Tuesday, February 20, 2007

Don't focus entirely on the Atlantic

News of innovation within the airline business model has been dominated by the Europeans lately, however those on the other side of the globe have not been sitting on their laurels. Australian Virgin Blue has just announced an impressive 81% surge in half-year profits, $98 million USD. This has been aided by a less volatile fuel price and increased business traffic.

The airline has already followed in the footsteps of JetBlue and ordered more than a dozen Embraer aircraft to capture thinner traffic flows. However, now the airline is stepping into the long-haul league and negotiations are underway with Boeing for 7 777s. Long-haul flights should commence in the second half of 2008. It has already begun the process of applying for US traffic rights, but destinations in Hong Kong, Japan, and Canada are also in the works. In another twist, Virgin Blue has admitted that an ultra-low cost brand has been contemplated for very thin leisure routes. This brand would likely operate 737s with an additional row of seats, essentially lowering seat costs by 5-6%. The CEO goes on to state that a Ryanair-look-a-like would most likely not be interesting to Australian consumers, but if that is what they want Virgin Blue would not hesitate to offer such a brand. Consumers the world over have demonstrated their love of low-fares and a Ryanair model would work in any market. It is interesting to hear of an LCC interested in starting an ultra-low LCC. This has not been successful in Europe or the US with mainline carriers, but maybe Virgin Blue will be able to carry if off. The source of this information is found here.

The Australian market has been a news generator for some time now. The aviation-focused Texas Pacific Group and Macquarie Bank have made a bid for Qantas, while Singapore Airlines attempted to gain rights on the Sydney - Los Angeles route.

"Low-cost" long-haul has so far bypassed American carriers. Europe and Asia have seen the sprouting attempts at this model, however its success is far from guaranteed. And as one Nordic LCC stated, "Our biggest competitor in the low-cost long-haul is the back end of traditional carriers."

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