The rivalry between Qantas and Virgin Blue is expanding from passengers to air cargo. Qantas and Australia Post joint venture Australian Air Express (AAE) is boosting capacity while Virgin Blue is looking for more cargo synergies with Toll Holdings, its new majority owner.

AAE has been relying on a fleet of Boeing 727 and BAe 146 freighters operated by National Jet Systems, a Qantas subsidiary. However Qantas is establishing another subsidiary, Express Freighters Australia, to operate four newly converted Boeing 737-300Fs for AAE.

Peter Gregg, Qantas chief financial officer, says the 737s will boost AAE's capacity and advance the company's goal of expanding its non-passenger revenue. Express Freighters Australia will begin operating in October.

Despite operating on a low-cost model, rival Virgin Blue has always carried freight in the bellies of its 737 fleet. It is also looking for ways to boost this side of its business. Toll Holdings, Virgin's new majority owner, is Australia's largest transport conglomerate. It has typically relied on AAE to carry part of its air freight, but now that Toll owns Virgin and Qantas owns half of AAE, Toll is keen to divert more business to Virgin Blue.

Insiders predict Toll's air cargo could boost Virgin's annual revenue by at least A$20 million ($15 million). This would mostly be profit because passenger service bears most flight operating costs.

Virgin and Toll are looking for ways to boost Virgin's cargo capacity without compromising its low-cost model, especially the quick turns critical to high aircraft use. Options under consideration include extending the turn time on Virgin's last flight of the day to load more freight, overnight flights that carry mostly freight, and carrying more freight on weekends when bellies are typically empty. ■

Source: Airline Business