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Tuesday, 12 March, 2002, 07:02 GMT
Branson beefs up Virgin Blue
Virgin Blue
Budget airline Virgin Blue is expanding its fleet
Sir Richard Branson has sold half his stake in Australian airline, Virgin Blue, to one of the country's biggest cargo operators, for 260m Australian dollars (96m; $136m).

The new partnership will strengthen Virgin Blue's position in the battle with rival Qantas to gain from the collapse of domestic airline Ansett, analysts say.

A government-backed attempt to put together a rescue for Ansett ended in failure earlier this month. The carrier's planes are now on the auction block for rivals to buy.

Flying higher

Ansett's bankruptcy made Virgin Blue the second biggest airline after international carrier Qantas.

Virgin Blue's new partner is Patrick, the cargo handler at Australian ports, which is eager to move into other transport businesses.

The budget airline will benefit from "new capital" for expansion using money paid by Patrick, the two firms said.

Flying further?

In the longer term, the agreement could allow Virgin Blue, "by being a truly Australian owned airline, to operate international routes in the future should it wish to do so".

Sir Richard Branson
Sir Richard Branson's airline has become the second largest in Australia

Qantas carries 85% of passengers on Australia's domestic routes, while Virgin Blue has 15% market share. Qantas shares fell on news that its rival had teamed up with Patrick.

"It is a significant strengthening of the competitive status of Virgin Blue, but it will take some time," said analyst Peter Harbison of the Centre for Asia Pacific Aviation.

Virgin Mobile to benefit?

Rumours that Sir Richard would sell part of Virgin Blue have been circulating for several months.

He was thought likely to use the funds to support the expansion of his mobile phone business, Virgin Mobile.

Virgin Mobile is now being talked of as a possible candidate for a stock market flotation in London in this year, according to UK press reports.

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 ON THIS STORY
Richard Gibbs, Head of Economics, Macquarie Bank
"The plan is to forge a viable second airline in Australia, but a very low cost one."
See also:

04 Mar 02 | Business
Ansett shuts up shop
19 Nov 01 | Business
Branson mulls Virgin Blue sale
18 Oct 01 | Business
Virgin sheds Our Price stores
16 May 01 | Business
Branson raises trans-Tasman stakes
01 May 01 | Business
Airlines clash down under
31 Aug 00 | Business
Virgin Blue takes off down under
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