Virgin Australia has the opportunity to deepen its partnership with Singapore Airlines

Virgin Australia could deepen its partnership with Singapore Airlines (SIA) to fill the void as its cross-Tasman joint venture with Air New Zealand ends on 27 Oct-2018.


Summary

  • Virgin Australia could add its code on Singapore Airlines’ new Melbourne-Wellington service, which is launching in May-2018;
  • Virgin Australia now relies on Air New Zealand in the Melbourne-Wellington market but its partnership with Air NZ is ending in Oct-2018;
  • Virgin Australia has announced the launch of Sydney-Wellington but appears to have decided to rely on Singapore Airlines for Melbourne-Wellington.

SIA is launching four weekly flights from Melbourne to Wellington on 3-May-2018. Virgin Australia is not currently selling this flight but is selling Air New Zealand’s daily flight from Melbourne to Wellington.

As the Virgin Australia-Air NZ partnership ends, it would be logical for Virgin Australia to use SIA to maintain a nonstop presence in the Melbourne-Wellington market. Virgin Australia currently does not operate this route with its own metal and therefore the Air NZ flight is the only nonstop option it is currently selling. A one-stop product on Virgin Australia metal is sold but is not competitive.

Virgin Australia could potentially launch Melbourne-Wellington on its own but using SIA would be less risky and free up capacity for other new cross-Tasman routes.

Virgin Australia currently operates 10 cross-Tasman routes: Brisbane to Auckland, Christchurch, Dunedin, Queenstown and Wellington; Sydney to Auckland and Queenstown; Melbourne to Auckland and Christchurch; and Gold Coast to Auckland. Virgin Australia announced on 16-Apr-2018 the launch of Sydney-Wellington and Melbourne-Queenstown on 28-Oct-2018 (one day after the JV with Air New Zealand ends).

Sydney-Wellington and Melbourne-Queenstown along with Melbourne-Wellington and Sydney-Christchurch are the main cross-Tasman routes, which Air New Zealand now operates, while Virgin Australia does not. The fact that Virgin Australia did not include Melbourne-Wellington in its 16-Apr-2018 announcement indicates it is likely leaving this route for SIA.

Air New Zealand operates 16 cross-Tasman routes: Sydney to Auckland, Christchurch, Wellington and Queenstown; Melbourne to Auckland, Christchurch, Wellington and Queenstown; Brisbane to Auckland and Christchurch; and Adelaide to Auckland; Cairns to Auckland; Gold Coast to Auckland and Christchurch; and Perth to Auckland and Christchurch.

Air NZ has already announced it will add Brisbane to Wellington and Queenstown in Dec-2018, two of the four routes in the JV that are currently only operated by Virgin Australia. Air NZ is also adding capacity on five core cross-Tasman routes – Melbourne to Auckland and Christchurch; Sydney to Auckland and Christchurch; and Brisbane to Auckland. Virgin Australia is also adding capacity on the core Brisbane, Melbourne and Sydney to Auckland routes.

SIA would benefit from a Virgin Australia codeshare on Melbourne-Wellington. SIA should have plenty of spare capacity as it will operate the sector with 266-seat 777-200s as part of a Singapore-Melbourne-Wellington routing. This will replace SIA’s current Singapore-Canberra-Wellington service, which was launched in 2016 with four weekly 777-200 frequencies.

See related report: Singapore Airlines route changes for Wellington: the good and the bad

Virgin Australia now places its code on SIA’s Canberra-Wellington service. This does not conflict with the Virgin Australia-Air New Zealand JV as Canberra-Wellington is not operated by Virgin Australia or Air NZ.

SIA could potentially launch more cross-Tasman services. SIA has the fifth freedom rights and would benefit from Virgin Australia selling routes such as Sydney-Christchurch (one of the routes only operated by Air NZ in the current Virgin Australia-Air NZ JV). The fact that Virgin Australia has not announced it is resuming Sydney-Christchurch, which it dropped a few weeks ago, could indicate that SIA is looking at entering this route.

However, SIA is generally not interested in the cross-Tasman market. Most of its Singapore-Australia flights turn around immediately; SIA does not have any aircraft sitting on the ground all day in Australia, which have historically made cross-Tasman routes attractive for other foreign airlines such as China Airlines and Emirates.

SIA may also want to avoid rocking the boat with Air NZ. SIA has had an extensive codeshare partnership and joint venture in the New Zealand-Singapore market with Air NZ since 2014.

From SIA’s perspective, things were certainly neater when Air NZ had a stake and close relationship with Virgin Australia. Air NZ sold its Virgin Australia stake in 2016, while SIA has maintained a large stake.

SIA first bought into Virgin Australia in 2012. The two airlines initially forged an extensive codeshare partnership in 2011. SIA has since placed its code on Virgin Australia domestic flights as well as Virgin’s cross-Tasman flights, which connect with SIA’s flights from Singapore to Australia.

A few years later SIA began codesharing on Air NZ’s cross-Tasman flights, providing another option for passengers connecting from SIA’s flights from Singapore to Australia and heading to New Zealand. However, most of SIA’s New Zealand passengers fly on nonstop flights from Singapore to Auckland and Christchurch. Some of SIA’s New Zealand passengers also use the one-stop service to Wellington although SIA relies mainly on local Australia-New Zealand traffic to fill a majority of the seats on the cross-Tasman sector.