Sydney Airport Message Board

Quote:

Low-cost carrier Virgin Blue will defer about $100 million of capital expenditure because of the difficult aviation market but says it has no need to raise fresh capital.

Chief executive Brett Godfrey told shareholders at the airline's annual general meeting on Friday that non-core capital expenditure will be cut to $US530 million ($A805.7 million) in the second half of fiscal 2009, from $US605 million.

Mr Godfrey said the balance sheet remained strong and the airline could release as much as $100 million in cash for operations if it offloaded non-core assets.

Mr Godfrey said the airline's 2007/08 year was dominated by the high cost of fuel but it faced weakening demand this year, which would be offset by falling jet fuel prices.

Virgin Blue chairman Neil Chatfield said the airline industry faced tough times.

"We expect the operating environment for the 2009 financial year to be the most difficult Virgin Blue has yet experienced," he said.

"The economy, the global financial crisis and the impact on consumer confidence will combine to overtake fuel as the biggest issue for our industry in the next 12 to 24 months," Mr Chatfield said.

Mr Chatfield said airline mergers were a likely consequence of the current economic circumstances.

"During the past few months, industry rationalisation on a regional and global scale has gained momentum," he said.

"We expect this to continue and believe that economic conditions will drive further need for consolidation, including merger activity, across the industry."

Mr Chatfield said Virgin Blue was looking forward to the launch of its international long-haul airline V Australia in February 2009.

"Despite launching in less than optimal circumstances, the fact remains that the Australia-to-US market has limited competition and we remain convinced of the potential of V Australia in the medium to long term," he said.

Virgin Blue was forced to postpone the launch of the long-haul offshoot following the delay in delivery of fuel-efficient Boeing 777-300s due to strikes at the US-based manufacturer's plant.

Virgin Blue closed up one cent to 32 cents.