By Rhys Haynes

ISN'T Virgin Blue meant to be a budget airline?

That is the question everyone was asking yesterday after the airline stunned the market by admitting it was “seriously” considering launching its own low-cost carrier (LCC).

The move comes just weeks after Tiger Airways declared it was heading to Australia to offer cheap airfares as low as $10 before taxes.

Chief executive Brett Godfrey said the airline's recent move into the business market had been a success, but it now had to reconsider the backpacker market.

“Virgin Blue has moved off the mark as being a pure LCC and we think it's quite prudent now to reassess whether or not Virgin Blue should even establish its own low-cost brand, its own ultra-low cost LCC,” he said.

Virgin has had talks with Avalon airport outside Melbourne, as well as Hervey Bay in Queensland, in a bid to compete with rival Jetstar.

The move also comes after Virgin exercised options for a further six aircraft for delivery in 2008/09, he said.

“We are in a position with the capacity that has come on to look at the ‘what if' scenarios and ... it is something that our senior management team is seriously looking into.”

Tiger Airways boss Tony Davis said earlier this month that the Australian market had “two budget airlines and no budget fares”.

Mr Godfrey laughed off suggestions that Tiger posed a threat to Virgin Blue, which currently boasts a fleet of more than 50 aircraft.

“There has been quite a lot of rhetoric on what Tiger is going to do to the local industry, but spare us -- they are coming with five aeroplanes,” he said.

Jetstar said it was also looking at expansion, although it was not considering launching its own LCC.

Industry analyst Peter Harbison said Tiger Airways had “significantly” lower costs than Virgin.

“If you put another one of those carriers in the market, (Virgin) really does run the risk of losing substantial market share at the bottom end,” he said.

Meanwhile, Virgin also wants to begin flying to the US as soon as July 2008, after closing in on a $3 billion deal to buy seven new long-haul aircraft.

Mr Godfrey said the international flights may also go “as far north” as Vancouver, Hong Kong and Japan.

Virgin Blue yesterday announced a half-year net profit of $124.3 million, an 81 per cent rise on the previous first half and forecast a full-year result 60 per cent above the previous full year's net profit of $112 million.

News Limited