By James Wilkinson

Virgin Blue has announced a major shake-up of its full-service international arm V Australia, with the 18-month-old carrier shedding routes and announcing a tie-up with Abu Dhabi-based Etihad Airways.

V Australia is set to fly to Abu Dhabi

Just a week after announcing services would be increased to Johannesburg (South Africa) and Phuket (Thailand), flights have been axed to both destinations from February 2011 in favour of new services to Abu Dhabi from Sydney and Brisbane.

Virgin Blue CEO John Borghetti said the decision was made due to the poor performance of the routes since they commenced and turning a profit in the near future would have been “remote”.

“As we go forward those markets aren’t appropriate,” he said. “As a minor player on the African route the prospects of achieving a return are remote.

“The Phuket route is also sub-optimal for our Boeing 777-300ER given our configuration,” Borghetti said.

The news also comes a week after Virgin axed V Australia’s Sydney-Nadi services, with Pacific Blue set to return to the route on October 19, 2010.

He said the overhaul of V Australia’s routes was an outcome of the second stage of Virgin Blue’s network review, which also determined the need to introduce larger, A330-200 aircraft on a range of East Coast routes from Perth.

Borghetti said V Australia was better placed to serve two hub-destinations – Abu Dhabi and Los Angeles – and feed passengers onto the networks of Delta and Etihad from there.

“What we are interested in is a strategy of two key hubs,” he said.

Borghetti said an outcome on the agreement with Delta, which also includes code-sharing and route planning on the lucrative trans-Pacific route, was expected by September 2010, while today’s partnership with Etihad would be submitted in due course to the Australian Competition and Consumer Commission (ACCC).

Virgin Blue is also awaiting the outcome of a code-sharing and planning deal with Air New Zealand. Like the Delta partnership, Borghetti said he is optimistic of a positive outcome on the trans-Tasman deal, which both Virgin and Air New Zealand argue is to the benefit of the travelling public on both sides of the ditch.

The plan with Etihad includes code-sharing on all services from Abu Dhabi, while on the reverse, the UAE carrier will have its ‘EY’ code on all Virgin Blue, Pacific Blue and V Australia flights.

Alongside the codeshare agreement, V Australia will operate three Sydney-Abu Dhabi services per week from February 2011 and three Brisbane-Abu Dhabi flights by February 2012.

Borghetti said the alliance with Etihad allowed V Australia to redefine its operation and unlock a “genuine global network”.

“This is a real game changer and positions us as a truly global player,” he said. “Just as Virgin changed the game in domestic travel ten years ago and last year made huge impacts on the Pacific route, this agreement will bring real benefits for the travelling public.

Borghetti said tourism would also be a major winner in the new partnership with Etihad, particularly from an inbound perspective.

“The benefit to Australian tourism will be significant,” he said. “It’s one of the major attractions of the deal.”

Etihad Airways CEO James Hogan said the partnership with Virgin Blue and V Australia would grow to become one of the Gulf carrier’s most significant, alongside the likes of existing relationships with ANA and American Airlines.

“We are excited to facilitate the entry of V Australia into Abu Dhabi as the first Australian airline to fly to the United Arab Emirates since 1991,” he said.

“Australia is a critically important market for Etihad and we are very pleased to be able to provide more capacity on our Australian routes through this partnership.

“With our combined route network, we will provide all-important access from Australia to both the USA and Europe, which improves our suitability for both business and leisure travel and puts us right in the race for major corporate travel accounts.

“Virgin Blue is fundamentally reshaping itself and, much like Etihad, they have made huge strides in a short space of time. We know there are huge opportunities in working together very closely in this market,” Hogan said.

Although V Australia is axing Phuket flights, Borghetti said Pacific Blue would increase services to the Thai resort destination. Flights from Perth to Phuket increase from two to three per week on September 17, 2010.