Branson's blues lift down under

The Australian hero of recent weeks has been Steven Bradbury, a bubbly, bleached-blonde speedskater who hurtled from obscurity to Olympic gold in Utah after the four competitors ahead of him tumbled over on the final corner.

Britain has its own chirpy blonde who has been the beneficiary of a similar good fortune in Australia recently. Eighteen months ago, many believed Sir Richard Branson was heading for a fall when he launched his budget airline, Virgin Blue, in Australia. The crowded market was headed by Qantas and Ansett, with another operator, Impulse, already covering the new budget end of business.

But last year, Impulse was swallowed up by Qantas. Then, last week, the country's troubled second-largest airline, Ansett, finally collapsed after a desperate rescue bid by two - normally successful - Australian businessmen failed.

Amidst this turbulence, Sir Richard kept his feet and Virgin Blue moved from the back of the pack to become the second-largest domestic airline in Australia. It has with room to grow, and low operating costs - giving it a competitive edge over Qantas, now the overwhelmingly dominant player in Australia.

It is a leitmotif of the flamboyant entrepreneur's career that fortune favours the brave. The multimillionaire now finds himself sitting on a fortune.

Last September, Sir Richard called a press conference and gravely announced he had received a bid from Ansett for the airline. Financial journalists had already begun writing that he had sold up when, with a characteristic flourish, he tore up a mock cheque for £90m.

Less than six months on, Virgin Blue is worth more than five times that amount. Sir Richard is considering bringing forward a float of Virgin Blue after Goldman Sachs valued the airline at £550m.

Watching with interest will be Singapore Airlines, which holds a 49% stake in Virgin Atlantic and has long coveted an entry into Australia's domestic market.

Virgin Blue's operating profits have been modest, but it defied all predictions in even making a profit in the notoriously difficult Australian market. The airline is expected to report £10m profit for 2001, with earnings this year predicted to top £30m. The collapse of two of its three competitors, gives it an amazing opportunity to grow.

Through a combination of good fortune and shrewd judgment, Sir Richard has picked a winner, a welcome success for the much-scorned entrepreneur, whose catalogue of failures and sell-offs has mounted in recent months.

His recent sale of assets, including his Virgin Active health club business and Virgin One financial services company, has raised £270m in the past 12 months.

As well as generating some pocket money to buy another Caribbean island (as a tourist investment), he might be tempted to increase Virgin Blue's capacity by snapping up ex-Ansett infrastructure, including the company's lavish passenger terminals and rather less impressive ageing fleet of planes. But Sir Richard may not need to.

As Virgin Blue boasts, its small fleet is the newest in the world. And whilst its terminals in Sydney and Melbourne are little more than prefabricated sheds - and are starting to feel pretty crowded as customers flock to Virgin Blue - they are far more cost-effective than Ansett's expensive terminals.

Another option the Virgin boss has already flagged is to start up another budget airline in Australia, with the existing Virgin Blue becoming a flagship carrier with serious aspirations to cut into Qantas's market share.

City analysts often dismiss Sir Richard as all branding and no substance, but Virgin Blue has been a genuinely successful venture in Australia, offering standard economy airfares at half the price of Qantas.

Clever marketing has ensured the airline is never out of the news - whether it is controversy over an alleged ruling that its female staff must wear g-strings (denied by Virgin Blue) or one dollar tickets to celebrate its anniversary.

And Sir Richard's Australian team have built a genuinely good product. Virgin Blue's planes feel reassuringly new, the terminals are quick and convenient for business travel, and, like the man himself, the staff are unfailingly, almost overbearingly, chirpy.