Struggling Virgin Express Ireland the target (400 words)

Published: 1/23/2001

Aeroflot is currently holding talks with Brussels based Virgin Express concerning the possible acquisition of the airline's low cost Irish operations Virgin Express Ireland. The acquisition if it succeeds, would be a first by a Russian airline of Western carrier. According to Aeroflot, they are seeking to either take a stake or full control if approved by the Russian authorities.

The airline, which has been for sale since the 12th of December last year, is reported to have a number of parties interested in its five routes, although only three are reported to be currently operating:

· Shannon - Gatwick
· Shannon- Brussels
· Brussels- Gatwick

The airline currently operates a fleet of eight aircraft: 737-300s and 737-400s
Despite a rumoured price for the airline of around $10m, it is unclear exactly what the financial condition of the airline is at present, as its individual performance is not broken out in the accounts of Virgin Express. The parent however, reported third quarter 2000 losses of €7.3m for the three months ended September 30th 2000 and €27.5m for the first nine months of 2000.

According to an Aeroflot spokeswoman, Aeroflot plans to use the airline to offer low cost scheduled services into several European destinations. Acquiring Virgin Express Ireland with operations out of Shannon, a base the airline is familiar with, would give the Russian carrier a low cost brand name and full access to the EU under the open skies agreement, an asset that Aerofllot is particularly keen to acquire.

While there are a number of potential buyers interested in the airline according to Virgin Express, the acquisition of a loss cost airline in Europe at present seems an interesting decision for Aeroflot; given that one of the main problems confronting Virgin Express and Virgin Express Ireland, is the high level of competition in the European low cost segment. It is therefore difficult to see what Aeroflot can bring to the party in terms of improving the competitiveness of the 250-employee airline founded two years ago. If the intention is to use the airline on routes from Russia into the EU, then it will be an interesting development. Although it is not entirely clear how Aeroflot could make use of an Irish domiciled carrier to easily enhance its access into Europe.

According to reports Aeroflot will look to acquire another discount airline if the Virgin deal fall through

Article ID: 2314