Virgin Blue “international” will go after Qantas staff
A report in the The Age today says that the battle between Virgin Blue and Qantas in the international market is heating up as Virgin Blue moves towards the launch of its international airline with the signing a $2.6 billion deal for seven aircraft.
Virgin Blue has announced a $2.2 billion deal with Boeing for six 777-300ER aircraft, with an option for six more. It will lease another 777-300ER for $400 million.
At the same time, Qantas staff may be encouraged to jump ship with Virgin Blue revealing that its unnamed international carrier, due to start flights next year, would create 1160 Australian-based jobs.
Virgin Blue CEO Brett Godfrey said the airline had been in talks with the US Government for some months because it still needed regulatory approval from the US for landing rights.
Qantas and United Airlines have a duopoly on non-stop services between the US and Australia, with Qantas carrying 73% of passengers on the route in December, according to Australia’s Department of Transport and Regional Services.
“The US route alone is about 20% of Qantas’ international passenger network and in terms of revenue, it might be even bigger,” said Derek Sadubin, COO of the Centre for Asia Pacific Aviation, a Sydney-based consulting firm.
Parties behind the $11.1 billion buy-out bid for Qantas were quick to point to the Virgin Blue announcement as an indication of the challenges facing the airline industry to justify the $5.45-a-share offer, which some institutional shareholders regard as too low.
Balanced Equity Management and UBS Global Asset Management are holding out on whether they will use their combined shareholding to block the Qantas sale.
As Virgin Blue presses ahead with plans for its international venture, sister airline Virgin America has won tentative approval to operate on routes within the US.
The US Government accepted that the start-up airline had now complied with laws limiting foreign control of a domestic carrier.
Virgin America, which is partly owned by Sir Richard Branson, has changed its ownership structure to meet requirements that US citizens must own 75% of the airline.
Virgin Blue also announced that it would become the first Australian airline to allow passengers to offset the carbon emissions from their flights for an average cost of $1.15 a flight. The money will be used to buy abatement from projects in Australia and New Zealand.
Turnover in Virgin Blue shares was light, with the stock closing steady at $2.64. Qantas shares edged up 1¢ to $5.15.
Report by The Mole from The Age and with Bloomberg
John Alwyn-Jones
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