View Full Version : Will Singapore take a stake in VB ?

1st Dec 2002, 20:03
The Business Times (Singapore)
December 2, 2002
Air & Land Transport News

Qantas' Air NZ play puts pressure on SIA: analysts

Talk that SIA may take a stake in Virgin Blue to keep market presence

(SYDNEY) Singapore Airlines (SIA) risks being frozen out of the lucrative Australian aviation market if it fails to react swiftly to the planned tie-up between Qantas and Air New Zealand, analysts have warned.

They say the partnership meant SIA had to show its hand after months of shadow boxing over whether it will enter Australia's domestic market.

They also suggested the most likely scenario was for SIA to take a stake in Richard Branson's discount airline Virgin Blue, which has been a runaway success since it launched in Australia two years ago.

One analyst said the budget carrier was the only player left for SIA to consider, following the Qantas-Air NZ deal. 'Qantas isn't an option for them, setting up a domestic operation themselves is one option but I think that's unlikely, it doesn't make any sense,' he said. 'Doing nothing is possibly an option or doing something within the grouping of Virgin Blue.'

SIA lost its toehold in the Australian market when Ansett Airlines, a fellow member of the Star Alliance grouping of airlines, collapsed in September last year.

The proposed deal between Qantas Airways and Air NZ means SIA may lose another strategic ally in the region, as Air NZ is also a Star Alliance member.

Under the terms of the deal, Qantas will inject NZ$550 million (S$481 million) into the coffers of Air NZ, which had to be rescued by the New Zealand government a year ago. The link up would give Qantas 22.5 per cent of Air NZ.

A Sydney-based analyst predicted the new alliance would increase SIA's eagerness to return to the Australian domestic market, saying its absence was costing the airline hundreds of millions of dollars a year.

'They're already locked out of Australia and now that could be extended to New Zealand,' he said. 'They can't sit back and watch that happen.'

But SIA, which last month described launching into the Australian market as a 'viable' option, dismissed the renewed talk as purely speculative. Spokesman Stephen Forshaw said: 'We are aware of the speculation but we are not going to rush the decisions that we have to make at the right point.' He added SIA had no plans to offload its 4.3 per cent stake in Air NZ.

Virgin Blue, which has plans for a partial public float next year, was also keen to hose down speculation of a tie-up with SIA.

'The endless speculation about Virgin Blue and Singapore Airlines for nearly three years now has been consistently wrong,' Virgin Blue commercial head David Huttner said.

'We can assure all those experts that there are no discussions taking place with Virgin Blue and SIA at the present time, nor have there been in recent times.'

Market watchers believe the two airlines would only begin serious merger talks if they failed to persuade Australian and New Zealand regulators to block the Qantas-Air NZ deal because it would create a 'virtual monopoly'.

The Australian Competition and Consumer Commission and New Zealand's Commerce Commission will receive submissions on the deal from Dec 9. They both expressed initial reservations about it. - AFP