Godfrey says V Australia will tread carefully

A report in The Sydney Morning Herald by aviation correspondent Scott Rochford says that Virgin Blue has played down the potential of triggering a discount war on flights to the US with Qantas at the end of 2008, when its new long-haul airline V Australia hopes to start services over the Pacific.

“We’re not looking to come in and stampede the market because we’ve got limited capacity in the first instance,” said Virgin Blue CEO Brett Godfrey.

“With more capacity coming on we can do more innovative things in term of pricing,” he said, noting his airline would tread carefully in establishing a presence on the route.”

Virgin Blue will spend $70 million setting up the airline and Mr Godfrey said he did not expect the airline would make a profit in its first 18 months of operation.

V Australia is yet to announce where it intends to fly with its fleet of Boeing 777s due to be delivered in late 2008, but the airline has already applied to the US Government to launch 10 services a week to the US West Coast and it is expected this will include daily services from Sydney to possibly San Francisco or Los Angeles.

Virgin Blue has also indicated it plans to fly three weekly services into North Asia.

Given Qantas makes about 20% of its overall profits on flying to Los Angeles, it is believed Virgin Blue is keen to tap into what is considered one of the most uncompetitive long-haul air routes in the world.

Qantas flies 38 direct services to the US each week, while its only other competitor United flies 14.

Mr Godfrey said he felt the V Australia name suited Virgin Blue “to a T, adding, “We want to keep it close to our roots in terms of the Virgin Blue branding.”  “We also wanted to be very iconic in terms of its Australian appeal and we think the livery will certainly do that.”

The new airline, which will incorporate a refashioned Australian flag on its fuselage, cannot incorporate the Virgin name, because Singapore Airlines which owns 49 % of the Richard Branson founded Virgin Atlantic has the right to veto the use of the Virgin name outside Australia.

However, amid speculation Singapore Air is considering selling its stake, V Australia will allow Virgin Blue to easily rebadge the carrier Virgin Australia, with Brett Godfrey admitting, “There may be some tweaking at the edges”, adding, “We felt very strongly about the Southern Cross being incorporated into the livery and we think it all represents what is good about Australia.”

“There’s nothing more important for Australians than to get on an aeroplane when they’ve been away for a while and be able to see that Australian flag,” he said.

The main sticking point for V Australia in being able to launch US services will be the US Government, with under the current air services treaty between the US and Australia, new airlines can only fly four services a week in their first year of operation.

Mr Godfrey said the only US airline to fly to Australia, United Airlines, has already objected to its flying 10 services a week.  United also opposed Jetstar’s application to fly five services a week to Honolulu last year.

United though has been pushing for an Open Skies deal between Australia and the US, which Mr Godfrey said would given US airlines unfettered rights to fly services from other Asian countries such as Japan into Australia.

The Australian Government has been criticised over the past few years from protecting Qantas from competition on the US route, with Singapore Airlines continuing to be barred from flying the route.

Tourism Minister Fran Bailey, who has been a advocate for more competition on the route, said, “V Australia will deliver a shot in the arm to aviation capacity across the Pacific route.”

“Far too many Americans have missed out on a holiday to Australia due to a lack of capacity on the Pacific Route.”

Report by The Mole