Virgin Blue unveils wide-ranging restructure of network

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Australia's Virgin Blue is withdrawing from the New Zealand domestic market, increasing trans-Tasman, medium-haul and long-haul services, and boosting capacity on the domestic market as part of the first phase of its network review.

This major overhaul of its operations, the first since John Borghetti became the group's CEO in May, will deliver "increased competition" and help to capture "growth opportunities", says Virgin Blue.

"As we enter a new era for Virgin Blue, it is vital that we have the right aircraft on the right routes if we are to fully exploit our competitive advantages in the context of the group's three core business: domestic short haul, international medium haul and international long haul," says Borghetti.

"We are adding capacity to routes with strong revenue potential and, accordingly, removing capacity from services which are underperforming. These changes will maximise yields, increase aircraft utilisation and also provide a more attractive schedule for the business market, including better integration of our international and domestic schedules."

New Zealand-based subsidiary Pacific Blue will cease domestic operations, and expand as an international medium haul airline with operations across the Tasman, the Pacific Islands and Southeast Asia. This move is likely to be in tandem with a proposed trans-Tasman alliance with Air New Zealand.

The carrier has already announced increases on its Brisbane-Hamilton services. In the coming weeks, it will up its Denpasar-Melbourne services from five-weekly to daily, increase Perth-Phuket and Brisbane-Dunedin flights to thrice-weekly from twice-weekly, and ramp up Christchurch-Melbourne operations from four-weekly to daily.

It will also take over the six-time weekly service from Sydney to Nadi in Fiji operated by the group's long-haul carrier V Australia.

"By restructuring our Pacific Blue operations, we are now able to free up our long haul V Australia aircraft to capture the growing demand for travel to the USA," says Borghetti. ""By year-end, V Australia will be fully devoted to international long haul business more suited to the [Boeing] 777 fleet, with Fiji serviced by Pacific Blue."

V Australia will also increase its Sydney-Los Angeles flights to daily from six-times weekly in December, and adjust it to a morning departure from October to provide same-day connections to the US East Coast. Also from December, it will operate an additional service weekly on its Melbourne-Johannesburg, Melbourne-Los Angeles, and Melbourne-Phuket flights.

Virgin Blue plans to "strengthen" domestic Australian operations through its recently increased frequency and capacity on key routes, and the bilateral agreement with Skywest Airlines to increase its reach into the Western Australian intrastate market. Further announcements on the plans to "increase domestic competitiveness" will shortly be made, says Borghetti.

In late May, the group revised its profit forecast for the year to 30 June downwards to A$20 million ($17.9 million) to A$40 million, versus the previous forecast of A$80-A$100 million that it announced in February.

Over the last few months, the airline's executives have been trying to restructure its network and business plan. This is in light of what the airline said in May was a "rapid deterioration and increased volatility in the operating environment, particularly in respect of the leisure segment both domestically and internationally".