Enter Virgin Blue, the brandmaster

By DITA DE BONI marketing writer

Virgin Blue's entry into the New Zealand aviation market bears all the hallmarks of a first-stage Richard Branson branding blitz, say experts.

Speculation is growing that, as in Australia, Virgin's planes will usher in a barrage of Virgin-branded business - from financial services to hotels, records, health clubs and mobile phones.

As Virgin Blue's chief executive, Brett Godfrey, put it on the eve of the airline's introduction into Australia last year, there should be "no doubt" that Virgin Blue is the flagship for other Virgin-branded enterprises being "readied offstage."

And with Australasia as regional springboard, analysts think Virgin brands might one day be worth $10 billion in the Asia-Pacific region.

For now, New Zealand officials are still on standby for a formal proposal from Blue, having huffily questioned if anything of substance will follow the company's showy bid to fly local skies after the collapse of Qantas New Zealand.

But Sir Richard is used to locals dismissing his plans as flamboyant posturing. Once scoffed at in Australia, Virgin Blue has carved itself a niche between Ansett and Qantas and is set to list within five years.

Not only does its image as a cheeky start-up appeal to the Australian psyche, but allowing the public to own a chunk of the airline would both raise cash and cement an emotional attachment, according to one aviation analyst.

Peter Harbison, director of the Centre for Asia-Pacific Aviation, believes that Virgin will need outside capital in any case. While initial survival depends on the depth of Sir Richard's pockets, "if it goes to New Zealand, if it gets Tasman rights, if it gets enough aircraft to expand into the gap that Impulse has created, then there will be a partner from somewhere."

Which does not detract from the fact that the airline was started with an initial outlay of just $A25 million. Some say that move pre-empted the main plan: by taking on the big boys, Virgin achieved heavy media coverage in Australia which parlayed into Virgin-branded mobile phones.

Also pegged to take three years to break even, Virgin Mobile consumed $100 million of capital for set-up costs of the joint venture with local telecom Cable & Wireless Optus.

The Australian aviation market, said Sir Richard, was not only a "brand vacuum," but its mobile market of 10 million users, six networks, more than a dozen service providers and 360 different pricing plans was "ripe for the picking."

Was Virgin Blue a flying billboard for Virgin Mobile?

It is thought Australian subscribers number in the low tens of thousands, far behind the main players, but the company is aggressively courting new users and expects to attractup to 5 million of them in the coming years.

A local telecommunications analyst confirms that Virgin Mobile has made little impression in the Australian market, but says its business model is unique in Australia.

In contrast to its competitors, Virgin users paid virtually all the cost of the handset but were compensated by lower per-minute charges.

Virgin has previously used its brand profile to secure equity in major deals, including other mobile ventures. In a Singapore deal, Singapore Telecommunications will put $US450 million ($1.06 billion) into a regional mobile phones joint venture, Sir Richard will put up $US50 million in cash, and the rest - totalling $US1 billion - in brand value.

Virgin Mobile plans to extend into Thailand, the Philippines, Hong Kong and possibly Japan, aiming for 6 million to 10 million Asian subscribers within the next five years.

Virgin usually sets up a company in each country and invites local partners to take a minority stake.

But would New Zealand's hotly contested mobile market be worth the effort? A spokeswoman for Virgin Mobile told the Business Herald yesterday that, while there were no specific plans at the moment, the company was "definitely not ruling it out."

But if Virgin Mobile is not aiming at New Zealand, other Virgin-branded products could be. Virgin Atlantic, Branson's high-end airline, is tipped to extend its international routes to Australia, feeding into Virgin Blue national services.

Where this has happened in other parts of Asia-Pacific, an avalanche of other business has closely followed. In 1989, Virgin Atlantic began flying between London and Tokyo; a year later, Sir Richard opened 30 Virgin "megastores" selling books, music, software, and chased that with a movie chain.

As the flight schedule expands, FM radio stations in Taiwan, health clubs in India, internet services in Hong Kong and a slew of megastores and movie theatres are planned for the region.