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Old 4th Sep 2008, 13:40
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Virgin Buai

From today's Oztralian ....


Virgin Blue expands reach to PNG

Steve Creedy, Aviation writer | September 04, 2008

VIRGIN Blue intends to take on Air Niugini as it expands its reach to Papua New Guinea.

The airline has applied to the International Air Services Commission for 900 seats each way, each week between Brisbane and Port Moresby, using Boeing 737-800s operated by Pacific Blue. It told the commission it wanted to start four services a week from November 1 and a fifth within a year. The new Pacific Blue service comes as the airline is expanding into Western Australia to take advantage of the resources boom.

It will also establish a jet crew base in Sydney, eventually basing about a third of its fleet there and creating up to 1000 jobs.

After a bleak period in which its share price fell from $1.16 to under 50c, the future may be looking brighter for Virgin.

Chief executive Brett Godfrey believes a share overhang from a distribution to Toll Holdings shareholders has cleared and oil prices appear to heading down, even if jet fuel prices appear reluctant to follow suit.

Airline stocks generally have been buoyed by the lowest crude oil prices in almost five months.

Virgin shares rose 4.5c to close at 55.5c yesterday while Qantas shares closed up 11c at $3.64.

UBS Investment Research, which rates Virgin as a buy with an 80c price target, said current fuel and currency spot scenarios would see Virgin's earnings move from a break-even position to a $38 million net profit.

UBS's published forecast assumes jet fuel prices of $US135 per barrel, compared to a spot price of $US125, and an Australian dollar at $US89c, compared with a current spot of $US83c.

The investment bank said both airlines had "reasonably similar" positions for currency and fuel hedging. It said the current spot prices would also see Qantas forecasts upgraded by 43 per cent and implied only a 25 per cent fall in profitability from the record 2008 financial year.

"Each further $1 per barrel fall in jet fuel equates to circa $25 million and $6 million additional pre-tax earnings for both Qantas and Virgin Blue, respectively," UBS analysts Simon Mitchell and Ramoun Lazar said.
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Old 5th Sep 2008, 00:33
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How do they get a spot barrel of US$125? when the price is US$107??
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Old 5th Sep 2008, 00:42
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Oil price does not directly reflect turbine fuel price. There is a "refiner's margin" that varies between $10-$40 dollars a barrel on top of the base oil price. Supposed to go towards the extra cost of actually producing avtur and it's higher quality etc. It is also sometimes used as a profit enhancing tool, when refining capacity for the product is low, the "margin" suddenly becomes higher.....

At oil's peak price of about $145 or so not long ago, turbine fuel was $185 per barrel.
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Old 5th Sep 2008, 00:45
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Spot price = buy now from some one who paid $125 some time ago. $107 is agreed price for a barrel in the future.
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Old 5th Sep 2008, 02:35
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Regardless of the price of gas, this could have serious implications for Air Niugini.
The long honey moon may be about to end for Air Niugini. In reality I guess it was only going to be time b4 someone else moved in on the POM-BNE route. Given the state of the PNG resources boom at the moment, I recon it will be good timing. Hopefully it will also boost tourism for PNG.

Given the way Air Niugini is being run at the moment, Virgin will just sh!t all over Air Niugini. Funny thing is that the PNG government approved this, and they fully own Air Niugini. Maybe it's time the PNG government sold Air Niugini, it may be the only option given the amount of dead wood in all levels of Air Niugini.

The other problem is going to be availability of gates at POM. At the moment there isn't enough space to park all the aircraft that operate in and out of both the international and domestic terminals. Maybe it is time to bulldozen the old terminal and build a new one and start using that as well. It would be ideal to use as another domestic terminal.

Interesting times ahead.
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Old 5th Sep 2008, 07:08
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Junior would have loved to operate his jets BNE-POM
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Old 5th Sep 2008, 09:34
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Hopefully it will also boost tourism for PNG.
Doesn't matter how many flights are coming into POM, until they can make the centre of Morseby not look like a mix of Blackhawk Down meets Once Were Warriors, they will be hard pressed to get any tourists who are doing any more than that modern day Australian rite of passage - The Kokoda track.

NO social welfare, > 70% unemployment, and until the Yanks screwed up Baghdad, the most violent city in the world.
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