The obvious question has to be posed about the now threatened Virgin Blue/Delta Airlines joint venture as to just what the two airlines can say to the US Department of Transportation in the the next two weeks to prevent it rejecting their application for anti-trust immunity.
Delta is a not just an established American carrier familiar with US transportation laws and procedures, but an amalgam of two such very experienced carriers since its merger with Northwest.
And Virgin Blue not only went about its quest with meticulous planning and research, but with the encouragement and lobbying support of the previous two Coalition and Labor governments, both of which agreed to keep Singapore Airlines off the Australia-American non-stop routes until V Australia had established itself.
Which brings us to consider that what Virgin Blue and Delta might really try to impress upon the DoT is not more of the same about their plans-which the agency buried under scorn in its docket giving its reasons for proposing to disallow the joint venture-but their concerns about the consequences of Singapore Airlines entering the Australia-US market upon the exit of V Australia.
Make no mistake. Virgin Blue will not persist in flying loss making services to the US unless it can turn them around with a joint venture with an airline which gives it a US domestic feed larger than the one that Virgin America currently commands.
Virgin Blue CEO John Borghetti made his resolve to quit loss making routes clear when he killed off V Australia’s flights to South Africa, Fiji and Thailand and Pacific Blue’s NZ domestic services.
It is possible that Virgin Blue might try to expand its pending trans Tasman alliance with Air NZ to jointly address the long haul Pacific routes, although that doesn’t really deliver convincing US domestic feed since Air NZ’s Star Alliance partner, United, is also a competitor on long haul trans Pacific flights.
Which means the Virgin Blue Delta JV either gets approved, or everyone else– Qantas, United and Delta–ends up with Singapore Airlines as a competitor, as its entry to those routes really hinges on Canberra saying ‘Yes’ to an involvement that the US seems to regard as consistent with its own support of open skies between itself, Singapore and Australia.
The next two weeks may therefore be about the messages of concern the DoT hears from US flag carriers about Singapore Airlines opening new non-Singaporean routes to America rather than a reiteration from Virgin Blue and Delta of material they could not have failed to already present to the transportation department during the detailed and lengthy application process of seeking anti-trust immunity.
Keep in mind the performance of Singapore Airlines in Australia, and its strategic strengths.
Singapore Airlines has profitably grown at the expense of Qantas on long haul routes making connections over Changi Airport. It has with mixed fortunes tried to counter the expansion of Jetstar into the trans border low cost airline franchising sector with Jetstar Asia, based in Singapore, by setting up a Tiger Airways division in Australia.
In the June 30 quarter Tiger triggered a domestic fare war in Australia that drove Jetstar into loss and deeply harmed Qantas and left Virgin Blue with a slender profit from domestic flying in that period.
Tiger is undoubtedly under a lot of pressure in Australia, but it is capable of being a major spoiler even as a minor player on interstate routes.
If, stress ‘if’, V Australia is left without an alliance worth having on the trans Pacific routes and thus quits them, Singapore Airlines (including Tiger) will be able to discuss from a position of considerable strength, a future in which a single dual listed aviation company might be formed to run a dual branded combination of Singapore Airlines and Qantas that would rival the reach of the Air France KLM merger.
The notion of a Singapore/Qantas merger of sorts is not going to go away any day soon. The possible failure of the Virgin Blue/Delta deal and any subsequent exit of V Australia from the US market could bring it fully awake very quickly.
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VAus already sell connecting flights onto Delta’s network as well as Virgin America’s. And perhaps it’s just me, but aren’t the logistics – and at the moment the economics of SQ entry into the route particularly unattractive? I’d imagine DL/VA would be seeking over the next two weeks to detail their previously unpublicised plans for the JV so as to illustrate the tangible benefits approval. I would be surprised if they really took the argument -”Let us co-operate otherwise if VA leave then SQ will come”. I’m not sure why the DOT would give a stuff about who flies the route. Surely they wouldn’t hate the idea of a highly regarded airline such as SQ entering the route?
And let’s not pretend SQ /alone/ has grown at the expense of QF. EVERYONE has grown at the expense of QF. They dropped the ball big time. Flying a crap product in oldddd jets, and charging too much for those seats with shitty service. Their gradual demise is at their own hand – not because of anyone else being particularly exceptional.
tangible benefits *of* approval
Joey,
I might be ahead of the moment concerning SQ, and I would agree strongly that the authority may not pay much attention to warnings about its possible accelerated entry onto the Pacific, even though I formed the view after a few calls this morning that it will get such ‘signals’.
The thing that has impressed me however about Singapore Airlines is the consistent determination of Cheong Choon Kong and Chew Choon Seng as successive CEOs to escape from the ‘bounds’ of Singapore more than they have, even though outside observers might marvel at what they have done with Changi up to now. I have no doubt they want to be on top when, rather than if, large scale rationalisation occurs in the Asia-Pacific, so the timing of the right moment from the SQ perspective may not be as closely stapled to the state of, say, the trans Pacific at this moment, but where they think it might be several years from now, or where a sudden weakness presents itself.
I particularly remember this logic at work in a discussion some years back about the non-stops to Newark, which despite popular mythology, do make a modest amount of money. It wasn’t the fact that each flight made a few thousand dollars that mattered, but the fact that they took tens of millions of dollars a year off their multi-stop competitors, all of whom were diminished as a consequence. The message I have taken from SQ for some time is that they play a very long game with immense determination.
Even if the Virgin Blue Delta deal is approved, they will enter the Pacific market in the next ten years, perhaps much sooner than that, and I suspect, come up against several strong but somewhat transformed Australian carriers that will also be looking toward being part of strong entities owning a number of different brands.
Hint to Delta: toss Southwest a few LaGuardia slot pairs and re-submit…