Virgin "Lite" Blue??

How low can fares go? That is the question Virgin Blue, Australia’s first truly successful low-cost carrier, is asking.
Faced with intense competition from Qantas subsidiary Jetstar and the imminent entry of Singapore-based Tiger Airways, the airline is re-examining its cost structure to set up an “even lower cost airline” within a “low-cost airline”.

Virgin Blue chief executive Brett Godfrey confirmed that the lower cost operation would be up and running within three months.

The “Virgin Blue brand is heading upmarket”, Mr Godfrey said this week.

It was courting business travellers and clear separation of brands was on the table.

Mr Godfrey likened the separation to that of Lexus and Toyota.

In recent years Virgin Blue has moved its product upmarket with lounges and a loyalty program, which add costs.

There are more costs coming in the form of a joint venture with its parent Toll Holdings, a long-haul fleet of 777-300ERs for international routes, and smaller regional jets.

The moves will all be part of what many suggest will be an airfare bloodbath later this year. Qantas chief executive Geoff Dixon has said his airline group – Qantas and Jetstar – will defend its 65 per cent market share “no matter what”.

However, lower costs come at a price, as a survey this week by Choice magazine reveals.

Jetstar rated well below Virgin Blue in a customer survey, according to Choice.

In fact, of the major airlines Virgin Blue rated higher across most parameters, and the highest score of 77 per cent was in “value for money”.

It’s likely that the new Virgin Blue ultra-low-cost aircraft will have more seats, like Tiger Airways’ aircraft – and thus less leg room – and will only operate between the big capital cities.

The drive to cut costs has reached new lows in Europe, with low-cost giant Ryanair stripping out seat pockets and window shades on aircraft to save weight and costs.

On Virgin Blue’s aircraft the seats are set between 78.5cm and 84cm apart, while Jetstar’s are 76cm and those of Tiger Airways just 72.5cm.

It is expected that Tiger will remove some seats to cater for taller Australians.

Separately, Mr Godfrey said the airline would launch a public competition to choose a name for Virgin Blue’s new US offshoot, which will use Boeing 777-300ERs to fly from Australia to the US west coast.

Virgin Blue is not able to use the Virgin name outside Australia, because of an agreement that was part of the deal when Singapore Airlines took a 49 per cent stake in Virgin Atlantic in 2000.