Does Virgin face Pacific blues?
BRISBANE – Writing in the Brisbane Courier Mail, Geoff Easdown says this week’s launch of Brisbane-based Virgin Blue’s trans-Pacific route is a make-or-break move for under-pressure chief executive, Brett Godfrey.
He says the airline’s sharemarket value stands at A$329 million, yet its new fleet of seven Boeing 777s will cost at least A$1.5 billion.


The first jet will be leased but the next three will have US Government-backed finance.


Questions remain about how Virgin will fund the remaining aircraft at a time when airlines worldwide are under intense financial pressure, said Easdown. 


A global aviation specialist told The Courier-Mail , Mr Godfrey faced “the brutal reality” of the times.


“He is coming into the route when Qantas is flooding the Pacific with extra seats on its A380 super jumbos,” the specialist noted.


New competition also looms from US-based Delta Airlines, the world’s biggest carrier, which surprised the aviation market last month by announcing a daily Sydney-Los Angeles service from July.


”The Pacific no longer looks like the gold mine it once was when the Qantas-United Airlines duopoly creamed the profits,” the specialist said.
He argued that if he were Mr Godfrey he would quickly arrange to push back aircraft deliveries.


“Going onto the Pacific and challenging incumbents Qantas and United Airlines is no longer the safe play it once seemed,” he added. 


Macquarie Bank has also warned that Virgin’s trans-Pacific offshoot V Australia could face weak demand, particularly from the lucrative business and premium economy market.


Macquarie says it expects more aggressive pricing as V Australia and Delta jostle for market share.


“If things weren’t sufficiently challenging for Virgin Blue, the entry of Delta on the trans-Pacific route will only make things harder,” the bank said.
Ian Jarrett
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