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The Sydney Morning Herald

MacAirports, Virgin Blue agree to $50m-a-year terminal deal

Author: Brian Robins
Date: 07/11/2002
Words: 534
          Publication: Sydney Morning Herald
Section: Business
Page: 26
Macquarie Airports shares regained the $1 mark yesterday after it forecast $50 million in annual revenue from Virgin Blue's use of the former Ansett terminal at Sydney Airport.

Macquarie Airports has a direct and indirect 44.4 per cent stake in Sydney Airport Corp.

Under the deal between Virgin Blue and Sydney Airport, the discount airline operator is to channel a minimum of 4 million passengers through the terminal in the first year, rising to 4.5 million.

All litigation between the two parties has been abandoned.

Virgin Blue is expected to completely transfer its Sydney terminal operations to the former Ansett terminal by mid-December.

Virgin Blue has agreed to a fee of around $4 per passenger, a total of $18 million a year.

Virgin Blue's managing director, Brett Godfrey, said the agreement contained strong incentives: ``The more we put through, the cheaper it gets."

Virgin Blue already put around 4 million passengers a year through Sydney and the upper level of the agreement posed little difficulty, he said.

The rest of the revenues anticipated by Macquarie Airports stem from rental agreements and the like relating to higher throughput at the terminal.

Macquarie Airports now says annual passenger throughput at the former Ansett terminal will go as high as 7 million.

With the resolution of the deal, Virgin Blue said it is now focusing on new aircraft, as well as its offshore expansion, which is expected to centre initially on New Zealand.

Virgin Blue will have access to six dedicated gates at the terminal, Qantas six and regional airlines one.

Five gates will be left for expansion by existing players or a new entrant.

Sydney Airport is to upgrade the retailing and catering resources of the pier to be occupied by Virgin Blue, which will boost its prospective return from the terminal.

Macquarie Airports said it was confident of the gross profit (as measured by earnings before interest, tax, depreciation and amortisation) forecast of $377.4 million for the airport in 2003.

It is anticipated Macquarie Airports will meet with analysts over the next week to outline its plans for Sydney airport, which may see earnings forecasts for the facility upgraded.

Additionally, Virgin Blue is in the process of negotiations for additional aircraft, to expand its fleet to 30 by March and 40 by the end of 2003.

As part of its expansion, the discount airline operator is to move offshore for the first time, using Boeing 737 aircraft a move that could be anywhere from Bali to Fiji, Samoa and New Zealand, Mr Godfrey said.

The international service is expected to be launched during the second or third quarter of the year, he indicated. ``It won't be in the first quarter, and I'd be disappointed if it were any later than the last quarter," he said.

A tender has been issued to interested parties, with submissions due in 30 days.

``We've identified half a dozen we're interested in," Mr Godfrey said.

``We will see what competition is out there."

 
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