• Virgin Blue Holdings Limited
• Website: www.virginblue.com.au

Industry:

Airlines

Fiscal Year-End:

Jun 10

VBA competes on all of QAN's key domestic routes and has about a one-third market share. It operates around 80 aircraft, servicing numerous destinations in Australia, New Zealand, Fiji, Vanuatu and the Cook Islands. In January 2004, the airline launched Pacific Blue and in October 2005, VBA joined with the Government of Samoa to launch 'Polynesian Blue'. V Australia was launched in 2008 and began flying to Los Angeles in 2009.

Brett Godfrey and Rob Sherrard established VBA in Nov-99. With US$10M in seed capital from Richard Branson's Virgin Group, the pair modelled the airline on European and US low-cost carriers. VBA began operating in Aug-00. In Mar-02, Patrick Corp acquired a 50% stake from Virgin Group for $500M. VBA floated on the ASX on 8-Dec-03 at $2.25 per share. TOL's takeover of Patrick gave it control of VBA, but in Jul-08 it decided to divest its VBA stake via an in specie distribution to TOL shareholders.

The Australian aviation market is virtually a duopoly between VBA and QAN. VBA is Australia's leading low-cost carrier. The industry faces several macro factors that may impact earnings - competition, terrorism, war, political fall-out, regulatory issues, economic slowdowns and international issues. VBA also has a small freight operation.

VBA benefits from a highly competitive cost structure. VBA has (1) a modern and an efficient fleet; (2) flexible workplace arrangements; (3) cheap Brisbane HQ; (4) point-to-point services rather than a hub and spoke system; (5) elimination of expensive, non-essential add-ons such as free meals; and (6) effective and streamlined distribution model (over 90% of tickets sold are via the internet and the platform is ticketless).

Customers: mostly leisure travellers on regional routes. VBA is also focusing on growing the corporate sector. Major domestic competitors are primarily Qantas and Jetstar but also regionals like Rex, Airnorth and Skywest. As VBA expands overseas, competitors will include Air NZ (and its LCC Freedom Air), Emirates, Singapore Airlines, Air Vanuatu, Cathay Pacific, Thai Airways, Japan Airlines. Freight: other handlers like QAN, Australian Air Express, DHL, UPS, FedEx and various customs brokers.