GAFA
24th Nov 2010, 08:32
From the Brisbane Times,
Virgin Blue would continue to aggressively compete with budget airfares despite promising a "game change" as it threatened Qantas' share of the corporate market, shareholders were told today.
Nearly 10 years after Virgin Blue sparked budget airfare price wars in Australia, the airline's chief executive John Borghetti said the leisure market had become too turbulent and Virgin Blue wanted to spread its wings in the corporate sector.
Mr Borghetti told shareholders at the company's annual general meeting today that a “game change” was about to start and Qantas was firmly in the airline's sights.
Advertisement: Story continues below Mr Borghetti announced two more Airbus A330-200 planes would be added to the fleet, in addition to two A330s announced earlier this month, but would not disclose whether they would be purchased or leased.
He also reiterated Virgin Blue’s strategy to increase its share of the corporate market from 10 to up to 20 per cent within the next two years.
It has already jumped on the flying kangaroo, announcing last week that it had stolen the AFL sponsorship from Qantas – a contract Virgin Blue estimates will generate $8 million.
Mr Borghetti said Virgin had forged a strong position in the leisure and small-medium business markets but it had become too over reliant on those segments,which were far less lucrative and more volatile at times of downturn.
“Meanwhile ... the corporate and business end of the market is effectively controlled by one player, one player with a significantly higher cost base,” Mr Borghetti said.
Focusing the airline as a budget carrier had become too dangerous, he said, as evidenced during the global financial crisis.
“I believe it is [too dangerous] and to some extent it’s been shown,” he said after the company's annual general meeting in Brisbane.
“Clearly at the beginning of this year when there was a downturn in leisure spending, the leisure market in airfare felt it the most, whereas the corporate sector kept really travelling normally.
“So it is prudent and it is logical for us to hedge our revenue base to off-set any potential that you might have at any one end of the market.”
However, Mr Borghetti said the airline would continue to aggressively compete with budget fares for holidaymakers.
“It would be wrong for anybody to think that we will not be competing strongly at the leisure end of the market,” he said.
“From our perspective we have everything to gain from this, our competitors have everything to lose.”
Mr Borghetti said two additional A330s would operate out of Perth, but would not reveal which east coast cities they would fly to.
Virgin Blue would also refurbish its terminal at Brisbane Domestic Airport, he said.
Mr Borghetti said customers would notice construction zones at the terminal from as early as tomorrow and work was due to be completed by next March. However, he did not reveal the extent of the works or whether it would affect check-in and boarding procedures.
He also would not be drawn on discussions with IT company Navitaire, which was responsible for the system outages in September that cost the airline an estimated $15-20 million.
Virgin Blue would continue to aggressively compete with budget airfares despite promising a "game change" as it threatened Qantas' share of the corporate market, shareholders were told today.
Nearly 10 years after Virgin Blue sparked budget airfare price wars in Australia, the airline's chief executive John Borghetti said the leisure market had become too turbulent and Virgin Blue wanted to spread its wings in the corporate sector.
Mr Borghetti told shareholders at the company's annual general meeting today that a “game change” was about to start and Qantas was firmly in the airline's sights.
Advertisement: Story continues below Mr Borghetti announced two more Airbus A330-200 planes would be added to the fleet, in addition to two A330s announced earlier this month, but would not disclose whether they would be purchased or leased.
He also reiterated Virgin Blue’s strategy to increase its share of the corporate market from 10 to up to 20 per cent within the next two years.
It has already jumped on the flying kangaroo, announcing last week that it had stolen the AFL sponsorship from Qantas – a contract Virgin Blue estimates will generate $8 million.
Mr Borghetti said Virgin had forged a strong position in the leisure and small-medium business markets but it had become too over reliant on those segments,which were far less lucrative and more volatile at times of downturn.
“Meanwhile ... the corporate and business end of the market is effectively controlled by one player, one player with a significantly higher cost base,” Mr Borghetti said.
Focusing the airline as a budget carrier had become too dangerous, he said, as evidenced during the global financial crisis.
“I believe it is [too dangerous] and to some extent it’s been shown,” he said after the company's annual general meeting in Brisbane.
“Clearly at the beginning of this year when there was a downturn in leisure spending, the leisure market in airfare felt it the most, whereas the corporate sector kept really travelling normally.
“So it is prudent and it is logical for us to hedge our revenue base to off-set any potential that you might have at any one end of the market.”
However, Mr Borghetti said the airline would continue to aggressively compete with budget fares for holidaymakers.
“It would be wrong for anybody to think that we will not be competing strongly at the leisure end of the market,” he said.
“From our perspective we have everything to gain from this, our competitors have everything to lose.”
Mr Borghetti said two additional A330s would operate out of Perth, but would not reveal which east coast cities they would fly to.
Virgin Blue would also refurbish its terminal at Brisbane Domestic Airport, he said.
Mr Borghetti said customers would notice construction zones at the terminal from as early as tomorrow and work was due to be completed by next March. However, he did not reveal the extent of the works or whether it would affect check-in and boarding procedures.
He also would not be drawn on discussions with IT company Navitaire, which was responsible for the system outages in September that cost the airline an estimated $15-20 million.