Virgin Australia expects to launch direct services between Australia and mainland China, Hong Kong and another south-east Asian city in the next 12 months as part of the airline's first major international push for six years.
Virgin on Friday announced the launch of its first service between Australia and Hong Kong mid-year as part of a new alliance with its Chinese partner HNA Group. However, it is also understood there are plans to launch other direct services to a mainland Chinese city by the end of the year along with a third Asian destination within 12 months.
The move, which is Virgin's first big offshore push since it launched Abu Dhabi flights in 2011, is part of chief executive John Borghetti's long-term vision for the international business which will focus on capturing growing outbound traffic from Australia to the United States and inbound traffic from China.
The international move comes as Virgin posted a lacklustre first-half result and deferred plane deliveries due to weak demand in the domestic aviation market. Virgin is focused on paying down debt and cutting costs after raising $1 billion in capital from its big airline shareholders to secure its financial position.
Virgin hopes its alliance with HNA Group, which owns 10 airlines in the region, will give it a competitive edge on the dozens of airlines scrambling for a share of China's booming travel market. About 1.2 million Chinese tourists visited Australia last year.
Trade and Tourism Minister Steve Ciobo is leading a delegation of tourism operators and airport owners to China next week to meet top executives at China Southern, Air China and China Eastern to encourage the Chinese airlines to open more routes to Australian cities and regional centres.
Mr Ciobo told AFR Weekend he wanted to maximise the opportunities from a new air services agreement with China last year which removes restrictions on flights between the two countries.
"We really want to make sure we don't just stop at the agreement but that we maximise the opportunities," Mr Ciobo said. "Slots into the major (airports) can be challenging. There is an incredible opportunity to utilise some of the regional airports." The owners of airports in Sydney, Melbourne, Hobart, Brisbane, the Sunshine Coast and North Queensland will be represented.
Mr Borghetti said he was confident of obtaining interim Australian Competition and Consumer Commission (ACCC) approval for a new alliance agreement with HNA Aviation, Hong Kong Airlines and HK Express within the next four weeks. Virgin will code-share and offer reciprocal frequent flyer benefits with its new partners. Rivals Qantas and Cathay Pacific are the only two carriers now flying direct between Australia and Hong Kong. Qantas relaunched a route to Beijing last month.
"Cathay and Qantas have got it by the throat and we intend to break that duopoly and bring competition on the route," Mr Borghetti said.
Virgin swung to a net loss of $21.5 million in the December half, including the impact of restructuring costs, compared with a net profit of $62.5 million a year earlier.
Underlying profit before tax was $42.3 million, down $39.2 million. Virgin earlier this month posted a 37 per cent fall in second-quarter underlying earnings.
Hong Kong-based Cathay Pacific announced this week it would increase capacity into Sydney with a third daily Boeing 777-300ER service from October. It has increased capacity into the Sydney market by 25 per cent since February 2015.
