Virgin Australia will consider adding aircraft types beyond the current A320s to the fleet of budget carrier Tigerair Australia as part of a potential international expansion that would help it to better compete against Jetstar, says Virgin chief executive John Borghetti.
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Virgin hasagreed to buy the 40 per cent of Tigerair it did not already own from Singapore-based Tiger Airways Holdings for $1, with the deal including rights needed to fly internationally.
"This international licence ... is a weapon in our armoury we could choose to use against Jetstar in short-haul [international] travel, just like we do domestically, which means that we bring further competition," Mr Borghetti said.
Tigerair's ambitions might not be limited to using its existing fleet of 13 A320s, he said, saying it would be possible to transfer Boeing 737s from Virgin to Tigerair or to add other aircraft types to the mix.
He ruled out the prospect of Tigerair selling its fleet of A320s and replacing them with 737s to give it commonality with the Virgin short-haul fleet.
"The benefit of [not having a common fleet] is you have two manufacturers that will compete with each other for sales," he said. "We have no plans – I mean zero, zilch of getting rid of all the A320s and moving to 737s in the Tiger fleet. Or vice versa."
To fly overseas, Virgin still needs Foreign Investment Review Board approvals, bilateral air traffic rights, airport slots and approvals from the Civil Aviation Safety Authority (CASA).
Mr Borghetti has been reluctant to provide public guidance on capacity and growth plans because he wants to keep rival Qantas Airways in the dark about growth plans.
But potential short-haul international destinations for Tigerair would include Bali, Fiji, Phuket and New Zealand.
Virgin shares are majority foreign owned, but its international division is a separate unlisted entity with a separate board to ensure it maintains Australian control to comply with the Air Navigation Act.
It is unclear whether Tigerair will need to sit inside the international subsidiary for it to obtain its own international traffic rights.
CBA analyst Matt Crowe said he believed Virgin would need to use the $336 million of proceeds from the recent sale of 35 per cent of its loyalty program to private equity group Affinity Equity Partners to fund further operating losses now that it had acquired the rest of Tigerair.
Mr Crowe said he expected Virgin would report a loss before tax of $188 million this financial year, including the Tigerair losses.
