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Virgin Blue to target business segment: CEO

Virgin Blue, Australia's second- biggest airline, is targeting a 30 percent share of the nation's business and government passengers by undercutting bigger rival Qantas Ltd to help stem declining earnings.

"We've got 30 percent of the overall market, we should be able to get something like 30 percent of the business and government market," Chris Corrigan, chief executive of Patrick Corp, which took control of the carrier in March, told Channel Nine's Business Sunday program yesterday.

"I'd be disappointed if we can't do that," he said.

Virgin Blue, founded by UK billionaire Richard Branson in 2000, had a 20 percent drop in half-year profits as fuel costs rose and competition jumped. The carrier aims to boost its "very small percentage" of more-profitable government and business passengers by offering cheaper seat prices, Corrigan said.

"We're not aiming to get up to the price level of Qantas, we're aiming to be well under the price level of Qantas," Corrigan said. "If we can be 10 percent under that's going to attract people to come to us."

Virgin Blue shares fell A$0.015 to A$1.68 at the 4pm market close in Sydney on Friday. Patrick's shares closed A$0.15 higher at A$5.56.

Patrick, Australia's largest port-handler, lifted its stake in Virgin Blue to 62.4 percent from 45.4 percent after bidding A$1.90 a share for the rest of the carrier on Jan. 28. Branson's Virgin Group retains a 25.6 percent stake.

Virgin Blue said on May 18 net income declined to A$75.1 million (US$56.8 million) in the six months to March 31 after its fuel bill surged 65 percent and competition from Qantas' one-year-old Jetstar unit drove down ticket prices.

Corrigan, who has blamed rising airport fees for denting profits, said there were few extra cost efficiencies the company could bring in to bolster profits.

"I don't think there are any great cost downs that we can achieve," he said.

Australian domestic airlines carried more than 38.7 million passengers last year, a 14 percent increase from 2003, according to the government's Bureau of Transport and Regional Economies.

Since Virgin Blue began flying in 2000, the number of passengers carried by domestic airlines increased 29 percent.

Qantas said Feb. 17 that net income in the six months ended Dec. 31 rose 28 percent to a record after costs cuts and a tax benefit.

OzJet Airlines Pty, owned by Minardi Formula One racing team boss Paul Stoddart, is also seeking to tap the market for business-class passengers in Australia.

OzJet, an all-business class airline to be based in Adelaide, South Australia state, is trying to obtain an air operator's license from the Civil Aviation Safety Authority and will probably get approval for a September launch date, Stoddart also told the program.

OzJet was unlikely to receive a license that soon because the airline's aircraft were 30 years old and it took Virgin Blue even longer to gain approval with new planes, Patrick's Corrigan said.

"I saw the start of the last Grand Prix and two Minardi were stillborn on the starting line and it sort of was a little prophetic for me," Corrigan said.

Stoddart will "find it very difficult indeed," he said.
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