by Bernice Han, June 7, 2011
SINGAPORE (AFP) - 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.
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 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."
Julius Yeo, an aviation analyst with financial consultancy Frost and Sullivan, told AFP the tie-up with Virgin Australia takes SIA one step closer to its dream of competing on the trans-Pacific route from Australia.
"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 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 strength of first and business class travel.
Goh said the partnership with Virgin "presents a significant opportunity for Singapore Airlines to drive growth in a manner consistent with our focus on service excellence, product innovation and network connectivity."
Through the 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.
Members of their respective frequent flyer programmes will be able to earn and redeem miles on each other's flights.
Virgin Australia group chief executive John Borghetti said Asia was "a critical market" for his airline and SIA's extensive network in the region "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.
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