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Virgin sets its compass to Asia

VIRGIN AUSTRALIA has signalled it will launch international routes to Asia within the next year following an improvement in its fledgling long-haul operations.

After shedding loss-making routes and forming alliances with airlines such as Singapore Airlines and Etihad to stem losses, Virgin's chief executive, John Borghetti, said he was keen to expand flights to international destinations.

"Our international business is no longer in the state it was when I started and as we consolidate that business … it will give us opportunity," he said.

Mr Borghetti declined to reveal the routes Virgin would target but it is believed Asian destinations are high on the agenda.

"I don't believe the theory that says you can't make money internationally. The trick is having the right strategy and what we will never do is have a fragmented strategic approach to international," he said.

He also said that Virgin would be "staying on strategy" despite a looming price war with Qantas for lucrative business travellers.


Qantas's boss, Alan Joyce, has made clear he will aggressively defend its so-called "line in the sand" of a 65 per cent share of the domestic market by increasing capacity.

But Mr Borghetti said he was focused on improving yields from domestic flights rather than market share. "He should get a new line - it is getting a bit boring. I don't care about market share."

Analysts say Virgin will struggle to post a pre-tax profit in the second half of this financial year if it continues to expand domestic flights. In February Virgin increased capacity by 16 per cent.

Virgin shares slid further from recent highs, falling 2¢ to 38.5¢ yesterday as investors became nervous about heavy discounting by airlines. Qantas rose 3¢ to $1.65.

But Mr Borghetti said Virgin continued to benefit from its strategy of targeting more business travellers, indicating its share of the corporate travel market was now greater than 17 per cent, compared with 10 per cent more than a year ago.

Virgin is putting new A330 wide-body aircraft on key business routes, renovating airport lounges in Sydney and Melbourne, and boosting its loyalty travel scheme. It is also expected to introduce a rival to the invitation-only Qantas Chairman's Lounge.

Mr Borghetti's plans to launch some international routes mark a change in Virgin's approach towards long-haul flying. It has been relying on alliance partners to perform the majority of flights which make up its so-called "virtual international network".

But he indicated that he was comfortable its long-haul business was now on a sustainable footing after previously suffering big losses on some routes.

While Virgin is talking up the launch of new flights to overseas destinations, Qantas has scaled back its exposure to Europe and elsewhere in an attempt to reduce large losses incurred by its premium international business. Qantas's growth on overseas routes has largely been through its budget offshoot, Jetstar.

The reporter travelled to Toulouse, France, courtesy of Virgin Australia.