Virgin Express, one of the pioneers of Europe's low-fares air market, reports that it grew by one-third in 1996 and expects to report a profit despite the dramatic growth.

The announcement comes, however, with a veiled warning that Belgium's high social costs could persuade the carrier to leave its base in Brussels.

The airline was set up five years ago as EuroBelgian Airlines, but Richard Branson's Virgin Group acquired and rebranded the carrier in April 1996, with the intention of developing the carrier's low-cost scheduled operations.

Chief executive Jonathan Ornstein says that over the past year the airline has increased sales by 30%, to ú130 million ($215 million), led by the expansion of scheduled services. Routes were added from Brussels to Nice and Copenhagen, while daily services link Rome to Barcelona and Madrid.

The airline also launched 18 daily flights from Brussels into London Heathrow under an agreement with Sabena which is expected to be extended to more European cities soon. Ornstein says that the Heathrow service, which started on 27 October, achieved profitability during December. He adds that Virgin Express as a whole will post profits for 1996, despite the expansion and a ú2.8 million increase in fuel costs.

Passenger numbers were up by 35%at 1.8 million across charter and scheduled services. The fleet now stands at 14 leased Boeing 737s and the staff has grown to 550.

Despite the positive news, Ornstein warns that, with competition intensifying and the European single air market due to be completed in April 1997, airlines will have to locate in "-countries where operating costs are lower".

Although no decision has been made to leave Brussels, he points out that Belgium's social-employment costs are 40%higher than in the UK.

He adds that UK pilots joining the company at the start of February will get 20%more in their wage packets, but cost 25%less for the airline due to the UK's lower social benefits. "If it comes to relocation it looks like Britain is an obvious choice," he says.


Source: Flight International