Virgin Blue Buys New Planes, Eyes Long-Haul Flights

Virgin Blue Holdings, Australia's second-biggest airline, said on Tuesday half-year net profit rose 81% on demand for travel and announced new plane orders ahead of an international expansion.

Virgin Blue shares fell as much as 6.8% after it announced it was in talks with planemaker Boeing to buy seven widebody aircraft worth US$2.6 billion ahead of the launch of long-haul operations next year.

Virgin Blue said net profit for the six months to Dec. 31 was A$124.3 million (US$98 million), compared to A$68.7 million a year ago. The airline forecast 2006/07 full-year net profit to be more than 60% higher than the previous corresponding period of A$112 million.

Three analysts on average were expecting a net profit of A$98 million for the company, which competes with takeover target Qantas Airways. Virgin also announced it had exercised options for six aircraft from Brazil's Embraer on top of the 14 it ordered last year to be used on routes to islands in the South Pacific.

It said it was in exclusive negotiations with Boeing to acquire seven 777-300ER, as well as another six options. Virgin said it expected to launch a long-haul service in the second half of 2008.

Virgin said last year it wanted to start long-haul flights to Asia and Hawaii by late 2008 and Europe and North America by 2010.

No Management Buyout

Virgin also said it was not currently considering a management buyout, but did not rule out the move in future. "Not today, no," Virgin Blue Chief Executive Brett Godfrey told reporters when asked if the airline was considering a management buyout. "It is certainly something that would be considered if the shareholders decided they want to exit the airline."

Australian transport group Toll Holdings owns a 62.3% stake in Virgin Blue which it inherited when it launched a takeover for ports operator Patrick Corp.

Virgin, which has about one-third of Australia's domestic aviation market and competes against Qantas Airways and its budget carrier Jetstar, upgraded its earnings forecast after attracting more business travelers and increasing its protection against high oil prices.

Virgin Blue said it had 95% of its fuel requirements hedged at US$70 a barrel for the rest of the current fiscal year.

Virgin Blue shares, which have gained more than 40% since Qantas confirmed it had been approached by a private equity consortium in November last year.