virgin blue to lure business flyers

8/06/2010 7:25:01 PM

Virgin Blue Holdings Ltd is planning to tackle its profit slump by attracting business class flyers.

Chief executive John Borghetti said he was set to transform the budget airline by diversifying its revenue base by moving into other markets.

Targeting the business traveller was top of his list but said Virgin Blue would not copy Qantas' business class business model.

"Virgin Blue has the opportunity to design business class for today with a better cost base (than Qantas)," the former Qantas executive told stockbrokers at a conference in Melbourne on Tuesday.

Airfares were at record lows and over seven years economy class airfares had halved.
However business class fares were just five per cent lower than in July 2003, making the sector more attractive, Mr Borghetti said.

Virgin Blue was in the midst of a strategic review and would this month work towards securing two more loyalty alliances with other airlines, he said.
Over recent weeks the airline had seen "an incredible decline in the revenue line" that resulted in two downgrades to guidance in May.

The company said on May 28 it expected net profit before tax and exceptional items for 2009/10 at between $20 million and $40 million, as much as 75 per cent below previous guidance issued on May 3.
Mr Borghetti denied the downgrades were done to "clear the decks" when he officially took over the top job from Brett Godfrey on May 8.

"Nothing could be further from the truth," he said.
"Financially we are a very strong company. We have $800 million in cash and no (bank) covenants," Mr Borghetti said on Tuesday.

He said Virgin had no intention of walking away from the leisure market, which currently drives 80 per cent of Virgin's business.

"There is no intention of handing over the key strategic routes to our competitors," Mr Borghetti said.
Capacity had been cut among airlines since January when some industry players expected the market would improve.

"Everyone went too fast too soon," Mr Borghetti said.
More capacity cuts were likely before Christmas, he said.
He said the airline had clear plans for its immediate future and none of Australia's major airlines were losing market share.

"In 12 months we will have a much stronger, much more resilient and diversified airline," he said.
Some early signs of some airlines reducing capacity had emerged in recent weeks, he said.

http://money.ninemsn.com.au/article.aspx?id=1066676&rf=true