Virgin Blue Ups Fares, Cuts Routes On Fuel Costs

June 13, 2008

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Virgin Blue, Australia's No. 2 airline, said it will cut some domestic routes and raise fares by an average AUD$5 on more than half its routes in the face of a 21 percent rise in its fuel costs this year.

It will also freeze pay on all management positions in the coming fiscal year, but will not cut staff, as part of a plan to cut AUD$50 million (USD$47 million) in costs in the fiscal year starting July.

It said its fuel bill for next year was 53 percent hedged at USD$108 a barrel, compared with Friday's price just below USD$137.

Virgin Blue followed steps by rivals Qantas, Air New Zealand and other international airlines, which have raised fares, quit some routes, and reduced capacity in a struggle against high oil costs.

"It's not a case of planning interim measures to offset a spike in the cost of fuel. All airlines must come to terms with a new reality in our industry," Virgin Blue Chief Executive Brett Godfrey said in a statement on Friday.

Virgin Blue said it would take four planes out of the domestic market in the September quarter, cutting planned capacity growth for the next fiscal year by 6 percent, and would move some planes out of loss-making services into new or more attractive markets.

It is considering other proposals to deal with record energy prices.

Virgin warned in April its profit would fall by more than half this year to around AUD$100 million.

(Reuters)