Air Transport World

Branson unsettles Australia.

Virgin's plan to invade the continent's air market with the help of SIA unnerves the establishment

Like most high-caliber entrepreneurs, Richard Branson is every inch an opportunist. The ink was still drying on Australia's newly liberalized aviation policy when Branson flew into the country to announce the Virgin Group's plans to launch a "no frills," Virgin Express-style domestic operation with just $30 million in seed capital.

It was a typically flashy Branson performance. The effervescent Virgin chairman provided few details, but what he said had the desired effect. He told Australians they were getting a raw deal on fares, issued a warning to his rivals about anticompetitive practices and sat down for a Canberra briefing with Prime Minister John Howard. His whistle-stop visit sent Qantas Airways shares into free-fall, alarmed Ansett management and spooked investors looking to fund several other proposed domestic startups.

As the market was still reeling over Virgin Group's seemingly curious move into Australia, Branson tightened the screws further. He arranged Virgin Atlantic's entry into the massive Indian market, then headed to London to announce the sale of 49% of his innovative international airline to Singapore Airlines for S$600.3 million. As part of that deal he will buy part of SIA and Virgin Atlantic will be recapitalized to the tune of S$100 million, S$51 million of it coming from the Virgin Group.

It all happened in two weeks: Australia, India and SIA. What, if anything, the SIA-Virgin Atlantic coupling will mean to Virgin's Australian venture is open to speculation. One theory is that SIA will persevere with its so-far-frustrated attempts to buy half of Ansett from News Corp. and that Virgin ultimately will link into that alliance as a dedicated low-fare domestic carrier. According to analysts, SIA's unexpected "marriage" to Virgin Atlantic has "thrown a hand grenade into the global alliance dynamics." Whether the flak from that will extend south to Australia will become clearer in the next few months.

Virgin's hyperactivity has reawakened the competitive spirit in the A$5 billion Australian marketplace after six years of relative slumber. …

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