Virgin Blue in bid to launch service based in Macau

PUBLISHED : Tuesday, 31 August, 2004, 12:00am
UPDATED : Tuesday, 31 August, 2004, 12:00am

Talks on mainland-focused airline will hinge on local carrier waiving sole rights

Australian no-frills airline Virgin Blue is in negotiations to launch a new China-focused airline from Macau, flying into and out of mainland cities, by early next year.

The new airline would focus on tapping the emerging mainland air travel market and be based at Macau International Airport, which recently attracted Southeast Asian carrier AirAsia to start flights between Macau and Bangkok.

But Virgin Blue's plans will hinge on Air Macau's willingness to waive its 25-year concession on airline operations based in Macau.

It is believed the two sides have been in negotiations on commercial terms for the waiver, along with Air Macau majority shareholder the China National Aviation Corporation for several months.

Virgin Blue commercial chief David Huttner would not confirm that the two sides were close to a deal, saying only that 'it is well known that Virgin Blue has looked at a number of opportunities where we can apply our expertise and replicate the success we've had in the Australian market'.

'We do not rule anything out and will continue to examine every business possibility that comes our way,' he said.

Air Macau chief executive David Fei Hong-jun was not available for comment.

In 1995, Air Macau and the Macau government signed a 25-year concession that gave the airline exclusive rights to operate as Macau's only home-based carrier.

Under the agreement, Macau airport is free to attract foreign airlines to fly there, as in the case of AirAsia, which started flights to Macau from Bangkok in June.

But the launch of a new Macau-based airline requires a waiver of the concession from Air Macau and its shareholders, which include casino magnate Stanley Ho Hung-sun and Taiwan's EVA Airways.

Virgin Blue's proposal to launch its new Macau airline will depend on whether it can negotiate favourable terms for the waiver. It is not known how far apart the two sides are in the negotiations.

While investors have seemed anxious to invest in low-cost Asian airlines recently, so far there has been more talk than action.

While Air Macau's concession is a daunting barrier, Macau has emerged as an ideal base for a new low-cost Asian carrier given that it has a similar aviation regulatory structure to Hong Kong's, plus a large allotment of unused air rights and lower operating costs.

Macau has air rights to 31 mainland cities, but Air Macau operates scheduled services to just nine - Beijing, Shanghai, Nanjing, Xiamen, Haikou, Kunming, Shenzhen, Guilin and Chengdu.

The city also has 42 air service arrangements with overseas countries and territories, yet Air Macau flies to only three cities - Bangkok, Manila and Taipei.