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Virgin buys into budget carrier

Putrajaya, August 11, 2007

British billionaire Richard Branson's Virgin Group took a 20 per cent stake in a new Malaysian airline that has ambitions to become the world's top long-haul budget carrier.

Branson and AirAsia X, founded by former Virgin executive Tony Fernandes, did not immediately give a price for the deal, which is rumoured to be tiny, but the real value of the transaction is in the longer-term alliance of the two businesses.

'Virgin's involvement will provide AirAsia X with greater global credibility and visibility across its markets and will assist in the negotiations with various airports, regulatory authorities and governments,' AirAsia X chairman Kalimullah Hassan said in a statement.

Branson's 23-year-old Virgin Atlantic, owned 49 per cent by Singapore Airlines, already flies to select destinations in Europe, North America, Africa and Asia.

By contrast AirAsia X is start-up operation, though it will use the same brand as its sister firm, AirAsia Bhd, Asia's largest budget carrier, also founded by major shareholder Fernandes, who once worked for Branson in Virgin Music.

AirAsia Bhd, like its counterparts in Europe such as Ryanair and Easyjet, focus mainly on short-haul flights.

The low-cost model has yet to be proven on a large scale in the long-haul market, where it has been assumed that passengers will be reluctant to sit for eight hours and more in a crowded cabin with no-frills service.

'It is going to be a tough battle as those who perceive us as competitors are not going to roll over and play dead,' Kalimullah said in the statement.

'But again, both Sir Richard and Tony are battle-scarred and with a song and a prayer, and lots of hard work, I believe we shall prevail.'    

AirAsia X has rights to fly to Stansted airport, a major UK hub for European low-cost flights, as well as to Australia's Gold Coast tourist mecca and to Avalon airport near Melbourne.

The Australian flights are due to begin by the end of next month.

AirAsia X's parent firm, Fly Asian Xpress, has ordered 15 new Airbus A330-300 aircraft, the first to be delivered in time for the September launch. It has options on 10 more.  Reuters




Tags: Virgin Group |

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