Virgin Blue Poised to Sign up a Partner
By Steve Creedy, The Australian | Aug. 24, 2006
Virgin Blue believes it can boost its bottom line by up to $160 million by developing partnerships with other airlines.
Chief executive Brett Godfrey said yesterday the airline was poised to sign a codeshare agreement with "one of the major players into Australia" and would be looking at developing other relationships over the next two years.
He did not name the airline but Virgin has been talking to several carriers and there has been speculation recently that Virgin would extend its frequent flyer relationship with Emirates.
Mr Godfrey also revealed the airline was looking at long-haul operations into Asia to supplement proposed daily flights to the US. He said this would allow the airline to efficiently operate three long-haul aircraft and increase margins if the operations were to go ahead in early 2008.
The moves were one of several new initiatives outlined by Mr Godfrey as he unveiled a 12 per cent rise in net profit to $84 million for the nine months to June 30.
The increase came despite a $70 million rise in fuel costs and a $7 million one-off charge for setting up the airline's Velocity frequent flyer program.
Virgin has been moving to capture more of the business market through initiatives such as Velocity, new lounges and a greater emphasis on corporate deals. That strategy helped yields rise 2.6 per cent compared with the previous corresponding period; and unit revenue-measured as revenue per available seat kilometre - was up 4.7 per cent.
"What we had in this period was an improvement in load factor, which is the number of people we carried, and an improvement in the average ticket price that we generated from our traffic," Mr Godfrey said. "As a consequence, that ... meant the average revenue per departing flight was up some 4.7 per cent over the corresponding period."
Passenger numbers rose 7.5 per cent to 10.5 million as the percentage of seats filled by paying passengers increased by 1.9 percentage points to 77.9 per cent.
Revenues were up 8.5 per cent to $1.39 billion. Total operating expenditure rose 7.4 per cent to $1.26 billion under the influence of a 35 per cent fuel price hike, but controllable unit costs dropped 2 per cent to a record low when fuel was excluded.
Mr Godfrey said the result exceeded market expectations and was "a pretty good result" given the punitive fuel prices. But he warned fuel, now costing the airline $US88 a barrel, would continue to be an issue and security could add further burdens for travellers.
He hoped any softening in consumer sentiment due to inflation would benefit Virgin because people would tend to "trade down", but Virgin was also remaining flexible in case demand exceeded expectations.
"If we see that the market is expanding more than we predicted, then we would want to see some more capacity come in because we'd rather be in a position ... to try and retain our market share," he said.
Mr Godfrey said he had no news on whether new majority owners Toll would sell its share in the airline but the companies were looking at synergies "in lots of areas and freight is the key one". The board was also reviewing its dividend policy and would probably make a statement at the AGM in three months' time.