Geoff Easdown
VIRGIN BLUE has signalled that airfares are about to get much cheaper on regional routes as a result of a new deal with WA carrier Skywest Airlines.
The arrangement will see Skywest lease up to 18 new and fully crewed turbo-prop aircraft to Virgin as it attempts to bolster its assault on the profits of arch rival Qantas.
Skywest shares shot up 16 per cent, or 7.5c, after the announcement early yesterday, before slipping back to finish just 2c up for the day at 45c.
Virgin Blue ended trading 4.65 per cent, or 2c, higher at 45c.
The 10-year partnership marks the completion of the third stage of Virgin Blue’s network review, which focused on building alliances with other carriers to gain access to international and domestic markets.
Virgin chief executive John Borghetti told BusinessDaily the Skywest-operated turbo-props would be used to open new routes and to introduce new competition against QantasLink, which until now has dominated air services to rural communities and regional centres.
He said the planes also would replace jet services on routes where aircraft such as Virgin’s twin-jet E170 Embraer aircraft were too expensive to operate.
But Mr Borghetti was giving little away yesterday, declining to identify routes or the type of aircraft that the Skywest-Virgin partnership intended to bring into service.
“I can assure you that whatever aircraft type we have decided on will be competitive,” he told BusinessDaily.
Skywest chairman Jeff Chatfield said the deal offered the airline the opportunity to boost its appeal to the resources sector and charter clients.
Skywest will lease the aircraft and then on-lease them to Virgin and not be exposed to the capital investment of owning the turbo-props, he said, signalling what the market sees as a win-win deal for the WA operator.
Industry sources suggest the new planes will be the ATR 62 700 aircraft, a twin-propeller machine built by a French-Italian consortium and capable of carrying up to 74 passengers.
Until now Virgin’s commuter jets have been unable to compete against Qantas’s fuel-miserly Q400 propeller-driven aircraft.
The Virgin-Skywest partnership is the fourth alliance Virgin has formed over the past year.
The others are with Middle East carrier Etihad, with Air New Zealand on trans-Tasman services, and a proposed partnership with Delta Airways on Australia-Los Angeles flights.
Commonwealth Bank analyst Matt Crowe described yesterday’s announcement as a “sensible way to get into a lucrative market made that much bigger by the mining boom”.
Meanwhile, the NZ Companies Office has revealed that Virgin Blue offshoot Pacific Blue lost $19.8 million last year in what was a futile attempt to compete on domestic routes across the Tasman.
Source: www.heraldsun.com.au
