Virgin stirs up aviation landscape

Virgin stirs up aviation landscape
By admin


Virgin Australia has heralded a new era of competition in Australian aviation as it revealed plans to take on Qantas in each market segment through three major equity transactions.

Pending regulatory approval, Virgin Australia will acquire 60% of Tiger Australia for $35 million and 100% of regional carrier Skywest. In addition, Singapore Airlines will take a 10% interest in Virgin.

Chief executive John Borghetti told analysts this morning that while Virgin directly competes with Qantas, the Tiger acquisition will enable it to take on Jetstar, while control of Skywest would see it go up against QantasLink.

He referred to fare decreases which had been seen in the aftermath of its entry into the corporate and regional markets as indicators that prices would tumble.

“So many markets have been monopolies for so long,” he said. “Competition will come to every segment of the market in Australia. It will be good for jobs and it will certainly be good for tourism.”

Borghetti underlined a major cost advantage over Qantas as the age of Virgin’s fleet.

“We’ve got one of the youngest fleets of any airline our size in the world,” he said. “That comes with savings in the biggest cost which is fuel and maintenance.”

In addition, “very strong shareholders” were an additional boost for the carrier. Singapore Airlines joins Etihad in holding a 10% stake in Virgin with Air NZ holding 19.99%.

Delta Airlines is the only remaining strategic partner of Virgin that does not hold a stake in the airline, with Borghetti adamant no such equity deal is on the cards.

Meanwhile, he insisted the airline was only halfway through its five-year transition plan.

“This is just one more step in our five-year strategy. It isn’t the final step,” he said. “We are confident we will build an airline group that will have sustainable growth going forward.”

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