Branson Pumps £40m Into Australian Budget Airline Virgin Blue

Australian low-cost carrier Virgin Blue is facing its hardest year to date due to the world economic crisis and the effect it is having on the airline industry.

The airline predicts losses of between A$160m and A$165m for the for the 12 months to the end of June.

Virgin Blue’s short haul services are profitable and have increased their market share by over 30 percent but their newly-launched long-haul division V Australia has been hit particularly hard by the recession and due to a price due to the newly deregulated trans-Pacific routes which were once dominated by a QANTAS and United Airlines duopoly.  There are now 5 airlines service this route.

Virgin Group, which owns a quarter of Virgin Blue, has committed to by over 300 million shares and to act as a sub writer for 20% of the retail component offer, which could raise its stake to 30.2 percent.

“Our belief in the future of the business is underlined by our ongoing support and sub-underwriting of the rights offer. Whilst the aviation world faces some tough market conditions, we have faith that Virgin Blue is well placed to meet the challenge with its strong brand and market position” Sir Richard said yesterday.

The worst is over according to Virgin Blue and predicts that it will break even in 2010.  “This is an opportunity to invest in one of the industry’s most well-respected airline brands,” said chief executive, Brad Godfrey.

“The proceeds of the raising will significantly strengthen Virgin Blue’s capital position and improve liquidity and financial flexibility which we believe is prudent in the light of challenging conditions facing the airline industry.”

Mr Godfrey, who has been in the post since the company was founded by Virgin Group in 2000, also announced yesterday that he would be stepping down next year.

Quotes thanks to the Independent.  For more information visit their website: www.independent.co.uk