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Virgin Australia is set to battle Qantas on another front with the official launch of Virgin's regional airline.
Perth-based Skywest will be rebranded as a Virgin airline and add some 32 planes to the Virgin Australia fleet, with 800 services per week to some 41 destinations.
Virgin Australia CEO John Borghetti and global Virgin brandmeister Sir Richard Branson oversaw the new airline's debut at Perth Airport, where Borghetti said of the move "For us this is all upside, and for the others it is all downside."
Borghetti sees the-airline-formerly-known-as-Skywest as fuelling Virgin's push into regional centres and charter-based 'fly-in, fly-out' (FIFO) services dominated by QantasLink.
"We needed expansion – and Australia needed expansion – in regional markets, as well as more competition, especially in charter and fly-in, fly-out markets" Borghetti explained.
"Everywhere Virgin Australia has gone has always seen a reduction in price."
Growing Virgin's regional reach
And while the Skywest ports are mainly dotted around West Australia, Borghetti said he sees scope for expanding the network map, especially in Queensland and New South Wales on 'regulated routes' where state governments have decreed that Qantas or another airline is the sole carrier.
"It costs more to fly Brisbane-Roma return than Brisbane-Perth return on one of our A330 jets" Borghetti observed. "We know if ever we could get access to that route the costs would drop by 30% – that's a given."
The criteria for those agreements vary from state to state. While the NSW government has set a deregulation trigger of 50,000 passengers on intrastate routes, approximately 150,000 passengers went through Roma Airport over the last 12 months, Virgin says.
Richard Branson: why regional airlines matter
For his part, Richard Branson said he considers Virgin's regional play as "one of the final pieces in the jigsaw puzzle for competing with Qantas."
However, Branson admitted that "even if some (regional) routes don't make money, they can still be an essential part of an airline and its network."
"Short-haul is extremely important for feeding onto long-haul" Branson told Australian Business Traveller. "The reason we launched Little Red in the UK was to feed our long-haul airline."
"We've had 30 years with our hands tied behind our back, where we haven't been able to get any slots out of Heathrow to do short-haul."
"In fact, I was actually quite jealous when I heard that Perth was spending a lot of money in infrastructure, that's something that just isn't happening at Heathrow" Branson said.
Virgin's move into the regional market puts it on the same three-tier footing as Qantas with a full-service mainline carrier, a regional arm and a low-cost airline (in the form of Jetstar and Tiger Airways Australia).
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