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Virgin inks long-term deal with Singapore Airlines Matt O'Sullivan
June 7, 2011 - 10:20AM

Virgin Australia has scored a major boost to its plans to snare lucrative corporate customers from Qantas after announcing plans to form a ?long-term alliance? with Singapore Airlines.

Under the agreement, the two airlines will codeshare on each other?s international and domestic networks, and offer reciprocal frequent flyer benefits and lounge networks.

The proposed deal also means Virgin and Singapore Airlines will engage in joint sales, marketing and distribution activities, as well as coordinate flight schedules between Australia and Singapore and beyond.

The joint venture is a major gain for Virgin Australia, which saw Asia as the last region in which it needed to find an alliance partner.

Virgin shares were up as much as 1.5 cents, or 5.3 per cent, to 30 cents, making it the biggest gain among the top 200 shares on the market in early trade.

Rival Qantas shares extended their falls to a fifth day, dropping as much as 6.5 cents, or 3.3 per cent, to $1.98, its lowest since July 2009. So far this year, Qantas shares have lost about 25 per cent of their value, while Virgin has sunk about 30 per cent.

ACCC nod needed


As part of plans to boost its appeal to corporate travellers, Virgin has already formed joint venture arrangements with Middle Eastern airline Etihad, US carrier Delta and Air New Zealand. The Australian airline wants to boost its share of the corporate travel market from about 10 per cent to 20 per cent.

The proposed agreement with Singapore Airlines will need the approval of the Australian Competition and Consumer Commission. The carriers plan to begin their alliance from August 1.

Virgin Australia?s chief executive, John Borghetti, said Singapore Airlines was one of the most respected and innovative airlines in the world.

?Asia is clearly a critical market for us as we build our international alliance network," Mr Borghetti said in a statement.

?Singapore Airlines' extensive network throughout Asia will be particularly attractive to our international business and leisure travellers and this partnership, along with our other alliances, will mean Virgin Australia can now offer truly global flight coverage.?

Mr Borghetti and Singapore Airlines?s chief executive, Goh Choon Phong, will front a press conference in Singapore later this morning.

Mr Goh, who took over as Singapore?s CEO in January, said in a statement that the deal would ?enable us to offer even more choice for domestic and international air travel?.

Macquarie Equities analysts said last month that Singapore Airlines would be an ?ideal south-east Asian partner given its excellent connectivity and superior product and service offering?. A tie-up between Virgin and Singapore Airlines would also bolster the combined frequencies into Brisbane and Melbourne, they said.

However, Singapore Airlines was seen as less likely than some other Asian carriers to want Virgin Australia as a bedfellow.

Singapore Airlines owns 49 per cent of British airline Virgin Atlantic. The remainder is held by Sir Richard Branson?s Virgin Group, which is the largest shareholder in Virgin Australia.

Last month Virgin secured the support of Singapore Airlines to rename its international operations ? V Australia and Pacific Blue ? as Virgin Australia. Approval was needed from Singapore Airlines because it held veto over the use of the Virgin name on international routes due to its stake in Virgin Atlantic.

The Virgin deal comes just a day after Malayasia Airlines announced it would become a member of the oneworld airline alliance. It is seen as opening the way for Qantas to pursue closer working ties with the Asian airline.

Qantas is a long-standing member of the oneworld alliance.

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