How will the extended Qantas-Emirates partnership affect SIA?

The increased capacity on some of SIA's key routes could hurt its yields.

Australia-listed Qantas Airways Ltd (Qantas) extended its partnership with Emirates for another five years with key changes from 25 March 2018 onwards.

According to OCBC, the extended partnership could have an impact on Singapore Airlines (SIA).

There are also two key changes in Qantas that SIA must watch out for. First, Qantas will re-route its daily Sydney-London A380 service via Singapore rather than Dubai. It will also upgrade an existing daily Melbourne-Singapore flight from an A330 to an A380, and turn the second three per week service increased into a daily A330 service.

Here's more from OCBC:

In essence, there will be increased capacity on these routes.

In our view, we estimate the South West Pacific and Europe routes form close to 50% of SIA’s total capacity, and we believe London, Sydney and Melbourne are key cities that are material for SIA. That said, depending on the origin of sales and final destination, passengers may be indifferent whether the stop is Singapore or Dubai.

However, for SIA’s domestic market (i.e. Singapore), its customers now have an additional airline, Qantas, to choose from when flying between Singapore – London/Sydney/Melbourne, especially with the increased capacity.

Hence, with Qantas’ injection of capacity on some of the key Kangaroo routes of SIA, we expect the most direct impact would be on the yields on these routes as SIA now has to compete with Qantas to fill up its aircraft, assuming demand does not grow at the same pace as capacity by 25 Mar 18.