VB and the Pacific
Virgin Blue to take on Qantas in Pacific
Katharine Murphy
February 09, 2006
SINGAPORE Airlines' bid to fly between Australia and the US could be deferred for another two years, with the Howard Government deciding to buy time by allowing Virgin Blue to compete head-to-head with Qantas on the lucrative route.
After agonising over the decision for more than a year, cabinet will consider a proposal within a month to defer Singapore Airlines' entry to the Pacific route, The Australian understands.
Transport Minister Warren Truss appears increasingly convinced that a budget Australian-owned carrier - rather than a premium "third-country" brand such as Singapore Airlines - will boost falling tourist numbers in the critically important market between the east coast of Australia and the US.
"If our objective is to have more people come to Australia, tourists and the like, then to achieve that we need a different product than that provided by the current services," Mr Truss told The Australian yesterday.
Qantas boss Geoff Dixon arrived in Canberra yesterday, ahead of a looming cabinet decision, to lobby parliamentarians to protect his airline from any additional competition from Singapore.
Qantas has made it clear to the Government it wants a decision on the Pacific route early this year to allow it to plan its future operations in the region.
Virgin Blue has said it needs two years to secure the necessary aircraft, equipment and crew to fly its aggressive budget service against Qantas, the dominant player on its most lucrative aviation route.
The Australian understands Mr Truss has already begun lobbying the US Secretary of Transport, Norman Mineta, to secure the necessary approval for Virgin to fly to the US seven times a week.
Virgin, as a new entrant to the Pacific route, would face restrictions on its ability to fly into the US unless Mr Mineta grants more landing rights.
Mr Truss said yesterday he would not pre-empt the cabinet's decision, but he argued in favour of Virgin gaining access to the key route.
"The advantage of Virgin operating is it is an Australian airline, it operates a different product and therefore profits would flow to Australia," Mr Truss told The Australian yesterday. "Virgin could also link up with Virgin Atlantic and the network it is trying to establish in the US."
But those in cabinet who support granting Singapore Airlines access to the Pacific route are likely to continue their dogged fight to force a final decision in favour of the Asian carrier rather than endure another deferral of the proposal.
However, Treasurer Peter Costello is strongly in favour of additional competition on the Pacific route, as is Industry Minister Ian Macfarlane, who has already proposed a phased entry for Singapore Airlines to fly between Australia and the US.
But aviation industry sources have questioned whether Virgin would be ready to fly the route in two years.