View Full Version : Richard Branson "Business Sunday" interview (trancript)

10th Nov 2002, 05:06
"Business Sunday" transcript

10 November 2002
Michael Pascoe

A deal finally, between Virgin Blue, Patrick Corporation, Sydney Airport and the various entities of Macquarie Bank which effectively control the airport.

The past six months or so have seen a lot of hot air and a lot of shadow boxing by the various parties over whether Virgin Blue and Sydney Airport had a deal on Virgin Blue using part of the old Ansett terminal.

This degenerated into stunts, name-calling and legal action, but rather than make the lawyers rich, a commercial settlement has been struck and Virgin Blue will fly from its new facilities before Christmas and the holiday period.

Virgin Group founder Sir Richard Branson talks to Michael Pascoe.

Sir Richard Branson, Virgin Group: I think that I'm not a great believer in duopolies or monopolies or anything, I think, the more competition the better. If there ends up only room for two airlines in a particular country, then we owe it to the travelling public to make sure that we don't get greedy and that, even if we could afford to charge more we don't because it's actually not good business sense for us to do it, I mean the most profitable airlines in the world are South West Airlines, Easy-Jet, Orion Air, Virgin Blue, those airlines that keep their costs base low and they keep very, very, very low prices for the travelling public.

Reporter: So Virgin Blue is one of the world's most profitable airlines, how profitable is it?

Branson:Well, I've set our staff the challenge of seeing whether we can get over a hundred million dollars in this year's trading. I'm absolutely confident that they'll achieve that...

Reporter: That's bottom line, cash profit?

Branson: Net profit but an airline needs to be very profitable to be able to re-invest in new routes, I mean we're talking about ordering thirty to forty jets and that order will most likely be announced in the next four or five weeks and so we were talking about big investments in big route expansions and making sure that we can fill in the gaps in Australia and overseas that we're not already flying to and there are still plenty of routes where the public are over-paying.

Reporter: So the plane order then is the last thing to lock up before the float?

Branson: The plane order is the last thing to lock up before the float.. we have a couple of extremely attractive deals on the table. It's the best time perhaps in the history of aviation to be buying new planes because obviously after September the 11th. there aren't many airlines in a position that where they are expanding.. most airlines are contracting so we're confident that, once again, by ordering thirty or forty new planes, we can drive our cost base even lower.

Reporter: How big are your expansion plans? There's been a report that you're going to target the British Airways/Qantas Joint Services Agreement next year on the Kangaroo Route?

Branson: Well Virgin Atlantic, I hope, will be flying all the way to Australia next year and we've got permission from the Australian Government, we've got permission from the British Government, and Hong Kong look like they're going to be flexible, so we will finally be able to connect up Virgin Blue with Virgin Atlantic and that's something we've long wished to do and it'll be very exciting.

Reporter: When next year are your aiming for then?

Branson: As soon as we can get the final permissions in place. The Hong Kong route is effectively a complete monopoly between Qantas and British Airways and Pacific Cathay who are a part of that alliance and that's resulted in very high air fares and so the sooner we can get up and running and competing, the better.

Reporter: Necessarily through Hong Kong, or would you like to go through another Chinese port?

Branson: We could consider Virgin Atlantic also flies to Shanghai, Bangkok's obviously another option but Hong Kong is the place we feel needs the competition first and that's where we're hoping to open up first. At the same time there'll be routes that Virgin Blue will be flying internationally out of Australia but more likely the places like Fiji and Bali and other places like that.

Reporter: Well as part of that route then, Australia, UK via Hong Kong, will you challenge the Qantas BA Joint Services Agreement that allowed them to collude on timetables, fares?

Branson: I mean it seems inconceivable that - well it's not inconceivable because it's allowed but it seems unbelievable that Qantas and British Airways are allowed to collude on fares and match fares decide how to set their fares on certain routes and I'd be baffled if the ACCC allowed them to continue to do so when that Agreement is up in a few months time, so we're certainly putting in a submission to the Commission Authority so say in the interests of the consumer and competition they should be competing not colluding. We had a similar battle with American Airlines and British Airways across the Atlantic - all the competition authorities ruled that to be anti-competitive and we would expect the same with Qantas and British Airways.

Reporter: Would you oppose any deal between Qantas and Air New Zealand on the Tasman Route?

Branson: We'd certainly oppose any deal between Qantas and Air New Zealand on the Tasman Route because again, it's obviously not in the interests of the travelling public. There may be ways in which we could negotiate with the Commission to open up the Tasman Route and maybe try to over some of the worst of the competitive issues, in the negotiations with the ACCC but we would most definitely oppose it.

Reporter: Virgin Atlantic, Virgin Blue, what would be the relationship there, just cousins, or something closer?

Branson: Very friendly cousins.. I mean obviously similar shareholders and obviously we'll work together to try to help each other but we have got different shareholders, I mean in Virgin Blue you've got Chris Corrigan as one of our major shareholders, in Virgin Atlantic you've got Singapore Airlines as one of our major shareholders and so in a working - in a friendly relationship seeing how we can help each other.

Reporter: The Virgin Blue float will be totally Virgin Blue, no other Virgin interests outside interests airline bundled into it?

Branson: No I mean the idea is to bring in the public into Virgin Blue sometime in the first half of next year and it will be a stand alone float of Virgin Blue and I think we've pretty well got everything in place except for the crow that's making a lot of noise above me, to get that float away.

Reporter: Another Australian relationship while you're in the country, with AMP, it seems they want to get out of their Virgin Direct/Virgin money joint venture in the UK with you, what have they said?

Branson: Well they haven't said to us that they want out of the relationship they've got with Virgin Direct, I mean they have said that they're going to retreat somewhat from the UK because they
have general investments in the UK have not gone as well for them as they'd hoped but their investment in Virgin money has gone well and if they want out obviously we'd be happy to buy them out but they haven't actually said that they want out.

Reporter: Do you need another partner in there if it's not AMP, would you want someone else?

Branson: I don't know, it's not something which we like to consider one way or the other, I mean they haven't actually said to us that they want to completely retreat to Australia, they may well want to keep their investment in Virgin Money because it's been good for them but if they decide they want to sell their shares back to us we'd certainly be buyers of shares. Whether we - then at some subsequent time brought in another partner, that would be for the distant future to decide.

Reporter: Has it been a worthwhile business, is it worthwhile to you?

Branson: Well it's been very successful and AMP have done very well out of it.

Reporter: Is it profitable?

Branson: It will be profitable and I think Eyk and Virgin Money are two of the most successful financial service companies in the UK, they've grown very rapidly and we're creating very good shareholder value but the more customers that you acquire the more it costs and therefore, we can almost decide when we want to be profitable if we decide not to acquire new customers we can be very profitable today but at the moment we're still in a growing phase therefore it will take, in another year to be actually bottom line profitable.

Reporter: And given the AMP's problems in the UK, it can't afford profitless prosperity?

Branson: Well it's not costing AMP any money so, I mean, AMP can either stay in or we'll buy their shares for them and they can make some money by selling their shares but they haven't indicated to us that they actually want to sell and want out.

Reporter: They could get out at a profit, you'd pay them a profit to get out?

Branson: We'd pay them a profit to get out if they wanted to get out.

Reporter: How much?

Branson:: I'm not going to get into negotiation with AMP on television.

Branson:: I'm not going to get into negotiation with AMP on television.