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Australia's Virgin Blue Launches Long-Haul Airline

Australian airline Virgin Blue Holdings said on Wednesday it planned to invest A$70 million (US$62 million) in a new long-haul carrier it hopes will be flying on lucrative United States routes by late 2008.

The new airline, called V Australia, still needs U.S. regulatory approval for its plan to operate 10 weekly services between Australia and the United States, which requires changes to existing bilateral air service agreements.

Virgin is spending more than A$2 billion on six Boeing 777-300ER widebody aircraft for the new airline, which it said would be profitable in the second year of operation.

Virgin Blue, which has about one-third of the Australian domestic market, expects V Australia to initially take about 12% of market share on Australia-U.S. routes, where it could compete on some routes with UAL's United Airlines and Qantas Airways.

"We are not looking to come in and stampede the market because we have limited capacity in the first instance. Our idea is to come in and hopefully not lose a lot of money in the first 18 months which we do expect to," Virgin Blue Chief Executive Brett Godfrey told reporters.

Godfrey declined to say which cities the airline would fly to. Local media reports have said it has targeted Las Angeles which is also a key route for Qantas.

Australia's International Air Services Commission (IASC) gave Virgin Blue approval this week to fly on the routes. Godfrey said he was confident of U.S. regulatory approval. The airline may fly to some destinations in Asia if it does not get all 10 services approved.

The planes come amid a surge of new competition in the Australian aviation space. Qantas' low-cost subsidiary Jetstar is expanding on long-haul routes in Asia, while Middle Eastern carriers and low-cost Asian airlines are increasing services into Australia.

Virgin, 62% owned by Toll Holdings, also flies to New Zealand, Fiji and Tonga, under the Pacific Blue and Polynesian Blue names. Richard Branson's Virgin Group owns 25.6% of the airline. Branson's Virgin America Airlines plans to start flying on routes within the United States in August.