Virgin Blue scraps New Zealand domestic services

Virgin Blue Holdings Ltd, Australia’s second-largest airline, will scrap New Zealand domestic services as Chief Executive Officer John Borghetti overhauls operations to focus on more profitable routes.

The fleet, carrying the Pacific Blue brand, will be redeployed on routes across the Tasman Sea and to Southeast Asia and Pacific Islands such as Fiji, Brisbane-based Virgin Blue said in a statement on Monday. Planes currently serving those markets will in turn be used to boost long- haul V Australia services, including flights to Los Angeles and Johannesburg.

The changes, which take effect from October, are Borghetti’s first steps in re-shaping Virgin Blue’s network after rising competition in Australia from Qantas Airways Ltd’s Jetstar unit and Tiger Airways Holdings Ltd forced the carrier to slash its profit forecast. Air New Zealand Ltd jumped the most in almost in two weeks following the withdrawal, which will pare competition in the country of 4.3 million people.

“We are adding capacity to routes with strong revenue potential and accordingly, removing capacity from services which are underperforming,” Borghetti said in the statement. “These changes will maximize yields, increase aircraft utilization and also provide a more attractive schedule for the business market.”

Borghetti has also agreed to cooperate with Air New Zealand on Tasman Sea routes, pending regulatory approval. The former Qantas executive halved Virgin Blue’s forecast for profit before tax and items to less than A$40 million ($35 million) in May. He became the carrier’s CEO the same month.

Virgin Blue fell 0.5 cents, or 1.7 per cent, to 29.5 Australian cents as of 10:48 am in Sydney. The stock has tumbled 50 percent this year compared with a 9.5 per cent decline for the benchmark S&P/ASX 200 index. Air New Zealand jumped 2.6 per cent to NZ$1.17 in Wellington.

Travelers with bookings on the canceled Virgin flights will instead be offered seats on Air New Zealand services, the Auckland-based carrier said in an e-mailed statement today.