Week of March 6, 2000
  Blockbuster Deal of the Week
   from Site Selection's exclusive New Plant database

Virgin Goes Down Under:
Queensland Lands 750-Employee HQ

Virgin Airlines (www.fly.virgin.com) has landed down under, touching down on turf where Virgin Atlantic Chairman Richard Branson once viewed his company's entry as "potentially suicidal," Virgin is setting up a 750-employeee operation in Brisbane, Queensland, that will be the airline's Australian headquarters. Obviously, the equation for Virgin's entering the Australian market has markedly changed since Branson's "potentially suicidal" remark made several years earlier.

And change was an integral element in this project.

Premier Puts Queensland in the Hunt

Queensland, for example, wasn't even in the running in the early stages of this site search. Instead, the clear frontrunners on Virgin's initial location list were Sydney and Melbourne, two cities with higher international business profiles.

That, though, was before Queensland Premier Peter Beattie got involved in the wooing of Virgin in general -- and Branson in particular. "When we heard Richard Branson was coming to Australia and not even visiting Queensland, I rang him and urged him to include Queensland in his deliberations," Beattie explained.

Apparently, Beattie, along with his economic development team, wields considerable persuasive powers. Virgin, company officials said, rapidly discovered that Queensland was ready to go the extra mile - or kilometer, such as it was.

"The government has gone out of its way to facilitate our arrangements with all parties involved," Brett Godfrey, chief executive officer of Virgin Australia, said at the project's formal announcement.

"Significantly, it helped in bringing Brisbane Airport to the table and in securing good, affordable terminal access.

"While several states offered us attractive packages," Godfrey continued, "the Queensland government went a step further in actively assisting us with requirements like airport access and finding office accommodation."

In addition to landing the headquarters facility, Queensland will also be the site of a Virgin Airlines maintenance base and operations center, as well as a 150-employee Virgin Air call center.

State Development Dept. 'Created
For Exactly This Sort of Operation'

At least in retrospect, this looks like an opportunity that was waiting to happen.

The Beattie administration had put the pieces in place to position Queensland to capitalize on just the kind of opportunity that Virgin represented. (Or, as someone once sagely put it, luck is what happens when preparation meets opportunity.)

"I had created the Dept. of State Development (www.statedevelopment.qld.gov.au/) for exactly this sort of operation," Beattie explained. "A team led by Deputy Premier Jim Elder coordinated the negotiations, and Brisbane Airport Corp. (www.bne.com.au) was also very commercial and entrepreneurial in its approach.

"We were able to convince Virgin that we are a can-do state in which everyone is going in the same direction," the premier added. "What this win shows, more than anything else, is that Queensland can compete strongly with the larger states, and that international companies can see that Queensland is a viable base for their Australian operations."

Company officials announced that Virgin Airlines' initial investment in the Australian headquarters complex will total US$60 million. Beattie, however, added, "Virgin [has] indicated to us that they will be investing $40 million a year for each of the next five years. "But as importantly," Beattie added, "Virgin [has] also signaled that they will be looking at using Queensland as the base for other commercial activities, and we can expect that even more jobs will flow from this."

Queensland's Aviation Cluster Attracted Virgin

Queensland's fast-growing aviation cluster was another major attraction for Virgin, company officials explained.

"It's clear that Queensland is becoming something of an aviation center for Australia, with one of our likely suppliers, Boeing, already established in Brisbane," Godfrey said.

Echoed Beattie, "Together with the major Boeing presence and other developments, we will now be viewed as a major aviation center." Virgin's entry also gives Australia a third national airline. And as the project was announced, Virgin officials trumpeted the increase in competition - not only in the nation's airline industry, but also in Australia's race for business expansion.

"We believe it will be good for competition for Queensland to have its own state carrier," Godfrey explained. "As the center of the fastest expanding region in Australia, Brisbane deserves its own carrier, just as Sydney has Qantas and Melbourne has Ansett."

Queensland's labor pool certainly welcomed Virgin's arrival with a jumbo-sized exclamation point. Shortly after the project was announced, 5,500 Queensland residents applied for the airline's new jobs.

'Potential Suicide' Becomes Potential Profit

An earlier Virgin deal supplied much of the fuel for the airline's touchdown in Brisbane.

Virgin had long been considering expanding operations in Australia. Then in December, Singapore Airlines (www.singaporeair.com) bought a 49 percent stake in Virgin Air for $968 million.

With Virgin the second-largest carrier in the UK market, the deal increased Singapore Air's access to London's Heathrow Airport. For Virgin, pairing up with Singapore Air offered more clout in the Pacific Rim. And with Singapore air's equity stake, Virgin now had the capital to capitalize on that clout. Branson invested $82.4 million of Singapore Air's purchase price back into Virgin. In addition, Singapore invested another $78.8 million into Virgin.

The Singapore Air deal changed the dynamics for entering the Australian market that Branson publicly described in 1996. That was the year in which the Virgin Atlantic chairman appeared before the British House of Commons' Transport Select Committee, testifying on the proposed alliance between British Airways (BA) and American Airlines.

"BA and Qantas have so much clout in the Australian travel agency community that for us to compete on the route would be potentially suicidal," Branson asserted.

Now, though, it's full speed ahead for Virgin in Australia. Virgin officials say the company will initially concentrate its Australian operations primarily on discount routes between Brisbane, Melbourne and Sydney.

Analysts say that Virgin's move into Australia faces odds that are less foreboding than in 1996. But the airline, they caution, could still encounter significant turbulence in the market. Bold steps, though, are nothing new for Branson. The venturesome, iconoclastic 49-year-old entrepreneur has built the Virgin brand into a household name for everything from music stores to airlines by shredding location constraints.

In fact, within eight years, Branson vows, Virgin Galactic Airways will be offering short tourist flights into space.

©2000 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.