Wirraway
30th Aug 2002, 17:13
Sat "The Australian"
Virgin hit man's aim is true
Mark Westfield
August 31, 2002
WHEN Richard Branson fires both barrels, he doesn't miss. Macquarie Bank and Sydney Airports Corp (owned 53 per cent by bank listed vehicles) are full of lead shot.
If the bank and SACL boss Tony Stuart thought they had been roughed up a fortnight ago by Chris Corrigan, the managing director of Patrick Corp, which owns 50 per cent of Virgin Blue in Australia, then Branson's brazen use of shock tactics has left them even more dazed and rattled.
The situation, though, is probably more complex than it appears. It may be more than a straightforward stoush over terminal access for Virgin Blue. Corrigan and Branson insist that they have a deal with Stuart and airport management for nine of the 18 gates in the former Ansett terminal in Sydney.
Stuart insists there is no deal and hasn't buckled yet in his offer of only four dedicated gates with Virgin sharing the remaining uncommitted gates with possible new entrants. Qantas has opportunistically grabbed six non-exclusive gates for its regional services.
Virgin is suing, and has published the 110 or more points of the agreement said to have been struck on April 18.
This brawl is being conducted through the media and now the courts in the giant jumbo jet shadow of a player that hasn't appeared yet: Singapore Airlines.
Qantas and Virgin are highly sceptical, in public at least, that Singapore would expose itself to huge potential losses by taking on Qantas and Virgin.
The history of third airlines in Australia is that one of them, usually the newcomer, goes broke quickly.
Even a wealthy carrier like Singapore hasn't unlimited resources, or certainly money to fritter away on an ultimately futile exercise. Even if it did carve out a 10 or 15 per cent market share, mainly in the business and first class market at Qantas's expense, the set-up costs and hefty operating losses for years would not justify the marginal boost the airline might get from feeding more passengers into its international network.
Logically, if Singapore were to move into Australia it would buy into an existing business. It would be able to control its costs and get a running start with a good slice of market share.
It had its best opportunity with Ansett last year, but resisted the temptation. Singapore was already being burned on its investment in Air New Zealand and could see some big costs recapitalising the struggling Ansett.
Today, the obvious candidate is Virgin Blue, which has 22 per cent of the market and is making money – not much, but enough to suggest it is capable of earning more once its fleet expansion is completed.
When the scenario of Singapore buying out either Virgin or Patrick is put to either of the shareholders they declare they are not sellers. Singapore may be foxing with its intentions, because so long as there is a threat that it might enter Australia, Qantas's share price is capped and it is stopping Qantas and Virgin tying up the Ansett terminal.
Branson was talking yesterday about his airline's expected listing next year, Plan A, in which the UK Virgin parent and Patrick would each sell 10 per cent into the float. Plan B could be for Virgin to sell altogether, and by talking up the float, Branson is also talking up the price. Is he attempting to get some tension between a mooted float value, and a price from a trade buyer?
If Singapore were to buy into Virgin (it could buy British Airways' stake in Qantas, but have little say in running the airline), then the issue over gates would die.
On the surface, the spat over terminal space has the appearance of a farmyard cockfight, but there is a bigger play beneath.
It will decide whether Singapore does enter Australia, and whether Chris Corrigan will challenge Qantas's Geoff Dixon for supremacy of the skies.
[email protected]
Virgin hit man's aim is true
Mark Westfield
August 31, 2002
WHEN Richard Branson fires both barrels, he doesn't miss. Macquarie Bank and Sydney Airports Corp (owned 53 per cent by bank listed vehicles) are full of lead shot.
If the bank and SACL boss Tony Stuart thought they had been roughed up a fortnight ago by Chris Corrigan, the managing director of Patrick Corp, which owns 50 per cent of Virgin Blue in Australia, then Branson's brazen use of shock tactics has left them even more dazed and rattled.
The situation, though, is probably more complex than it appears. It may be more than a straightforward stoush over terminal access for Virgin Blue. Corrigan and Branson insist that they have a deal with Stuart and airport management for nine of the 18 gates in the former Ansett terminal in Sydney.
Stuart insists there is no deal and hasn't buckled yet in his offer of only four dedicated gates with Virgin sharing the remaining uncommitted gates with possible new entrants. Qantas has opportunistically grabbed six non-exclusive gates for its regional services.
Virgin is suing, and has published the 110 or more points of the agreement said to have been struck on April 18.
This brawl is being conducted through the media and now the courts in the giant jumbo jet shadow of a player that hasn't appeared yet: Singapore Airlines.
Qantas and Virgin are highly sceptical, in public at least, that Singapore would expose itself to huge potential losses by taking on Qantas and Virgin.
The history of third airlines in Australia is that one of them, usually the newcomer, goes broke quickly.
Even a wealthy carrier like Singapore hasn't unlimited resources, or certainly money to fritter away on an ultimately futile exercise. Even if it did carve out a 10 or 15 per cent market share, mainly in the business and first class market at Qantas's expense, the set-up costs and hefty operating losses for years would not justify the marginal boost the airline might get from feeding more passengers into its international network.
Logically, if Singapore were to move into Australia it would buy into an existing business. It would be able to control its costs and get a running start with a good slice of market share.
It had its best opportunity with Ansett last year, but resisted the temptation. Singapore was already being burned on its investment in Air New Zealand and could see some big costs recapitalising the struggling Ansett.
Today, the obvious candidate is Virgin Blue, which has 22 per cent of the market and is making money – not much, but enough to suggest it is capable of earning more once its fleet expansion is completed.
When the scenario of Singapore buying out either Virgin or Patrick is put to either of the shareholders they declare they are not sellers. Singapore may be foxing with its intentions, because so long as there is a threat that it might enter Australia, Qantas's share price is capped and it is stopping Qantas and Virgin tying up the Ansett terminal.
Branson was talking yesterday about his airline's expected listing next year, Plan A, in which the UK Virgin parent and Patrick would each sell 10 per cent into the float. Plan B could be for Virgin to sell altogether, and by talking up the float, Branson is also talking up the price. Is he attempting to get some tension between a mooted float value, and a price from a trade buyer?
If Singapore were to buy into Virgin (it could buy British Airways' stake in Qantas, but have little say in running the airline), then the issue over gates would die.
On the surface, the spat over terminal space has the appearance of a farmyard cockfight, but there is a bigger play beneath.
It will decide whether Singapore does enter Australia, and whether Chris Corrigan will challenge Qantas's Geoff Dixon for supremacy of the skies.
[email protected]