The elusive Asean Open Skies dream

Courtesy Asean

Courtesy Asean

STILL waiting. Asean Open Skies continues to be an elusive dream for the ten-nation bloc as members renewed their commitment at this year’s Asean meeting of their leaders in Kuala Lumpur. Asean, which stands for Association of Southeast Asian Nations, is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

A new declaration to form an Asean Community all but reiterated the association’s original manifesto, the progression reinforced as building “economies that are vibrant, competitive and highly integrated, and an inclusive community that is embedded with a strong sense of togetherness and common identity.” The Community will be formally instituted on Dec 31, aiming to eliminate trade barriers to form a single market and production base.

Since the Open Skies policy has been part and parcel of that umbrella ambition, it marks another milestone as a positive thrust in the desired direction although the target was to have it fully implemented this year. But where does the Open Skies stand in the development?

Much was said in the past about hurdles posed by the region’s disparate geography, economic disparity, different political make-up and diverse cultural practices. Not in the least, the different levels of economic progress and welfare across the region continue to pose difficulties for member nations to move at the same pace towards the ideal commonality. A single market modelled on that of the European Union (EU) is still a long way off.

No one denies that liberalisation will benefit Asean and fuel aviation growth in the region. It may open up channels for collaboration among operators but lest it be misconstrued, it does not necessarily run on complementary operations as a single entity against the rest of the world. Open skies means freeing up the competition across the borders and breaking down barriers of entry which allows neighbouring carriers to compete with home carriers on a level playing field. Therefore, the fear of competition among Asean carriers – each at a different level of growth – is real. The major carriers operate very much the same routes, and there is competition to channel traffic away from home bases through hub and other airports. Asean has a myriad of carriers, many of them thriving on niche and closed markets. The question is: Are they ready?

The EU has seen increased competition in the single market, benefitting customers and driving carriers to be more cost-efficient. Low cost carriers such as Ryanair and easyJet have grown to be more than just low-end niche players but serious threats to legacy airlines which are already struggling to stave off competition from foreign carriers which are more efficient and service-friendly. The single market has also led to mergers for strength, such as the International Airlines Group which conglomerates British Airways, Iberia, budget carrier Vueling and Aer Lingus, and is 10-per-cent owned by Qatar Airways. (See International Airlines Group partnership works, Nov 26, 2015) It is hard to envisage at this stage such a development within Asean, no less for the reasons already mentioned.

To be fair, the region has seen some progress in the liberalising process, even as the goal post keeps moving away. Some major airlines are already preparing for the eventuality as the market shows signs of growing, particularly in the demand for budget travel. However, if the failure of Tigerair’s forays into the Philippines and Indonesia as a joint-venture partner is any indication of the climate for cross-border investment, it again points to the region’s readiness and propensity to sustain the efforts. The pace is not moving fast enough, and so long as the goal post keeps shifting forward, it is easy to lose that drive.

Priorities can change quickly. Asean nations are caught in the current of the global scramble for economic pacts across a wider region in a world that is increasingly being threatened by geopolitical rivalry down economic lines. They, not as a bloc but individually, risk isolation and being disadvantaged by non=participation. This could be a distraction away from the Asean agenda.

Four Asean members – Brunei, Malaysia, Singapore and Vietnam – signed the Trans-Pacific Partnership (TPP) agreement which took effect on October 5 along with Australia, Canada, Chile, Japan, Mexico, New Zealand, Peru and the United States. Indonesian president Joko Widodo at a subsequent meeting with US president Barack Obama expressed his country’s interest in joining the bloc. Asean itself has proposed a Regional Comprehensive Economic Partnership to engage non-members Australia, China, India, Japan, New Zealand and South Korea. However this does not prevent member nations from independently pursuing bi-lateral trade agreements which may see implementation of some measures such as faster immigration channels between these parties ahead of similar facilitation within a common Asean union.

Within the aviation industry too there are alliances and there are alliances, so to say. Global alliances represented by Star, OneWorld, SkyTeam do not preclude member airlines from forging other partnerships outside their ambit, some of which are cross-border agreements. It seems to complicate the relationships, but apparently it also opens up opportunities that may otherwise be thwarted by restrictions of exclusivity.

This year’s Asean Summit – its 27th – is focused on forging an Asean Community which will be formally instituted on Dec 31. The lack of an Asean identity is viewed as a major hurdle in the progress towards a no-barriers common marketplace. Singapore prime minister Lee Hsien Loong said: “One of the constraints on government – and one of the reasons Asean finds it difficult to make progress together – is (that) there is not a very strong sense of Asean identity:” (The Straits Times, Nov 23, 2015) He added: “I think there is some distance yet.”

There was mention of the Asean community engaging in projects such special lanes for citizens of member nations at airports and facilitation vide an Asean Business Travel Card.

But new issues that surfaced recently aren’t going to make the forward thrust any easier. Indonesia, the largest community in the bloc, has expressed its intention to rein in administration of part of its airspace presently under the purview of the Singapore authorities, but its aviation safety record is raising reservations. Following findings by the United Nations International Civil Aviation Organization (ICAO), the US Federal Aviation Administration (FAA) has downgraded its safety rating of Thailand’s aviation authority over concerns about safety standards.

Such issues are likely to shift the priorities of not only the affected nations but also the bloc as a common entity, particularly considering its small composition of member states. So it appears that Open Skies will be taking a backseat in the meantime

This article was first published in Aspire Aviation.

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Qatar Airways nets a prized catch, expanding westwards

IT may seem somewhat crazy, but it is definitely not surprising in today’s aviation landscape of fast changing and crisscrossed relationships, some of them making most unlikely bedfellows. The ends justify the means.

Courtesy British Airways

Courtesy British Airways

Qatar Airways has acquired a 10% stake in International Airlines Group (IAG), better known as the owner of British Airways (BA) and Iberia. IAG also owns Spanish budget carrier Vueling. The act of acquisition itself by the cash-rich Middle East carrier does not surprise. Qatar lags behind rival Etihad Airways in this respect; Etihad already owns Alitalia (49%), Air Serbia (49%), Air Serbia (49%), Air Seychelles (40%), Etihad Regional (formerly Darwin Airlines) (33.3%), Air Berlin (29.21%), Jet Airways (24%), Virgin Australia (10%) and Aer Lingus (2.987%).

But coming lately, Qatar has bagged a prized acquisition, considering IAG’s bases at two major European hubs, in particular London Heathrow, and the strong transatlantic networks of BA and Iberia. Qatar chief executive Akbar Al Baker said: “IAG represents an excellent opportunity to further develop our westwards strategy.” It should be a strong partnership. Together, their networks cover Europe, North and South America, Africa, the Middle East, India and Southeast Asia.

In 2013 Qatar became a member of OneWorld, becoming the only one of the big three Gulf carriers to join a global airline alliance. More than an apparent Qatari interest in things British, this was a step forward to forge a closer relationship with BA. Qatar said it may increase its stake in IAG for which it paid £1.15 billion (US$1.73 billion). However, EU regulations have placed a cap on non-EU ownership at 49%.

Courtesy Qatar Airways

Courtesy Qatar Airways

Quite unlike Etihad, which has entered the arena as a white knight in many cases, Qatar is buying into one of Europe’s more profitable outfits. Clearly it is a strategic move. While European carriers are becoming wary of Gulf carriers making inroads in the EU market, the competition is at the same time a race among the big three Middle East carriers themselves- Qatar, Etihad and Emirates Airlines. This has become all the more prominent in recent years as they out-compete each other within their region and seek aggressively to push out their geographical boundaries, leveraging on the success of home bases such as Dubai, Abu Dhabi and Doha as hubs for international traffic connecting Asia Pacific, Europe, Africa and the Americas.

The rivalry for supremacy is clear in a jibe made by Mr Al Baker on the race to top the chart for extreme luxury in the air, something that carriers outside the Gulf are less disposed to think about at the same level. He said: “We always raise the bar for our dear friends around the area to try to copy us.” (The big deal about extreme luxury, Jan 19, 2015)

Courtesy PA

Courtesy PA


The timing could not have been better for Qatar as IAG looks likely to succeed in a new takeover bid of Irish carrier Aer Lingus after two failed attempts previously. This would gain IAG more take-off and landing slots at Heathrow. What is interesting is the composition of Aer Lingus partners, which include Ryanair (29.8%) and Etihad. Any opposition to the deal is likely to come from the Irish government which owns 25% of Aer Lingus, but it may be a price well worth paying for the crucial air links between cities in Ireland and Heathrow as the world’s largest hub (until topped by Dubai recently) and beyond. Ryanair has itself attempted unsuccessfully to take over Aer Lingus and objected vehemently to IAG’s proposal in the past for reasons that are not difficult to see. IAG’s chief executive officer Willie Walsh and Ryanair’s chief Michael O’Leary are not exactly the best of friends. But if money talks, the latest offer of €1.3billion (US$1.47 billion) by IAG may well carry the day.

Airline relationships in today’s industry are more complex, if not blatantly promiscuous. While global alliances offer the broad framework for cooperation, it is not uncommon to find rival airlines connected in some way through a third party. The numerous cross-border codeshare arrangements are testimony to the multi-faceted connections. Less than half the world’s airlines belong to any of the three global alliances: Star (27 members), SkyTeam (20 members), and OneWorld (15 members). Although many major carriers are already members, there are notable exclusions such Virgin Atlantic (although CEO Richard Branson who made an about turn in 2012 announcing Virgin might join one of the alliances soon) and the other two of the big three Gulf carriers Emirates and Etihad. While Aer Lingus itself is unaffiliated, and so are part owners Ryanair and Etihad, IAG’s influence cannot be precluded although it has said Aer Lingus would continue to operate independently.

It is best to adopt a detached view of the business. Alliance membership may but not necessarily suggest a like-mindedness that brings friends to the same table. There is no reason why friends and foes alike may not put their money in a common proposition that will help further their respective positions. OneWorld membership may have eased Qatar’s way into the IAG stable, making it easier for Mr Walsh to be “delighted to have Qatar Airways as a long term supportive shareholder.” Not sure if he would be any less delighted if it had been Emirates or Etihad. But for Qatar, as part owner of IAG which is set to take over Aer Lingus, it is stealing a march on rival Etihad.

This article was first published in Aspire Aviation.

Air India joins Star Alliance: How will it benefit?

Logo_Star_AllianceNO more pussy-footing. Air India becomes a member of Star Alliance from July 11, 2014, joining a global network of 26 airlines that include founders Air Canada, Lufthansa, Scandinavian Airlines, Thai Airways International and Untied Airlines. Other airlines that have since joined the alliance include Air China, Air New Zealand, All Nippon Airlines, Asiana Airlines, Singapore Airlines and South African Airways.

Welcoming the Indian flag carrier to the club, Star Alliance COO Jeffrey Goh said Air India would enjoy “Alliance’s benefits” while other member airlines would benefit from “improved access to a region which includes the world’s fifth largest domestic aviation market.”

Courtesy Star Alliance

Courtesy Star Alliance


At the same time, an elated Air India chairman and managing director Rohit Nandan said: “We eagerly look forward to extending the benefits and privileges of Star Alliance to (our) passengers.” The benefits are assumed, often touted from the perspective of the air traveller with “connectivity” and “seamless travel” listed at the top of the list. Air India’s admission to the club can only mean more flights and more destinations added to the alliance’s network, which will boosted by an additional 400 daily flights and 35 new destinations in India.

Yes, indeed, it is only to be expected that membership must come with benefits. What does Air India – as an airline – hope to gain from the induction?

If it works good for the passengers, it should work well for the airlines. That, after all, is the encapsulation of the alliance’s goal to grow the market share collectively in a way that individual members may not be able to do as effectively and as efficiently because of costs and the limitations of market access. Member airlines are increasingly moving towards more code share flights, shared facilities such as airport lounges and even pooled management at some ports. The launch of a dedicated Star Alliance terminal at London’s Heathrow Airport will strengthen the cooperation among member airlines and enhance the connectivity between them. Alliances (including OneWorld and SkyTeam) will have to introduce more of such initiatives to convert doubters like Virgin Atlantic chief Richard Branson; except for the scale, membership otherwise is not much difference as commercial tie-ups between individual airlines that may even benefit from the flexibility of cross-alliance arrangements. However, airlines such as resource-rich Emirates which are single-handedly successful thus far may not be as easily convinced. Suffice that it be suggested that Air India is not quite Emirates.

On the home front, India is currently being served by 13 Star Alliance members flying to 10 destinations, making up a total of 13% market share. It is expected that with Air India, the market share of the alliance will increase to 30%. However, is the alliance benefiting at Air India’s expense? The inducement for Air India must be the international market which will increase to 28% for Star Alliance. Through the alliance, Air India will be able to serve more than 10 destinations additionally in China, Africa and Europe over and above its own 33 international destinations. Since its main focus is the Middle East, through the alliance, Air India may be able to check the competition posed by the big three Middle east carriers of Emirates Airlines, Etihad Airways and Qatar Airways. Interestingly, Air India’s seat share is only 18% compared to Emirates’ 20% between India and the Middle East.

In the same way that Emirates (although not a OneWorld member) has increased Qantas’ access to more destinations in the Middle East besides Europe and Africa, Air India could latch on to Star Alliance partners such as Turkish Airlines for the same extension. In fact, some observers have primed Turkey’s TAV Istanbul Ataturk Airport as a veritable competitor that may one day usurp the hub status of Dubai. In that connection, Turkish Airlines will also grow in importance.

Yet another school opines that India has that same hub potential to connect Asia and Australiasia with Europe and Africa and beyond. Mumbai could be a convenient one-stop between Sydney and London with feeds to the region. Access by Star Alliance members to India’s domestic market and the improved standing of Air India in the global market will, as Indian Prime Minister Narendra Modi hoped, revive economic growth in India under his leadership.

So much has already been said about India’s potential with a population of 1.2 billion for both domestic and international traffic. That almost suggests an imbalance in the equation in favour of Star Alliance members outside India waiting to tap into that potential. But granted that the benefits are mutual as they are supposed to be, it cannot be denied that there remains still a lot of intra-competition. Yes, membership has its benefits, but Air India cannot be blind to the competition. If it is not about the greater good, it has to be about the lesser evil.

This article was first published in Aspire Aviation.

Qantas’ Chinese connections

EVERY airline looking east (or westwards or northwards depending on where they are based) wants a foothold in China, that huge market with a growing population of air travellers.

Three years or so ago when Australian flag carrier Qantas announced a transformation program, chief executive Alan Joyce identified Asia, in particular China, as the answer to the airline’s woes in the international arena. The rising wealth of Asia’s most populous country makes good reason for Qantas to consider an Asia-based premium carrier near enough to tap into that market, and to set up a budget carrier in Hong Kong, the gateway to China, jointly with China Eastern Airlines and a local conglomerate owned by casino magnate Stanley Ho. While the former proposal was aborted, the latter is awaiting regulatory approval – against the wishes of Cathay Pacific – with ordered planes parked at the Airbus factory awaiting delivery. That, Mr Joyce had said, was not unusual for start-up airlines.

Courtesy Qantas

Courtesy Qantas

All that did not stop Qantas from building up its Chinese connect ions through codeshare services. In a recent agreement with China Southern Airlines, Qantas customers can gain direct access to four destinations within China including Guangzhou from Sydney, Melbourne, Brisbane and Perth. China Southern customers will similarly gain access to domestic destinations across Australia as well as beign able to fly between Sydney and Auckland.

Qantas International CEO Simon Hickey said: “Partnerships are at the core of our strategy in Asia and together with our airline partners, we’re pleased to now offer customers access to 179 flights to 12 cities in Asia each week, with fares available to over 120 additional Asian cities.” He added: “The Qantas Group has never had a stronger presence in Asia. More than one sixth of our total revenue now comes from flights to and within the region, and we plan to keep opening up new travel opportunities.”

This can only mean high alert for rival airlines, particularly those which by fifth and six freedom rights have been routing travellers through their home bases.

Qantas already has a codeshare arrangement with China Eastern Airlines between Australia and China via Singapore.

None of the mainland China-based airlines are members of the OneWorld alliance to which Qantas belongs. That may be of little consequence, considering that codeshare partners Chna eastern and China Southern are both SkyTeam members. Air China and Shenzhen Airlines are members of the Star Alliance. Out of Hong Kong, Qantas` Jetstar may face stiff competition from Hong Kong Airlines and Hong Kong Express, both carriers owned by the Hainan Airlines Group, besides Cathay’s Dragonair. Note however that Hong Kong Airlines and Dragonair are by definition regional and not budget carriers.

If there is any indication of China’s growing demand for air travel, it is Shandong Airlines’ recent order of 50 Boeing 737 aircraft to the tune of US$4.6 billion. At the same time, however, Air China warned that its first quarter profits would be 65 per cent lower compared with that last year because of the falling yuan. A statement issued by the airline said: “The financial expenses of the company substantially increased as compared with the corresponding period of 2013 due to the exchange losses.” Fellow competitor China Southern issued a similar warning on falling profits. These are but minor blips that will not deter foreign airlines from connecting with the China market.

Comeback kid Garuda Indonesia is Asean’s rising star

garuda imageEveryone loves a comeback kid, and Garuda Indonesia is the newest comeback kid on the aviation block.

The Indonesian flag-carrier has come a long way from a speckled past to becoming the new star of Asean. It is no mean feat for an airline that in June 2007 was banned (along with all other Indonesian carriers) by the European Union (EU) from flying to its member countries over safety issues, and that for a good 50 years or so it has all but maintained a very low profile.

In fact, we hear more of rival Lion Air – Indonesia’s second largest airline after Garuda – and its grand plans to expand across Asia with record plane orders. In the 60s, Garuda flew beyond the region to Amsterdam, Frankfurt, Rome and Prague in Europe, and to Honolulu and Los Angeles in the United States. Services to Amsterdam were resumed a year after the EU in 2009 lifted the ban, but services to the US had long ceased since 1997.

garuda image1 courtesy garuda
Image courtesy of Garuda Indonesia

In the 2013 Skytrax survey, Garuda Indonesia was listed among the world’s best 10 airlines. If that was not impressive enough, consider how it was also ranked fifth in the Asia category, behind Singapore Airlines (SIA), All Nippon Airways, Asiana Airlines and Cathay Pacific – ahead of some other presumably better known brands. There is more: Garuda was voted in the same survey as best economy class, and this is worthy of note considering that many top-rated airlines are reputed for their first and business class but not necessarily for economy which across the industry is increasingly becoming very much the same.

Surely the Indonesian flag carrier must be doing something right. Mr Emirsyah Satar, president and CEO whom I had the privilege to interview, attributed Garuda Indonesia’s success to a strategic 5-year transformation programme known as Qantum Leap implemented in 2009, the same year that the EU lifted its ban on the airline. The makeover gives Garuda a fresh corporate identity complete with new livery, a name change to Garuda Indonesia in full instead of merely Garuda, and new crew uniform. Embedded in the “Garuda Indonesia Experience” that it offers – typified by the warm hospitality inherent in the Indonesian culture at every point of customer contact – is the drive to improve customer’s perception.

emrisyah satar
Image courtesy of Garuda Indonesia

Mr Satar said: “Service experience is what sets us apart.” He added, “We want passengers to experience the warmth of the Indonesian hospitality whenever they fly with us. Before, we were lacking a distinct uniqueness and the idea behind the branding strategy in 2009 was to create a new culture for Garuda based on the traditions and values of Indonesia hospitality.”

What does the rise of the mythical bird to new heights mean to the competition in the region, particularly in the offing of the Asean Open Skies policy which is expected to be fully implemented in 2015?

First, regional carriers including SIA cannot afford to ignore the competition posed by Garuda Indonesia. Going forward, the airline is increasing not only its fleet but also capacity as it expands its network. It will offer more seats between Jakarta and Singapore, which is its largest destination outside Indonesia. Naturally, it can only mean that airlines currently operating the lucrative short route will have to fight harder to retain its market share or generate new demand, the latter case being good news for Changi Airport in terms of traffic growth.

Garuda Indonesia will also be introducing a direct service between Jakarta and London in February next year; the flight was originally scheduled for November this year but has been delayed because of limitations faced by Soekarno-Hatta International Airport. Mr Satar believed that Indonesia is a high growth market for the United Kingdom (UK), a market that is currently underserved. Considering the double-digit growth of traffic carried through other Asian hubs, Mr Satar was confident that Garuda Indonesia is in a dominant position to capture a good share of the market.

However, there is a less rosy flipside for other regional airlines and airports that have hitherto benefited from the connecting traffic of Indonesian travellers if more of them choose to fly direct from Jakarta instead. The impact may be softened by Garuda Indonesia’s scheduled landing at Gatwick instead of Heathrow, but it may all hinge upon how the airline packages its offer in light of the fluid global economy that has made cost a significant driver of consumer behaviour.

Second, product-wise Garuda Indonesia has made strides to match or be nearly as good as some of the best airlines in the industry. Mr Satar said: “It took us a lot of hard work and major restructuring over the last few years but we’re now finally back on track. Customers can continue looking forward to warm exceptional service, high safety standard and cutting-edge technology.” The airline boasts features that are no longer exclusive to its competitors such as comfortable ergonomic chairs, spacious leg room, flexible head rests, individual touch-screen LCDs equipped with Video-on-Demand (VOD) offering a range of movies, music, TV shows and games.

Third, Indonesia being the most populous member nation when Asean Open Skies kicks in should offer Garuda Indonesia home ground advantage. Mr Satar said the airline is in a strong position and ready for the competition. He dismissed Lion Air as a veritable competitor, insisting that Garuda Indonesia is a full-service carrier and “we’re not competing with the LCCs in the region”. Besides, the domestic market of 240 million people is large enough to admit more competition.

For the budget market, which looks set to grow with liberalization, Garuda Indonesia has its own budget subsidiary Citilink to compete with the like of Lion Air, AirAsia, Tigerair and Jetstar. The carrier has an ambitious growth plan to support a projected 19 million passengers by 2015, increase its fleet by another 75 planes to its current 26 by 2017, and operate beyond Indonesia to destinations in Southeast Asia in 2014 ahead of Asean Open Skies.

Garuda Indonesia will not be working alone, as it has decided to join the SkyTeam alliance, and the agreement will be officially formalized in March 2014. Is it any wonder why it has not opted to join Star Alliance of which SIA is a member or OneWorld of which Cathay Pacific is a member? It indicates the carrier’s serious intent to up the ante in competition with its regional rivals. It should be interesting to see how these other airlines react to Asean’s rising star.

You can read the full text of my interview with Mr Emirsyah Satar at http://www.aspireaviation.com.

Star airlines to be housed under one roof at Heathrow

starIT is good news for Star Alliance member airlines at London Heathrow Airport. By 2014, they will be housed under one roof at the renovated Terminal Two.

CEO Star Alliance Mark Schwab said he was delighted by the airport’s decision to designate the terminal as the new home for its member airlines. This would facilitate inter-airline transfers and reduce connecting times between flights by half to just 45 minutes, thereby increasing connecting possibilities by 31 per cent. Member airlines will also be able to better pool resources and share common facilities, and promote the Star brand and identity.

Currently, 23 Star airlines operate out of Heathrow. They include Singapore Airlines, United Airlines, Air Canada, Lufthansa, Air New Zealand, Thai Airways and TAM.

Housing Star airlines under one roof naturally means airlines of other major groupings – OneWorld and Sky Team – will likely also find themselves within the same terminal or in close proximity.

With extensive code-sharing arrangements these days, air travellers may well be booking with one airline but find themselves travelling on the plane of a partner airline. A long shot perhaps, but will the day come when you may well be flying familiarly under a grouping name rather than the individual member’s banner? What then the fuss about brand loyalty?

 

Singapore Airlines in discussion to sell Virgin stake to Delta

Courtesy Virgin Atlantic

Courtesy Virgin Atlantic

IT looks like the ideal marketing situation, where there is a willing seller and there is just as willing a buyer. Singapore Airlines (SIA) may have found a buyer for its 49-per-cent stake in Virgin Atlantic which it acquired in 1999 for GPB600 million (US$963 million). The Singapore flag carrier admitted to talking to interested parties, and the rumour mill had it that the potential buyer is US-based Delta Airlines.

deltaDelta has expressed interest in buying into Virgin to increase access to London Heathrow. The Virgin stake would serve Delta better than SIA, whose acquisition came at a time when the airline was pushing for rights to fly trans-Atlantic from Europe to the US east coast. Somehow the Virgin stake did not live up to expectation, and SIA has long expressed its intention to divest its interest even as it has bought a 10-per cent stake in Virgin Australia. (See Singapore Airlines’ interest in Virgin Australia: Expedience or strategy? Nov 7, 2012)

However, Australia is quite a different story. SIA faces stiff competition from the Qantas-Emirates partnership, and Virgin Atlantic will help boost its reach across Australia and possibly beyond as the Australian carrier expands. Shifting its focus to Asia and the Pacific region is probably more imperative for SIA now than working with Virgin Atlantic in Europe.  Interestingly, Virgin Australia already has a commercial arrangement with Delta.

Virgin founder Richard Branson who holds the majority 51-per cent stake in the London-based carrier has said that Virgin should consider alliances to grow, particularly now in light of the British Airways-American Airlines deal. This is an about-turn for the billionaire entrepreneur who used to consider such blocs as being “anti-competitive”. He said: “We realised for the long-term stability of Virgin Atlantic we needed to look at an alliance partner.” The market rumour had it that Virgin is likely to join Star Alliance, but note that Delta is a member of Sky Team which also includes Air France and KLM.

siaAs for SIA, Delta’s interest in the Virgin stake must have come as a godsend after all those years of waiting. The question now is how much profit does it stand to garner from the deal?