Virgin Blue eyes network expansion and new aircraft

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Australian carrier Virgin Blue could expand its services to other parts of Southeast Asia and purchase additional narrowbody aircraft as part of its recovery plan once the economic crisis is over.

"Virgin Blue is constantly reviewing market opportunities and a host of potential routes for each of our airlines at any time but we have not made any decisions at this stage," says a spokeswoman.

The carrier is in negotiations to serve more destinations from Perth in Western Australia, its CEO Brett Godfrey said after Virgin Blue announced plans on Monday to raise A$231.4 million ($190 million) in fresh equity. Vietnam, Singapore, Penang and Kuala Lumpur in Malaysia, and Thailand's resort island of Phuket are among the options.

Last year, Virgin Blue's subsidiary Pacific Blue launched daily Perth-Bali services as part of an expansion of its international routes. This was partiallyin response to increasing competition in New Zealand, Pacific Blue's main operating base, from Qantas' low-cost subsidiary Jetstar.

"The New Zealand domestic market is very competitive and here too we are rearranging capacity, entering new regional routes and monitoring constantly," says the spokeswoman. "Earlier this year we announced capacity reductions related to softening Australian domestic demand. Part of our solution was redeployment of (aircraft) to new and uncontested routes including expansion of Pacific Blue's short haul international network."

The airline, however, has no plans to follow Qantas and cut some flights on the highly competitive Sydney-Melbourne route - which has become even more competitive with the entry of Tiger Airways with nine daily flights each way. Virgin Blue continues to see opportunities in the sector, and says: "If anything, we are likely to increase our Sydney-Melbourne schedule."

Godfrey also told Australian media that the airline would use the additional funds to acquire newer and larger Boeing 737 aircraft. The lease on 12 of its existing 737-700s ends in 2011, and the carrier could replace them with 737-800s and possibly 737-900s. "This again will be driven by market demand," adds the spokeswoman.

Virgin Blue said on Monday that it was raising the additional funds due to the most challenging operating environment in the airline's 10-year history. It is projected to report its first annual loss for the last fiscal year and Godfrey, who co-founded the airline with Virgin's Richard Branson, will leave as CEO in 2010.