How will Virgin Blue’s next chapter unfold?

After the collapse of Ansett it was that airline’s subsidiaries that were passed from one wannabe Biggles to the next and no sooner had matters settled on that front than Virgin Blue fell into – via an IPO – the arms of Chris Corrigan’s Patrick group.

In turn Patrick succumbed to Toll Holdings.

And now the rumour mill is working hard again with the apparent list of suitors for VB reading like a whosewho of the airline industry.

Toll Holdings boss Paul Little told The Australian in early December that the logistics company was on track to make an announcement early in 2008 about its intentions for its 62 per cent stake in Virgin Blue.

There are three options says Little – a partial, full sale or no sale of its stake.

He maintains there is strong interest from overseas but there are no details – just endless rumours about possible Middle Eastern suitors.

“We’re very pleased with progress,” he told The Australian.

“There’s obviously a bank involved and there’s a lot of work involved in interviewing each interested party and so forth. But I would have thought that by early next calendar year – and that’s January-February-ish – we would be in position to make an announcement on the findings of this process. ” Given Toll Holdings’s long term air freight agreement it is likely that Toll will stay “very close” to Virgin Blue.

Little said that if “that means maintaining a small equity position then we’re not averse to that. ” The possible sale of Virgin Blue could be one of the most significant events in the Australian airline industry since the collapse of Ansett.

Clearly Virgin Blue is no longer the lowest cost airline in Australia but it probably doesn’t want that title any more and prefers best value carrier as its label.

And there is a lot to justify that claim with higher yields confirming that some business clients are making the switch from Qantas to what is now seen as a viable alternative for business travel.

The arrival of Tiger in the market will almost certainly accelerate moves by Virgin Blue to position itself further up the consumer chain.

And the arrival later in 2008 of the airline’s first 777-300ER will add impetus to that trend as the airline pitches for the premium economy market to lift returns.

So how does a prospective suitor value Virgin Blue? It has certainly morphed into an alternative to Qantas to some of the business market and its recent move to a de facto premium class in the front end will add to that trend.

The airline has also committed to the latest – and most expensive – option in regional jets, although the cost of course is relative to yield returns.

If the new E-Jets are successful against Dash 8s on Sydney-Canberra that is a big tick, but they may find it harder competing against the likes of Skywest in WA with much cheaper to acquire Fokker 100s on mining fly-in fly-out work.

By all accounts the V Australia product will be well received on the Pacific and the airline is expected to be a potent competitor to Qantas.

If an Emirates or Etihad was to buy into Virgin Blue, although both have said “in a word no”, it would be expected that they would want to position the airline even further up the consumer buying chain to take on Qantas head to head.

In fact most full service airlines would probably have a similar strategy in mind to give their international passengers a more seamless experience when linking with Virgin Blue.

Virgin Blue has a great deal to offer – superb branding, reputation, product mix and committed management and staff.

All in all it will be fascinating to see how Virgin Blue’s future unfolds.