Virgin on cautious approach

By DANIEL RIORDAN aviation writer

Virgin Blue's plans to fly here by Christmas are on hold pending a Government decision on Air New Zealand's ownership.

Mark Siladi, the discount airline's New Zealand manager, said matters were moving more slowly than the company would have liked, and one of the complicating factors was the future of Air New Zealand.

"You can imagine if there's a Singapore/Ansett competitor on the Tasman, it's probably a bit different to a Qantas/Air NZ competitor on the Tasman. We're somewhat concerned at that. While we're continuing the process, we feel it's probably not wise of us to push too much."

The Government has promised Air NZ a decision by September 4 on the airline's request to have 25 per cent shareholder Singapore Airlines lift its stake to 49 per cent.

Mr Siladi said Virgin Blue was still compiling additional information the Government had asked for at the end of July.

He said the original application had been for Virgin Blue's exemption based on operating within a single aviation market. The company could also pursue designation as an Australian carrier, and has held talks with Australian and New Zealand officials on this.

But for now it was continuing slowly along its original path - on which the major obstacle is the airline's ultimate ownership by British national Sir Richard Branson.

"We're basically in a holding pattern."

Mr Siladi said the airline had contacted "seven or eight" local airports and had run the numbers on potential routes.

"We have a shortlist with the density of flights into any particular area based on market demand and costs. We're talking to airports and tourist bodies about incentives, looking at what we can do to develop the market.

"It would still make infinite sense to launch pre-Christmas but if we see that's not possible in the next couple of weeks we could look at the next peak. If we missed Christmas we might look at Easter, starting a few weeks before that weekend."

Industry sources told the Business Herald that some of the airline's dealings with airports had been "rather cursory" of late, suggesting the airline was doing little more than going through the motions.

Virgin Blue this week celebrates its first year in Australia, having confounded the sceptics by staying airborne while budget competitor Impulse folded and its two established rivals, Ansett and Qantas, recorded plunging profits.

In contrast, Virgin Blue recorded a modest, but unexpected, trading profit of $A519,000 ($631,000) for the seven months to March.

The airline's fleet is set to expand from nine to 16 next year. It has plans to expand from the eastern seaboard and Adelaide into the Northern Territory and Western Australia, as well as New Zealand.

With load factors of about 77 per cent, well above initial expectations, and 3.5 million passengers expected by next August, Virgin Group boss Sir Richard Branson may even fast-forward plans for a partial float.

Yet analysts like Centre for Asia Pacific Aviation managing director Peter Harbison say Virgin Blue's future is far from clear.

One possibility is that Singapore Airlines, which owns 49 per cent of Virgin Atlantic, will persuade Sir Richard to axe the Australian company or merge it into Ansett.

Singapore Airlines deputy chairman and chief executive Dr Cheong Choong Kong told the Business Herald last month that he would be surprised to see Virgin Blue fly in New Zealand.

Mr Harbison said: "Nobody really knows what to expect, because it's up to Sir Richard Branson. It depends on how much he's prepared to dip into his pockets."

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