to the west coast.

Wonder if VB has done much in the way of passenger research about the product. I've flown as SLF with them a few dozen times in the last year and they've never once asked me about my experience or for any suggestions.

Mind you, neither have the other mob.

Fings certainly ain't wot they used to be.

- VHCU

[Buster Hyman]

Simple matter of having a LAME reconfigure on turnaround
LAME's doing the seat change!....Sheer Luxury! In my day, the CSO's did it & got naught but abuse on the radio too! :8

[Eastwest Loco]

LAMEs did indeed do the seat reconfig back then when dinosaurs roamed the earth, but there is nothing to say the swap could not be done by cabin crews, LOCOs or ramp dudes. The single full width bottom cushion would take some if not most of the discomfort away.

Best

EWL

[Wirraway]

Wed news.com.au

Why is Chris verging on a blue?
By Terry McCrann
February 09, 2005

WHAT'S his game? What exactly does Chris Corrigan aim to achieve with his Patrick Corporation's unashamedly opportunistic bid for Dick Branson's Virgin Blue?

On the surface the answer seems obvious, and is composed of three parts. He's aiming to buy cheap.
He's aiming to buy control – moving from Patrick's existing 45.5 per cent stake to the supposedly all-important 50.1 per cent.

And he's aiming to then use that control to change Virgin Blue (VB) operationally and strategically.

All of that is undoubtedly true. The problem, as usual, is 'in the detail'.

Yes, he is certainly buying cheap – arguably super-cheap – at his preferred $1.90, precisely when the target is at the bottom of its cycle.

More on that in a moment, and a lot of silly negative comment about VB's performance, cleverly 'salted' by Qantas's energetic CEO Geoff Dixon and the said Mr Corrigan.

But what if he gets 6 per cent of VB, even 15 per cent – on the pretty solid assumption that Branson won't sell his Virgin Group's (VG) 25.1 per cent stake?

Yes, buying, say, 15 per cent of anything cheap is better than buying it expensive. But in the Patrick scheme of things it really ain't worth a hill of beans.

Ah, but he also wants control – that magic 50.1 per cent. Arguably he already has it; bizarrely he's actually giving up control precisely because of the bid. Albeit temporarily.

More pointedly, if he doesn't have control with his existing 45.5 per cent, he won't – can't – get it with 50.1 per cent. Or arguably even 74.9 per cent – every share other than the 25.1 per cent Branson's VG holds.

The explanation is the detailed agreement between the two 'partners' on the composition of the board. Under that, Patrick gets three positions on the eight-person board, including the chairman who has a casting vote; VG gets two; there are two independents and the CEO Brett Godfrey.

Importantly, Patrick gets to nominate one independent – former TNT CEO and Sydney Airport boss David Mortimer; and VG one – David Ryan. So if we assume that Mortimer is a 'Patrick independent', the Patrick camp has (had) four votes. And with Corrigan as chairman the casting vote.

If we assume that Mortimer is not a 'Patrick independent', Corrigan only has three votes and no control.

The key point is that the takeover can't change this. Whether he's got 45 per cent or 51 per cent, the agreement is the same.

If he controls VB with Mortimer now, he controls it tomorrow; and if he doesn't, he doesn't.

Interestingly, if he does – did – control, he's just given it up. Because of the takeover, he's stepped down from the chair and Ryan, the 'VG independent', has temporarily succeeded him.

That means, on the same logic, control has actually passed to VG plus Godfrey. They can muster four votes, plus the subsequent chairman's casting vote.

Now the possible key to all this is that while the board currently has only eight directors, it can have as many as 10. Perhaps Corrigan wants to vote on two more.

Then he would have a clear five, even without the 'Patrick independent' Mortimer. With a casting vote on a board of 10.

Arguably though, he could do that now with 45.5 per cent; or could have got to almost certain control by buying 3 per cent in the market. And got there much quicker.

Especially as while expressing unqualified support for Godfrey as CEO, he's made it clear he believes structural and operational change is urgent – a belief that is a vote of no confidence in Godfrey.

There are three difficulties for him in this argument.

First, he has personally signed off on everything, everything, that Godfrey has proposed. Including what's ascribed as 'the problem' – the big expansion in VB's capacity last year. Every decision of the board, from the start, has been unanimous.

Secondly, there is no 'problem'. There's been a lot of silly comment in the wake of VB's profit downgrade.

Yes, the huge ramp-up of capacity – a thumping 45 per cent of additional seats last year – ran smack into a 'perfect storm'. Jetstar and oil prices.

But what's the cost? Profit projected as being just 10-15 per cent down on 2004's $158 million.

A profit – the 2004 one – which made relatively small VB the 15th most profitable airline in the entire world. And represented a gross operating margin of 30c in the revenue dollar – only the fabled Ryanair at 38c was higher.

This year VB's operating margin will still be in the mid-to-high 20s. And with capacity bedded down, having taken the pain on ticket pricing, Jetstar's worst impact absorbed, and (hopefully) the fuel price stabilising, this could be the worst.

Further importantly, VB is already doing what Corrigan wants it to – adopting a strategy for the business market. But not going business class.

All this is understood at the board level – including obviously by the three directors, including Corrigan, from the bidder.

So to repeat: apart from picking up some shares cheap, what's the former investment banker's game?

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

[coaldemon]

If Corrigan gets 50.1% can't he then get rid of Godfrey and put in his new german CEO which would give him another seat on the Board? Sorry Terry looks really straight forward to me as to what is happening. Control is effectively about to pass to Corrigan and a new more Patrick aligned management will be put in place. Very simple really

[wirgin blew]

A profit – the 2004 one – which made relatively small VB the 15th most profitable airline in the entire world. And represented a gross operating margin of 30c in the revenue dollar – only the fabled Ryanair at 38c was higher.

Ladies and Gents this sums it all up. At the end of the day the object in life is to sell high and buy low. CC thought he could pick up an airline for less than what it is actually worth. He has obviously been reading the great man's (KP) book. We have since seen that other people ie SRB see VB as being worth far more than the $1.90 that CC has offered.

As for BG selling his shares, VB have trading windows that are open for certain times of the year for staff to sell and I think this was one of them.

Lastly as far as trying to entice the business traveller. Its not about enticing the traveller with gimmicks for an hour flight. Its about enticing the travellers accounting dept with cheap fares at suitable hours from suitable destinations which I believe VB is doing.