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Virgin Australia Shows Price War’s Costs

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SYDNEY — When John Borghetti took the reins of Virgin Australia Holdings Ltd. in 2010 after being passed over for the top job at Qantas Airways Ltd., one of his first moves was to launch a price war to lure travelers away from its bigger rival.

The casualties from that price war are mounting—and not just at Qantas, which is cutting jobs and might sell assets to protect profits. On Thursday, Virgin Australia forecast a loss before tax of around 49 million Australian dollars (US$44 million) for the six months through December, after its shares recently fell to a two-year low.

Airlines often experience turbulence because of factors such as high jet-fuel costs and tepid demand, but investors are now questioning whether Virgin Australia’s woes have been self-inflicted. Its move to boost capacity and cut ticket prices prompted Qantas to defend its 65% share of the domestic aviation market by responding in kind.

The result was a glut of commercial jets in the skies over Australia, and increasing numbers on routes to farther-flung destinations.

So far, Virgin Australia’s biggest investors are staying on board. Australia’s No. 2 carrier counts Air New Zealand Ltd., Singapore Airlines Ltd., Etihad Airways and Richard Branson’s Virgin Group Ltd. as its main shareholders, which together own more than 70% of the company.

Smaller investors, however, aren’t so sure that Virgin Australia’s strategy is on the right path.

“It’s interesting to note that Virgin has competed more heavily, and to its own financial detriment, over the period that Virgin’s ownership by other airlines has increased,” said Angus Gluskie, Sydney-based managing director at White Funds Management, which holds a small amount of Virgin Australia stock.

“Investors should be questioning whether the longer-term interests of these airlines are becoming more important to Virgin than near-term profits,” he said.

Air New Zealand, Singapore Airlines and Etihad compete with Qantas on international routes. Late last year, all three Virgin Australia investors increased their holdings after the Brisbane-based carrier issued new shares to raise around A$350 million.

“We are fully supportive of Virgin Australia and its strategy and are confident that John Borghetti and his team will continue to attract more share of the travel wallet of both business and leisure customers,” an Air New Zealand spokesman said. A spokeswoman for Singapore Airlines said it continued to support Virgin’s strategy, while an Etihad spokesman wasn’t immediately available for comment.

Virgin Australia’s strategy has involved putting business-class seats on domestic flights and targeting routes that ferry workers in and out of mining towns in more-remote regions of the country. By the end of June, Virgin Australia was making more than 20% of its revenue from higher-margin business and government travelers, up from below 10% when Mr. Borghetti took over as Virgin Australia CEO after leaving as head of operations at Qantas.

Qantas suffered from the domestic competition, warning on Dec. 6 that it expected a pretax loss of up to A$300 million for the six months through December and would lay off a further 1,000 workers.

Virgin Australia investors, however, were concerned about the finances at the company. Several brokerages have downgraded their earnings forecasts for the airline, which reported a pretax profit of A$61 million for the six months through December 2012, following the Qantas announcement.

“When I talk to investors, there are some that raise questions,” said Mark Williams, a Sydney-based analyst at CIMB. “But management has done a pretty remarkable job at repositioning Virgin Australia in such a short period of time. It’s pretty tough out there, but over time we’d expect capacity growth will settle down.”

Thursday’s earnings forecast by Virgin Australia—issued following a request by the stock exchange to explain a recent sharp fall in its share price—excludes one-off losses associated with budget carrier Tigerair and restructuring costs, indicating its bottom-line figure may be even worse. However, shares rose 8% to recover some of the steep losses incurred in the past two weeks.

Matt Spence, an aviation analyst at Bank of America BAC +0.18% Merrill Lynch, said he doesn’t expect a turnaround any time soon. He predicts that Virgin Australia will post a pretax loss of A$120 million for the full year.

Still, Mr. Spence noted that Virgin Australia increased fares in December by as much as 4%, a sign the price war with Qantas may be easing,

Qantas is due to report its first-half earnings Feb. 27, a day earlier than Virgin Australia.

– WALLSTREET JOURNAL

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Aviation

Shell Endorses Regional Action Plan for Safe Helicopter Services

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Shell Nigeria Exploration and Production Company Limited (SNEPCo) has welcomed efforts to promote safe helicopter services across Africa in a proposed Regional Action Plan (RAP).

The plan, according to a company statement, is the highlight of a workshop organised in Lagos within the week by the Aviation subcommittee of the International Association of Oil and Gas Producers (IOGP) in partnership with London-based safety advocacy group, HeliOffshore.

Biztellers reports that the two-day Offshore Helicopter Industry Safety Workshop (OHISW) with the theme “Developing a Regional Action Plan,” followed on from a similar session last year which SNEPCo sponsored.

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It also provided administrative and logistical support for this year’s conference which was sponsored by ExxonMobil. SNEPCo, which pioneered Nigeria’s deepwater production at Bonga in 2005, relies on helicopter shuttles for operations and supports the workshop as part of its contributions towards safe services in Nigeria.

In an address at the opening session delivered by General Manager Contracting and Supply Chain, Charles Oranyeli, Managing Director SNEPCo, Ronald Adams said: “By developing a regional action plan, we can move beyond dialogue to alignment, ensuring that the safety leadership, industry standards, and collaborative approaches championed last year are embedded in a common roadmap for collective improvement. The most effective solutions will come not from isolated efforts, but from partnership, standardization, and coordinated action across the region.”

The workshop was attended by more than 80 representatives from oil and gas companies, the Nigerian Content Development and Monitoring Board (NCDMB), the Nigeria Civil Aviation Authority (NCAA), the Nigerian Safety Investigation Bureau (NSIB), helicopter operators and original equipment manufacturers.

The event concluded with participants deciding action items for the proposed Regional Action Plan including Search and Rescue (SAR) initiatives, implementation of IOGP Report 690 standards and establishment of formal industry leadership forums.

The IOGP has been active for over 50 years, supporting its more than 90 members around the world to promote “excellence in safe, efficient and sustainable energy.”

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Airfares Likely to Rise as Aviation Fuel Price Spikes by 80%

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The Airline Operators of Nigeria (AON) has declared that airlines operating in Nigeria have come under financial pressure following a sharp increase in the price of Jet-A1, also known as aviation fuel.

According to the group, the price of aviation fuel, has surged to about N1,800 per litre in many parts of the country, from about N1,000 per litre two weeks ago. This amounts to almost an 80 per cent increase within a short period.

Aviation fuel remains the largest cost component in airline operations, accounting for about 30 to 35 per cent of total operating expenses.

Industry stakeholders have linked the latest spike to the ongoing conflict in the Middle East, which has pushed up global energy prices.

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Speaking on Channels Television on Friday, the spokesperson for the Airline Operators of Nigeria, Prof Obiora Okonkwo, said the surge had placed airlines under severe financial strain.

According to him, most carriers have so far refrained from immediately transferring the additional cost burden to passengers, despite the pressure on their operations.

“Two weeks ago, we were getting Jet-A1 at about N1,000 per litre, which today is about N1,800, and even more in some stations. We have experienced an increase of about 80 per cent. That’s quite a spike,” Okonkwo said.
He explained that airlines were currently absorbing the losses in order to avoid worsening the economic burden on the travellers.

“We are not in a business where you can easily adjust your ticket price. Right now what we are doing is that we are bleeding. We are taking the blow. We are selling tickets at very non-profitable prices. We are losing a lot of money,” he said.

Okonkwo warned that the situation might not be sustainable if fuel prices continue to rise without government intervention.

“Obviously, adjustments will be expected anytime soon. But again, we are very sensitive to the economic situation of Nigerians and our travellers,” he added.

He noted that developments in the global oil market, particularly the recent release of reserve crude oil, could influence fuel prices in the coming weeks.

Okonkwo also urged the Federal Government to explore engagement with the Dangote Refinery as part of efforts to stabilise aviation fuel supply locally.

“We were more hopeless in a situation where there was no refinery in Nigeria in the last two years. Now that we have a refinery, we are hopeful that we can find a solution around it,” he said.

According to him, if the spike persists, some airlines may struggle to continue absorbing the losses associated with the rising cost of aviation fuel.

Meanwhile, the AON spokesperson also reacted to the decision by the Federal Competition and Consumer Protection Commission to sanction about five airlines over alleged price fixing.

Okonkwo said while the commission has regulatory powers, the aviation sector remains deregulated, making coordinated price fixing unlikely.

“There is no meeting of airlines where they agree to fix prices. Fixing prices would mean operating as a cartel, and that is not the case,” he said.

He explained that airline ticket pricing varies widely because different aircraft types attract different operating costs.

“Each airline determines its fares based on its own operational costs,” he said.

Okonkwo added that airlines must also demonstrate financial viability to regulators as part of the conditions for maintaining their operating licences.

“At every point in time, you must prove to the regulators that you are financially viable and capable of sustaining operations,” he said.

He urged regulators to take into account the fragile nature of the aviation industry when making policy decisions affecting airlines.

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Bird Strike Hinders Air Peace Lagos–Port Harcourt Flight

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An Air Peace flight from Lagos to Port Harcourt has suffered a disruption, after the aircraft was affected by a bird strike on arrival at the Port Harcourt International Airport.

The airline made the disclosure on Thursday in a statement signed by its spokesperson, Osifo-Whiskey Efe.

He added that the incident necessitated safety checks on the affected aircraft and the deployment of another aircraft to convey passengers on subsequent flights.

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“We deeply empathise with passengers affected by this unforeseen incident and are working diligently to minimise disruptions,” Efe said.

The latest incident adds to the growing challenge of bird strikes faced by local airlines.
In December 2025, Air Peace disclosed that it recorded 49 bird strikes across Nigeria between January and September, stressing that even a single strike could ground an aircraft for weeks.

Chairman and Chief Executive Officer of the airline, Allen Onyema, had said on Arise TV that bird strikes constituted a major operational challenge, often leading to costly repairs and serious disruptions to flight schedules.

“One bird strike could cripple your aircraft for the next month. At that moment, there is no two ways about it. These bird strikes often lead to costly delays and serious disruptions in flight schedules,” he said.

He added that losses from such incidents compound other challenges facing Nigerian airlines, including heavy taxation and operational constraints.

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