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Virgin Blue's Going Boeing

16/01/2003

$5.4-Billion For up to 50 New Aircraft

Australia’s only low fare airline Virgin Blue, has announced it has signed a major contract with US-based Boeing Commercial Airplanes for up to 50 brand new 737 Next Generation aircraft.


The order now positions the carrier as one of the world’s largest low-fare airlines and also cements Virgin Blue as the operator of the youngest fleet of aircraft in the Asia Pacific region, if not globally.


Virgin Blue has spent the past ten months in tense negotiations with exacting expectations of both major aircraft manufacturers.


Chief Executive, Brett Godfrey said, “We set out almost a year ago to buy our new aircraft needed to continue our value based strategy and the reason it took so long is because we weren’t prepared to compromise until we got what we wanted. The three biggest factors were obviously cost, quality and reliability and we were unwavering in our commitment to ensuring we could maintain our position as Australia’s low fare leader.”


“The Boeing team worked tirelessly to put together an outstanding offer and this order is a win for us, it’s a win for Boeing but most importantly, it’s a win for Australian travellers who will have even further proof that flying on brand new state-of-the-art aircraft does not mean higher fares.”


The deal gives Virgin Blue 50 aircraft purchase rights, ten of which have just been converted to firm orders for 737-800 aircraft. All ten will be delivered by August 2004 taking the Virgin Blue fleet size to 40.


The remaining 40 purchase rights will position Virgin Blue to seize new domestic and international growth opportunities and also allow for older aircraft “swap-outs” to ensure Virgin Blue maintains its youngest possible fleet.


Jim Belz, International Sales Director for Boeing Commercial Airplanes, said, “As anyone who has dealt with them knows, Virgin Blue has some of the most accomplished negotiators around and they worked us hard to ensure their airline has the ability to continue being a low fare leader. We’re very pleased to be a continuing part of Virgin Blue’s success.”


It’s the first time the airline has purchased aircraft instead of leasing with pre-delivery finance secured from WestLB and Hamburgische Landesbank, building on the existing relationship between Virgin Blue and WestLB leasing company Boullioun Aviation.


Brett Godfrey continued, “When there’s well over $5-billion on the table, you aren’t talking about play money. This is a massive investment and a major milestone for Virgin Blue and it gives a clear indication of our bold future expansion plans.”


“Obviously one of the big moves this year will be the launch of international services and the 737-800 aircraft will have regional Pacific capabilities so that the only differences between us and the competition will be our lower fares and of course our fantastic service.”


The new aircraft will feature the latest in liquid crystal cockpit displays, distinctive 2m high range-enhancing winglets and will be capable of flying non-stop from Australia to destinations such as Singapore and Samoa.


The aircraft order propels Virgin Blue into the top half dozen low fare carriers in the world in terms of fleet size, alongside the likes of Ryanair, easyJet, JetBlue and WestJet.


“We don’t think that’s too shabby for an airline that isn’t yet even three years old and we will continue our foray in to new domestic and international markets to allow even more people to take advantage of our affordable and fun flying alternative,” finished Brett Godfrey.


Fast Facts


10 of 50 purchase rights converted to firm order for new 737-800 high gross weight aircraft direct from Boeing to be delivered within a twelve month period from August 2003

These aircraft will take the company’s fleet to 40

Further purchase rights for up to an additional 40 737NG aircraft over the next 10 years with choice of 737-700, 800 and 900X aircraft at Virgin Blue’s discretion

Maximum take off weight 79 tonnes, CFM56-7B26 engines with 26,000 pounds of thrust

Performance enhancing winglets

The 737-800 will have 180-seat configuration with all leather seats.

Capable of regional Pacific flight duration

Max gross contract value should all purchase rights be executed of US$3.1billion, which equates to approximately AU$5.4 billion based on current exchange rates.

Virgin Blue is already one of the top 10 737NG operators by aircraft number in the world and is now also one of the 6 largest low fare airlines in the world.

WestLB and Hamburgische Landesbank will provide the pre-delivery finance after Virgin Blue’s first foray into the debt market.

Virgin Blue expects to obtain long-term finance from the commercial debt market, including the support of the US Export Import Bank in the near future.