Richard Branson’s Virgin Blue Airlines is tightening its purse strings even further due to record fuel prices. The low-cost Australian airline is grounding two aircraft as well as introducing a range of cost-cutting measures, which include the removal of a further two aircraft from Australian flying, the introduction of new baggage fees and an increase in the airline’s Flexible Fares.“We have endeavoured to seek a reasoned and balanced approach to recover costs associated with current punitive fuel prices and the direct effects on our business,” said Chief Executive, Brett Godfrey.

“The necessary introduction of baggage fees and the reduction of our lowest fares for our price sensitive Guests, is anticipated to yield both improved demand levels and revenue,” he said.

The two Boeing 737 will be removed from the Australian domestic market by October 2008, reducing capacity by approximately 3% in addition to the previously stated 6% planned capacity reduction for the fiscal year 2008/09. The removal of these planes from scheduled flying will result in frequency reductions on a number of under-performing routes.

Virgin Blue has also agreed with the Embraer corporation to delay five committed 2009 deliveries. This will reduce planned capacity by a further 3% in fiscal year 2008/9.

These decisions, coupled with those announced on 13 June 2008, take the Virgin Blue capacity to be withdrawn from the Australian market to 12%. There will be no redundancies at either Virgin Blue or Pacific Blue as a result of these capacity reductions.

Virgin Blue will introduce a new “pay for weight” baggage policy which will apply to Virgin Blue and Pacific Blue domestic flights for fares booked from Monday 18 August on flights departing from Monday 1 September 2008. This policy replaces the current allowance of up to 20kg of free checked baggage.

Virgin Blue is also introducing a new “Go Fare!” cutting its lowest lead-in fares by up to $20 across more than half of the airline’s domestic route network.

The year round “Go Fares!” are intended to allow price sensitive travellers to offset the new baggage fees and to stimulate support for leisure markets.

Virgin Blue has also increased Flexible Fares by up to 5% on about half of its more demand resilient business markets.
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