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Virgin chief happy with a price war

written by australianaviation.com.au | July 23, 2012

Virgin Australia CEO John Borghetti said increased Etihad investment in the carrier would not alter the two airline's alliance. (Andrew McLaughlin)

Virgin Australia’s entry into the corporate travel market has pushed business class fares down by 25 per cent, Virgin chief John Borghetti said in an interview this weekend.

The revelation highlights the extent of a growing price war between Qantas and Virgin –  a competition the former Qantas executive said was long overdue at the top end of the airfare market.

“Price war is certainly a good way of putting it,” Mr Borghetti told The ABC’s Inside Business. “Let’s not forget that for more than 10 years, whilst economy fares and promotional fares have dropped significantly – in fact, on some routes it’s halved because of competition at the low end – there was no competition at the top end since Ansett stopped flying.”

Borghetti declined to be drawn, however, on whether Virgin’s nascent business class offerings are turning a profit despite the lower fares. “I think you have got to look at the profitability of the business as a whole,” he said. “People forget that, you know, there is the halo effect of the product and the brand that brings profitability as well.”

Mr Borghetti said Virgin was comfortable with current business class ticket prices and didn’t intend to cut fares further, but would respond if Qantas moved to lower its fares.

He also sought to steer clear of the recent war of words between Qantas and Virgin alliance partner Etihad, which this month doubled its stake in Virgin to 10 per cent despite intense Qantas lobbying against the tie-up that sought to portray it as a step toward a foreign takeover of Virgin. Melbourne-born Etihad chief James Hogan blasted Qantas for what he described as a xenophobic, un-Australian fear campaign against the deal.

Asked what he thought about Qantas’ attitude, Mr Borghetti cited “a lot of misinformation and a lot of jumping at shadows in the market.” He added: “I think people should take a cold shower.”


Mr Borghetti said the increased Etihad stake in the airline would not alter the basic framework of the two carrier’s year old alliance.

“We provide feed for them on their Europe services, they provide feed for us on our domestic services,” he said. “It’s been very good for both of us. So, you know, I think the equity investment doesn’t really impact the alliance that we have because it’s such a strong alliance and it’s been working very well for both of us.”


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