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Nov 20, 2012

Virgin Australia's owners to compete for its Europe bound flyers

Etihad and Singapore Airlines, each with 10% equity in Virgin Australia, are set to compete head on for its European customers about the same time the Qantas-Emirates partnership comes into play.


Virgin Australia customers flying to Europe and the UK are going to ‘spoiled for choice’ or perhaps treated to an in-brand brawl from early next year when two airlines, each with a 10% stake in the carrier, offering competing code share flights.

Singapore Airlines announced this morning that it would extend its code sharing arrangements with Virgin Australia to flights it operates to UK and continental cities via its Singapore hub from Sydney and Melbourne, where until now Virgin’s Velocity program members could only earn and burn points on Etihad services, or on flights that involve Virgin Australia services that extend as far as Etihad’s hub at Abu Dhabi.

But following the completion of an equity purchase by Singapore Airlines this week, it will have as much clout as Etihad has in the Australian carrier.

Answering questions after Virgin Australia’s AGM in Brisbane, CEO John Borghetti described this situation as a natural consequence of expanding networks flown by its major shareholders, which also include Air New Zealand, with a shared trans Tasman network and Delta, on non-stop Pacific routes to the US and on to the American carrier’s domestic network.

Borghetti also said Virgin Australia intended to launch at least five new routes within Australia on Tiger Airways, in which, pending ACCC approval, it will own a 60% stake in the low fare carrier’s domestic operations by March. Borghetti would not elaborate on the routes, other than to say they would not have been viable at this stage for Virgin Australia in its own right.

He has previously made it clear that Virgin Australia will not code share with Tiger on domestic routes the way Qantas code shares with Jetstar, saying that he wanted to avoid any brand confusion between the low fare and full service airlines, while using them to ensure shareholders participated in both sections of the market.

Borghetti told shareholders that Virgin Australia expected to lift its full year underlying profit before tax above the $82.5 million it reported in FY12 but because of economic uncertainty could say by how much. Investors were told that the airline is very aware of their interest in dividends, but could not say when they would next be declared.

However he also announced a three years to FY15 program to achieve a total of $400 million in efficiency and productivity dividends, and double its current frequent flyer program to a membership of 5 million in the same period.


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