Virgin Blue Faces Tough Competition in Pacific Route

Submitted by Jim Thesiger on 28 August, 2009 - 04:46

V Australia, the long-haul carrier of Australia based travel Service Company Virgin Blue (VBA) has highlighted the tough competition that it is currently facing on the pacific route as it recorded a $124 million pre-tax loss for the first four months of operation. The pre-tax loss includes foreign exchange losses and startup cost-which are considered as the key causes that led its parent to post a $160 million loss for the year that ended in June. The result was quite gloomy comparing with its earlier year $98 million worth of profit. V Australia has faced stiff competition from Qantas and United Airlines, two other giants of the industry which is considered as one of the key reason for the company to suffer a $64 million loss excluding start-up cost and foreign exchange loss.

Despite the recovery in the overall global economy, the chief executive Brett Godfrey remained pretty much cautious about the future conditions of the market for the airlines saying the number of passengers was not at a satisfactory level for the company. V Australia made an announcement last week regarding its new flight to South Africa and Thailand early next year. The new move is to reduce the airline’s dependency from the highly competitive trans-pacific route where other giants of the airlines industry are giving it a hard time to come up with a profit. Despite the crisis, Mr. Godfrey was confident that V Australia would make a comeback and would reach break even in 18 months.

The ongoing crisis in the airline industry became even more clear with Air New Zealand posting 90 percent drop in its net profit as much as $NZ21 million or $A17.3 million for the year that ended in June. Air New Zealand is about pay a NZ3.5¢ per share worth of final dividend.