View Full Version : Virgin Blue and SACL Agreement - T2

5th Nov 2002, 22:47

Virgin, Sydney Airport deal


SYDNEY Airport Corporation and discount airline Virgin Blue have reached an agreement which would allow Virgin's passengers to use the former Ansett terminals from early December.

Under the deal over access to Terminal 2 (T2), Virgin Blue would take six gates on a priority basis, with access to up to another six common use gates. Virgin Blue said it guaranteed to have 4 million passengers pass through the terminal in the first 12 months, and 4.5 million each year thereafter.
As part of the agreement Virgin Blue had undertaken to withdraw any litigation against Sydney Airport regarding access to the terminal.

Sir Richard Branson's Virgin Blue had lodged documents in the NSW Supreme Court in August alleging Sydney Airports Corporation Ltd (SACL) has reneged on a hand-shake agreement on the use of the terminal.

The agreement was said to have taken place before the airport was sold to a Macquarie Bank-led consortium in June.

However, SACL said no such deal had been struck between the airline and the airport.

It said Sir Richard's claims were unsubstantiated and that meeting between the Virgin boss and SACL chief executive Tony Stuart were "nothing more than an informal courtesy call".

Sir Richard previously said the airport wanted "nearly triple" the $17-$18 million the airline was prepared to pay for the terminal space, costs that would have to be passed onto customers.

Mr Stuart said the agreement with Virgin Blue meant between six and seven million passengers would now be able to take advantage of the T2 facility.

"This agreement is a sound commercial outcome for Sydney Airport and its shareholders," Mr Stuart said.

"T2 will now become more efficient through a better utilisation of space capacity.

"The agreement will result in an increase in revenue for the airport without any additional material cost or capex requirement, plus the capacity to grow the domestic market even further."

The completion of the agreement meant five airlines would now be using T2, with SACL planning an upgrade in retail and catering facilities at the terminal, he said.

SACL took ownership of T2 on July 1, 2002, and following the completion of this deal a total of 13 out of 18 gates would have been assigned.

The additional five gates were available for either increased capacity for growth of the existing domestic airlines or a prospective third entrant, SACL said.

SACL said it was planning other revenue generating opportunities for the domestic express terminal.

Macquarie Airports managing director Kerrie Mather said following the completion of this agreement total full-year revenue for T2 was estimated at $50 million on an annualised basis from the commencement of Virgin Blue's operations in the terminal.

The combination of the new revenue sources from T2 for 2003 and other initiatives was providing confidence in Macquarie Airport's forecast earnings before interest, tax, deprecation and amortisation (EBITA) for SACL of $377.4 million for 2002/03.

Going Boeing
5th Nov 2002, 23:56
I wonder if they got a cheaper deal than QF for the gates in T2?

6th Nov 2002, 02:39

Wed, 06 Nov 2002, 02:31pm EDT
Virgin Blue Gains Access to Sydney Terminals, Will Start Overseas Flights
By Margreet Dietz

Sydney, Nov. 6 (Bloomberg) -- Virgin Blue Airlines Pty. ended a dispute with Sydney Airports Corp. to gain access to more gates at the nation's largest airport, allowing Australia's No. 2 carrier to expand its fleet and start international flights.

The discount carrier founded by U.K. billionaire Richard Branson, which operates from a temporary Sydney terminal so small passengers sometimes line up outside, has gained priority access to six gates at Ansett Holdings Ltd.'s former terminal, and can get another six. The temporary terminal has five gates.

"This is what Virgin Blue really needed,'' said Albert Hung, who manages A$800 million ($449 million) at Tower Asset Management Australia Ltd.

Virgin Blue can now go ahead with an expansion of its 28 Boeing Co. aircraft fleet and raise its 18 percent market share by taking business from Qantas Airways Ltd. It's considering whether to add as many as 12 planes from Boeing or Airbus SAS.

The agreement "will allow Virgin Blue to fast-track its fleet expansion plans,'' Chief Executive Brett Godfrey said in a statement. "Virgin Blue can channel its resources into the international arena.''

Virgin Blue plans to start international flights at the end of the first half of 2003, Godfrey said.

Shares of Patrick Corp., which owns half of Virgin Blue, rose as much as 3.2 percent to A$15.07, and traded at A$14.60 as of 12:33 p.m. Sydney time. Macquarie Airports Group, the largest owner or Sydney Airport, gained as much as 7.2 percent to A$1.04. Qantas shares fell as much as 0.5 percent to A$3.81.

Pacific Routes
Branson will today release a tender document to solicit interest to help select the airline's first Pacific routes.

Qantas, Virgin Blue's largest domestic competitor with about 80 percent of the market, last month started operations of a new single-class international unit called Australian Airlines to lure budget travelers on flights to Osaka, Fukuoka, Nagoya, Taipei, Hong Kong and Singapore.

Brisbane-based Virgin Blue started operations in Australia in August 2000 with two planes and more than doubled its market share after the collapse of Australia's No. 2 airline, Ansett, in September 2001.

The discount carrier has moved into larger terminals previously used by Ansett at many of the nation's airports.

Virgin Blue plans to sell shares in an initial public offering next year.

Passenger Guarantee
Under today's agreement, Virgin Blue guaranteed it will have at least 4 million passengers pass through the former Ansett terminal, now dubbed T2, in the first year and at least 4.5 million passengers from the second year, Sydney Airports said.

A Macquarie Bank Ltd.-led group bought Sydney Airports from the government in June. After the purchase, Virgin Blue claimed Sydney Airports and its new owners reneged on an A$18 million agreement for access to some of the 18 gates at T2.

"Branson maybe helped a lot to make sure that the deadlock wouldn't hinder the progress of their expansion plans,'' Tower's Hung said.

The agreement is for 17 years and has annual charges comparable to those negotiated in April, Virgin Blue said. It will also allow the discount carrier to use its own information technology and baggage systems, the airline said.

Virgin Blue withdrew a lawsuit against Sydney Airports regarding access to the terminal, Sydney Airports said. Macquarie Airports said in a separate statement that revenue for T2 will be A$50 million for the year ending Dec. 31, 2003.


6th Nov 2002, 03:39
So let me get this right. We now have QantasLink B717's and Dash 8's, as well as Rex SF34's and Horizon's Metros competing for space with Virgin Blue B737's. Not to mention numerous buses driving around delivering passengers. Just can't see how it will work. Overload me thinks

6th Nov 2002, 06:11

AAPNew Virgin Blue airport deal
By Caroline Gammell
November 06, 2002

VIRGIN Blue has resolved its six-month feud with Sydney Airports Corporation Ltd (SACL), signing a 17-year deal for access to the former Ansett terminal.

The budget airline's founder Sir Richard Branson and SACL sealed the deal at midnight (AEDT) last night.

Sir Richard today said Virgin Blue hoped to move to terminal two at Sydney's Kingsford Smith Airport by mid-December, in time for the Christmas rush.

He said the deal was a victory for the travelling public and claimed the agreement was pretty much the same as an original proposal made six months ago.

"Fares will not go up by one cent," he said.

"We have not made any concessions and are now going to bury the hatchett with Macquarie Bank."

Virgin Blue claimed that after the airport was sold to a Macquarie Bank-led consortium, SACL's management reneged on a handshake deal with Sir Richard to lease the terminal.

In a mock Indian ceremony today, Sir Richard, wearing a colourful feathered headdress, and SACL chief executive Tony Stuart laid a stone outside the old Ansett terminal, symbolising the burying of the hatchett.

"May it never be undug," the carved stone read.

Surrounded by blonde models in war paint and Indian outfits, the two men posed happily for the cameras.

"I am very pleased with this deal," said Mr Stuart.

"(Terminal) 2 is too good a dancing floor for us not to be dancing together."

Mr Stuart said the deal was good for both Virgin Blue and SACL, but both he and Sir Richard would not say why it took so long to resolve the access issue.

"The important thing is that it has been a very tough six months but there were very many reasons why this has taken so long," said Virgin Blue chief executive Brett Godfrey.

"We were prepared to take this to the court steps, but so far as we are concerned we have got a great result."

Sir Richard said some of the people involved had taken the dispute personally, referring to Patrick Corporation chief executive Chris Corrigan, whose company has a 50 per cent stake in Virgin Blue.

Mr Corrigan had earlier accused Macquarie Bank of trying to "extort ridiculous charges from the travelling public".

"The fact was that Chris felt that he might have been let down personally, he felt very strongly about it, but we have got to move forward if we are going to work (with SACL) for the next 17 years," Sir Richard said.

The company chiefs said Virgin Blue hoped to expand to 40 aircraft but would remain a single-class airline.

Sir Richard also confirmed a frequent flyer deal was under discussion with Star Alliance.


6th Nov 2002, 19:42
Thurs "The Australian"

Virgin's blue ends in a big victory roll

November 07, 2002
MACQUARIE Bank blinked first and capitulated to Richard Branson and Chris Corrigan over the lease terms for Virgin Blue on the former Ansett terminal at Sydney airport.

The extent of the surrender is breathtaking, but can be explained by the fact that the bank and its troubled spin-off Macquarie Airports stood to lose rent at a rate of about $25 million a year from the airline and retail concessions in the terminal if the stand-off continued.

Virgin gets six gates exclusively and access to another six in the near-new terminal, although it originally asked for nine. The lease is for 17 years, whereas Virgin was happy to do its handshake deal in April for 10 years plus an option for another five.

The rent starts at $13 million a year and builds to $18.6 million, which is the lease agreed in the deal Virgin boss Brett Godfrey and half-owner Patrick Corp's Corrigan struck in April with former Sydney Airports Corp chairman David Mortimer.

The toll Macquarie wanted to charge Virgin of $6.50 a passenger is only true for the first two million travellers, but falls away to just 80c at four million to give the $18.6 million annual lease figure.

Virgin is contracted to have passengers moving through its terminal at a rate of four million a year by the end of 2003. The airline claims it is nearly there already.

Although the parent bank appears to have intervened to break the stare-down and get the rent flowing, the reason SACL and its chief executive Tony Stuart resisted Virgin for so long – on the grounds Singapore Airlines would come in as a third domestic carrier in Australia and require terminal space – is no longer valid.

Stuart was prepared to keep the terminal empty while he waited for Singapore. It never came.

A skilled and aggressive advertising campaign by Branson and Corrigan aimed at the Macquarie Bank parent's Achilles heel seems to have worked. As its share price sank in September and October to a three-year low, the bank's need to do a deal became overpowering.

One rumour that did the rounds during the stand-off was that Corrigan might do a deal with Singapore to try to persuade it to buy into Virgin. Although Singapore was thought to be interested in a domestic presence in Australia to feed passengers on to its international services, it wasn't interested in committing commercial suicide.

It appears that Corrigan did have some discussions with the Singaporeans a month or two back, but they seem happy to use the city-state as a hub rather than Australia. Also, Virgin Blue's single-class cabins don't fit the full-service philosophy of Singapore.

So Singapore isn't a starter in Australia. It took Stuart a few months to work this out and in the meantime the rent wasn't being paid.

Now that Virgin has effectively secured the spare gates that Qantas hasn't got in the terminal, Singapore can't enter the Australian domestic market for the next 17 years even if it changed its mind.

Singapore's apparent decision to stay away from Australia's domestic market may have something to do with the application by its 49 per cent carrier, Virgin Atlantic, to fly from Hong Kong to "one or two" Australian cities.

Yesterday Stuart inadvisedly accepted Branson's invitation to take part in yet another stunt, smoking a peace pipe and burying a hatchet to signify the end of hostilities. The peace has been achieved, but overwhelmingly in Virgin Blue's favour. The float early next year of about 20 per cent of Virgin is virtually guaranteed lift-off.

Surrounded by models dressed as Red Indians, Stuart had smoke blown in his face and watched Branson put a short-handled axe under a concrete slab.

It was all a bit of fun, but Branson in Sydney and his partner Chris Corrigan in Perth on other business yesterday were definitely having the last laugh.

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Virgin Atlantic sets its sites on HK-Australia flights

Virgin Atlantic plans to launch daily flights between Hong Kong and Australia in mid 2003.

Speaking to Travelbiz in Melbourne yesterday, Richard Branson said informal talks had been held with the Hong Kong government and formal negotiations would begin in the UK in January.

The carrier intends to use its newly delivered 311-seat A340-600s - the world’s longest aircraft - to offer daily services ex Australia, connecting to its Hong Kong-London flights.

Branson said Virgin Atlantic would also look to operate the A380 ‘super jumbo’ to Australia once it took delivery of the aircraft in 2006.

He said the airline would decide on which Australian ports it would operate to within the next two months.

Virgin Atlantic’s Hong Kong-London services benefited from significant Australian feed provided by Ansett International. Since the Australian carrier’s collapse, Branson claimed Onworld alliance members Qantas, British Airways, and Cathay Pacific had enjoyed a “triopoly” on the route.

“As a result, airfares are very high between Hong Kong and Australia and if Virgin Atlantic gets in there to compete it will be good for the public.”

Branson said Virgin Blue was also considering 18 different ports for international expansion, including Hong Kong.

“[Virgin Atlantic and Virgin Blue] could operate a bit like Qantas and Australian Airlines,” he said.

The Virgin chief claimed Bali remained another option, despite last month’s bombings in Kuta.

“Bali needs all the support can get so I would like to see that on the list as well. One incident shouldn’t be allowed to destroy a destination.”

Meanwhile, Virgin Atlantic has also set its sites on fighting any renewal of the Qantas-British Airways join services agreement (JSA) on the Kangaroo route.

The 10 year agreement, which allows for the sharing of profits and co-ordination of schedules on the route, is due to expire in June 2005.

Branson said the airline had already approached the ACCC and intended to hold further discussions over the next 12 months.

“Obviously it is stupid that the two biggest carriers are allowed to collude on fares.”