SIA better watch out as Qantas is targeting Asia next

Alliance with Virgin Australia approved. The Australian Competition and Consumer Commission yesterday gave the final approval to the alliance between Singapore Airlines and Virgin Australia, Australia's number two carrier. On top of code-sharing on one another's international and domestic flights under this alliance, SIA and VBA will be able to work together closely on schedule planning so as to provide passengers with seamless flight connections.

However, the tie-up will not include VBA's trans-Pacific flights to the USA. In addition, VBA CEO John Borghetti had earlier told the media VBA's alliance with SIA will not diminish VBA's collaboration with other code-sharing partners, possibly restricting the SIA-VBA code-sharing from certain Australian cities.

A win-win collaboration. SIA currently flies to the four Australian destinations of Brisbane, Melbourne, Perth and Sydney. With the alliance with VBA, SIA will be able to improve its service offering by providing its passengers with better flight connectivity to more Australian cities. This should increase its passenger volume between Singapore and Australia.

On the other hand, VBA sees this alliance as a way to capture a larger market share of the lucrative business travel segment from Qantas Airways, Australia's flag carrier. By leveraging on SIA's more extensive network, VBA hopes the better connectivity to destinations around the world will attract more business from the corporate travellers. In turn, this potentially increases passenger flow to SIA's flights by connecting VBA's passengers to international locations.

Possible partnership between Qantas Airways, Malaysian Airlines and AirAsia may intensify competition. QAN has been trying to establish closer ties with Malaysia Airlines in a bid to gain a bigger foothold in Asia. QAN even sponsored MAS, as a member elect, into the one world airline alliance back in Jun 2011. However, the share swap between the majority shareholders of AirAsia and MAS in Aug 2011 has complicated the relationship between QAN and MAS.

Latest media reports say QAN is now actively seeking collaboration with AIRA CEO Tony Fernandes. If a partnership between the three airlines materialises, it will provide tough competition to the SIA-VBA alliance.