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Virgin Australia’s deal with Singapore Airlines turns up the heat on Qantas Group


Issues & Trends – November 2012

Virgin Australia’s deal with Singapore Airlines turns up the heat on Qantas Group

VIRGIN Australia boss John Borghetti has turned up the heat on the Qantas Group with a flurry of deals that will enable his airline to compete head-on with its bigger rival in all key domestic market sectors.

Virgin takes control of low cost carrier Tiger Australia with the purchase of 60 per cent of its shares from Singapore-based Tiger Airways (which has Singapore Airlines as its major shareholder); at the same time Singapore Airlines will take a 10 per cent interest in Virgin Australia.

Virgin Australia will also take over Western Australian regional carrier Skywest, subject to shareholder approval.

The acquisition of Tiger will enable Virgin to tackle the Jetstar domestic price proposition at the bottom end of the market which will, in turn, intensify Virgin Australia’s ability to focus on its continuing bid to gain corporate market share with an upgraded product offering.

Meanwhile the acquisition of Skywest will enhance Virgin’s ability to make inroads into the lucrative traffic generated by WA’s mining industry boom.

Despite Tiger’s checkered past, Borghetti said the airline will retain the brand and he sees it developing into “a sustainable budget carrier” under Virgin’s stewardship.

The brand will be marketed quite separately from Virgin and Borghetti ruled out any code sharing between the two airlines. However he was equivocal about the prospects of Tiger becoming part of the Velocity frequent flyer scheme.

The deals also strengthen Virgin’s balance sheet, with Singapore Airline’s 10 per cent shareholding sitting alongside the stakes of two of its other international partners – Etihad with 10 per cent and Air New Zealand (just under 20 per cent).

Borghetti said there were no plans for Virgin’s other major international partner, Delta, to join the share register.

 

 

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