Singapore Airlines, Virgin Australia unveil tie-up

Singapore Airlines (SIA) and Virgin Australia on Tuesday announced a long-term partnership that will boost their global reach despite the exclusion of the lucrative Australia-US sector.

"The alliance will connect Singapore Airlines' extensive international network with Virgin Australia's wide range of Australian and Pacific destinations," the two carriers said in a joint statement.

They will share flights, coordinate schedules and undertake joint sales and marketing programmes.

The tie-up, announced on the sidelines of a global aviation industry conference in Singapore, will take effect on August 1 if approved by regulators.

The deal has one notable exclusion - the highly competitive trans-Pacific routes from Australia to the US West Coast that SIA has so far been denied by the Australian government.

But the two airlines said they were confident the alliance would boost their revenues significantly.

"We don't have a specific figure right now, but as you can see, the value proposition speaks for itself," SIA chief executive Goh Choon Phong told a news conference.

"You can see the potential is really quite immense, both currently as we cooperate and going forward."

Goh hopes the tie-up will boost SIA's chances of eventually convincing Canberra to allow the Singapore carrier access to the trans-Pacific routes.

"I think with greater cooperation, certainly it will strengthen our case," he said.

Julius Yeo, an aviation analyst with financial consultancy Frost and Sullivan, told AFP the alliance takes SIA one step closer to its dream of competing on the trans-Pacific route.

"It's a step forward in penetrating the Australian network. SIA has always been very keen on Australia. It's a staggered strategy to target the trans-Pacific route," Yeo said.

The move is the second major business announcement by SIA, one of the world's most profitable carriers, in two weeks.

On May 25, it said it will create a long-haul budget airline to tap growing Asian demand for no-frills travel to places like Europe, but details have not yet been unveiled.

SIA announced in May a profit of Sg$1.09 billion ($885 million) in the year to March on revenues of Sg$14.5 billion, but analysts say the airline is under pressure in its traditional core of first and business class travel.

Through the new tie-up, Virgin Australia will have access to about 70 more destinations, while SIA customers will have access to about 30 extra routes, the statement said.

Virgin Australia group chief executive John Borghetti said Asia was "a critical market" and SIA's extensive network "will be particularly attractive to our international business and leisure travellers."

The airline, formerly known as Virgin Blue, already has a partnership with US carrier Delta on trans-Pacific flights as well as an alliance with Etihad Airways of the United Arab Emirates.

In 2010, New Zealand and Australia approved an alliance between Virgin Blue and Air New Zealand on trans-Tasman routes.

At Tuesday's news conference, Goh said SIA was still open to offers for its 49 percent stake in British carrier Virgin Atlantic.

The Singapore carrier paid 600 million pounds ($981 million at current rates) in 1999 for the 49 percent stake in Virgin Atlantic, which was started by flamboyant British tycoon Richard Branson in 1984.

SIA has said its investment in the British carrier was not producing the sort of returns it was expecting.

Branson has a 26 percent stake in Virgin Australia, a company spokeswoman said.

bh/rc/hg

 

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