Andrew Doyle/LONDON
VIRGIN EUROPEAN Airways could begin operations in June if it goes ahead with plans to acquire a controlling stake in EuroBelgian Airlines (EBA).
The UK airline has confirmed that it has signed a memorandum of understanding (MoU) to acquire an 80% stake in EBA, which would serve as a platform for chairman Richard Branson's planned foray into the European low-cost scheduled market (Flight International, 14-20 February).
Virgin European plans a rapid expansion of EBA's scheduled network, which serves five European cities from Brussels, although this could depend on the availability of additional aircraft. The carrier is keen to avoid building a hub-and-spoke network from the Belgian capital, however, favouring point-to-point services instead.
This could lead to direct flights between Barcelona, Madrid, Rome, Milan and Vienna, while other destinations such as Copenhagen and Stockholm would soon be included. Crucial to the success of the airline, would be its ability to maintain high passenger-load factors, achieved by using smaller aircraft and charging lower fares, than those of competitors.
The airline believes that the profitability of European routes has in the past been hampered by the reliance of flag carriers on building major hubs, and their tendency to operate aircraft, which are too large. It calculates that average load factors of rivals on the routes it plans to contest are below 60%.
EBA has a fleet of eight Boeing 737-300s and three-400s, four of which are used for charter work. The airline has long-term charter commitments and Virgin European considers that it would be, cost-effective for this to continue.
Virgin European is carrying out detailed studies into its fleet requirements and wants to standardise on a single variant of one aircraft type. It is understood to be looking at the 737 and Airbus A320, and also regional jets. Three new 737-300s are to be delivered from lease companies this year - the first due in March.
The carrier, headed by former Continental Express boss Jonathan Ornstein and backed by US entrepreneur David Bondiman, must sign the deal by the end of April under the MoU. It would purchase the 80% stake in EBA from co-owners City Hotels group of Belgium and Luxembourg holding company NEI, with an option to buy half of the remaining stock over the next three years.
Source: Flight International
