Qantas says Branson's new Aussie airline unlikely to last
( 2001-05-29 15:19 ) (7 )

Virgin Blue, the no-frills airline launched in Australia by British billionaire Sir Richard Branson last year, is unlikely to survive in its present form, Qantas predicted Monday.

Qantas Airways Ltd. executive general manager for distribution and sales, John Borghetti, said competition in Australian skies would remain, possibly without the presence of Brisbane-based Virgin Blue.

"This market has been competitive for quite some years and certainly in the recent 12 months there's been significant changes," he told reporters at the Australian Tourism Exchange (ATE) meeting in Brisbane.

"But as to whether Virgin will or not will remain independent I guess you have to ask them, but my view is they probably won't."

Borghetti's forecast came, coincidentally, as Qantas shares fell nine cents to A$3.35 after Virgin Blue threatened legal action against Australia's competition regulator for allowing the takeover of Impulse Airlines.

Qantas is in the process of merging with Impulse, which became a victim of rising fuel prices, a falling Australian currency and a slowing domestic economy after only a year in a fiercely competitive domestic market.

The Australian Competition and Consumer Commission said the only alternative would have been to allow Impulse to go into liquidation, causing an even bigger loss of jobs and reducing competition further.

The takeover left Qantas and rival Ansett Airlines fighting Virgin Blue for the domestic market.

Just before the takeover, the national flag-carrier suspended two of its services -- to Shanghai and Vancouver -- to increase domestic capacity and compete better against its cut-price rivals.

Qantas has also announced a nine billion Australian dollar (US$4.7 billion) spending spree to upgrade its international and domestic fleet.

But with Branson's deep pockets, Virgin vowed Monday to stand and fight, come what may.

Virgin's commercial head David Huttner said Qantas should be worrying about its share holders and its own performance.

"We think they're clearly bent of spending huge amounts of money and incurring huge losses to ensure that competition is lessened in this country," he said.

"Virgin's staying power is a little bit more than some people expect sometimes and we have a long-term commitment. We wouldn't be ordering a billion Australian dollars worth of aircraft if we weren't serious.

"We will have a much newer, younger fleet than they have, better on-time performance than they do ... and we're happy to compete with Qantas on a fair and level playing field."

Huttner said a few weeks ago Virgin Blue had discussions with Ansett about a liaison but failed to find any common ground.

"I will never say never but there is no reason to believe that we will be doing anything with Ansett any time in the near future," Huttner said.