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Thu, Jul 08, 2004 - Page 12 News List

Virgin Blue eyes challenge to Qantas with US routes

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A file photo taken July 31, 2002 shows passengers disembarking a Virgin Blue airline passenger jet at Sydney Airport. The discount airline said yesterday that it was considering challenging Qantas's monopoly on the Australia to US west coast routes.

PHOTO: AFP

Virgin Blue Holdings Ltd, which in four years took a third of Aus-tralia's air-travel market, may start flights to the US, challenging bigger rival Qantas Airways Ltd on one of its most profitable routes.

Adding Australia-US routes was among options proposed by Virgin Blue's business development team, airline spokeswoman Amanda Bolger said.

"It's a project we're working on," Bolger said in an interview.

Australia-US "is a very profitable leg for Qantas," said George Clapham, who helps manage the equivalent of US$310 million at ABN Amro Asset Management in Sydney.

"Qantas has had high load factors on the route and competition has been limited," he said.

Virgin Blue chief executive Brett Godfrey plans to add Fiji, Vanuatu and the Cook Islands to the airline's Pacific Blue international unit this year and has said he's considering a low-cost carrier in Asia. Virgin Blue started with two planes plying Australia's domestic routes in August 2000.

"Whether it comes from Virgin Blue or someone else, it will impact on the profitability of that business," should another airline begin competing with Qantas between Australia and the US, Clapham said.

Also weighing on Qantas's share price is a possible strike by international flight attendants in December over the airline's plans to base an extra 400 cabin crew in London to save money.

The success of Virgin Blue in Australia's domestic market could be repeated in an international venture, Clapham said.

"It's probably worth them pursuing this opportunity," he said.

Virgin Blue hasn't yet applied to the Australian government's International Air Services Commission for air rights to the US.

"We've expressed interest in doing so," Bolger said.

Virgin Blue's US routes would be operated by a new airline that would be 51 percent owned by Virgin Blue, the Australian Financial Review reported, citing unidentified documents.

Bolger declined to comment on whether a new airline was under consideration.

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