Virgin Australia loses Toll contract, forms cargo division

After losing its exclusive belly-hold cargo deal with Toll Group at the end of this month, Virgin Australia said it will bring its cargo operation back in-house and form a new Virgin Australia Cargo division as of July 1. Merren McArthur, group executive for Virgin Australia Cargo, said that “Virgin Australia will now actively compete in the domestic and short-haul international cargo market for the first time.”

The airline’s cargo division has yet to sign a contract with a large customer since losing its bid to its chief rival, Qantas, but McArthur told the Australian Aviation that she hoped the new cargo division will bring in between A$150 million and A$200 million in annual revenue by 2017. She also said there were no immediate plans to add dedicated freighter aircraft to the airline’s fleet.

Starting July 1, Virgin Australia will begin selling belly space in the passenger fleet of its 737, A330 and Embraer E190s, as well as Tigerair Australia’s A320s and the ATR turboprops and Fokker fleet of Virgin Australia Regional Airlines.

In a bidding process that included both Virgin Australia and Qantas, Toll Group decided to award the next five-year belly-cargo deal to Qantas, which also re-signed its own contract to carry freight for Australia Post. Both the Toll and Australia Post contracts are expected to be worth a combined total of A$100 million each year for Quantas. The carrier also has an existing contract with TNT, meaning that Qantas now does business with three of Australia’s largest cargo customers.

During the announcement on Monday, McArthur said Virgin Australia will launch a new IT system to “optimize our cargo capacity and provide tracking and customized reporting to our customers.”

McArthur also said the company will keep its partnership with Virgin Atlantic for the sale and management of cargo space on Virgin Australia’s long-haul routes. She added that Virgin will be able to tap into the cargo expertise of its alliance partners, including Singapore Airlines, Etihad Airways and Air New Zealand as it built up its cargo unit.

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