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Virgin Atlantic Moves to Double the Size of Its Fleet of Jetliners

August 06, 2004|From Reuters

Virgin Atlantic Airways ordered $5.5 billion worth of Airbus jetliners Thursday to double its fleet as it takes on arch-rival British Airways.

The deal is a coup for Airbus, which beat out Boeing Co. for the order.

It follows a string of orders for Airbus planes in the last month, reflecting a gradual industry rebound after three years of cutbacks amid an economic downturn, and despite concerns that record oil prices and security fears could hit airline earnings.

Virgin said it would add 6,000 jobs and fly new routes to Australia and the Caribbean after placing orders and options for 26 long-range A340-600s, a turnaround from 9/11 when transatlantic travel tumbled after the terrorist attacks, forcing Virgin to cut 1,200 jobs.

"This is by some way the biggest aircraft order in Virgin Atlantic's history and will enable us to double the size of the airline over the next five years," Virgin Atlantic founder Richard Branson said in London.

Virgin picked the four-engine A340 over Boeing's twin-engine 777 because passengers prefer the extra engines, Branson said, adding that he also took into account the fact Airbus was European and would create jobs in Britain.

Virgin placed firm orders for 13 A340-600s and options for 13 more. The airline said the deal was worth $5.5 billion. The jets will be delivered in 2006-08.

Virgin currently has 29 aircraft, a mixture of Boeing 747s and A340s. Virgin also has an order for six of Airbus' A380 super-jumbo jets.

Branson said the airline hoped to take on British Airways as it expanded its long-haul network out of London with new planned routes. Virgin wants to double its annual passenger load to 8 million.

The new planes will be used to add capacity to its existing routes to the U.S., Hong Kong, Japan, India, the Caribbean and Africa, while adding new routes to Australia, the Middle East, Asia and North America.

Analysts said Virgin was unlikely to pose a major short-term threat to British Airways because it could not offer short-haul connections from London.

"The problem Virgin has is a lack of feeder networks. They don't have a short-haul network at Heathrow or Gatwick to feed their flights so they are totally reliant on the London market," Dresdner Kleinwort Wasserstein analyst Mike Powell said.

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