Virgin Blue's massive Boeing buy

Virgin Blue is to spend up to $8.4 billion on a fleet of up to 105 new Boeing 737 planes in the next six years as it seeks to expand to new routes.
The deal comprises a firm order for 50 737-800NG aircraft – which can be converted to either the 700 or 900 series – as well as 25 firm additional delivery positions secured as options and a further 30 future purchase rights.

The planes are due for delivery between June 2011 and 2017.

It is Virgin Blue’s largest order in the airline group’s 10-history, the Brisbane-based company said in a statement today.

“A significant percentage of the aircraft is intended for replacement of the existing narrow body fleet, while the remainder will be deployed to new routes and to boost frequency where demand dictates,” Virgin Blue said.

“Delivery options negotiated will provide important flexibility to manage movements in market conditions, to aggressively ensure market share is not eroded and to provide additional growth options at Virgin Blue’s discretion.”

Virgin Blue had announced an in-principle agreement for 50 Boeing aircraft at its first half results presentation last month.

At 11.00am, Virgin Blue shares were up one cent at 71.5 cents.

Outgoing Virgin Blue chief executive Brett Godfrey said the aircraft was secured on “attractive commercial terms”.

“Pricing cannot be disclosed but importantly net pricing is improved from 2001 levels, allowing for a lowering of the fleets cost base,” Mr Godfrey said.

“We expect to finalise our funding arrangements for these aircraft shortly.”

At December 31, 2009, the airline group – comprising Virgin Blue, Pacific Blue, Polynesian Blue and V Australia – had 87 aircraft, of which 62 were Boeing 737-700/800s.

The airline group has four Boeing 777-300ER planes, flown by long-haul offshoot V Australia to Thailand, the US, Fiji and South Africa.

A fifth is due in November.

Mr Godfrey said the agreement placed Virgin Blue in a strong position to “prepare for steady future growth” as domestic and short-haul markets recovered.

“It will also ensure a turnover of aircraft to maintain the youngest fleet of modern aircraft which is crucial for maintaining our commitment to on-time performance and the lowest cost base possible,” Mr Godfrey said.

Source: The Herald Sun