Singapore sees added value in Virgin alliance
Singapore Airlines insists it is holding its own on routes to Australia against Qantas and bedfellow Emirates, as it battles to convince travellers to fly to Europe via its home turf rather than its rival's Dubai hub.
A month after doubling its stake in Virgin Australia to 20 per cent, Singapore Airlines said it believed there was potential to boost flights further or use bigger aircraft on routes to Australia due to its alliance partner feeding more passengers on to its network.
As part of efforts to squeeze more out of their alliance, Singapore Airline executive Mak Swee Wah said the airline was in talks with Virgin about strengthening their loyalty programs and members' ability to earn and redeem points.
"That is a very big piece of any co-operation because that is the part that is very meaningful to the market," he said of co-operation on frequent-flyer schemes.
One of Virgin's biggest challenges remains putting its Velocity scheme on a par with Qantas' frequent-flyer program, which remains the latter's most potent weapon.
Mr Mak's comments come as Singapore Airlines made a $US17 billion order for new planes, including the stretched version of the 787 Dreamliner. Splitting its order between the world's two major plane-makers, the airline will buy 30 Boeing 787-10xs and 30 more Airbus A350-900s.
With the Australian economy resilient, Singapore Airlines has expanded aggressively on routes here, and by July it will have increased flights from 112 a week to 121.
"Competition is very intense in the market but we intend to hold our ground, if not even to expand the pie a bit," Mr Mak said on Friday. "We want to make sure our footing in this market is secure, and I think with this alliance with Virgin has made us even more steady."
He declined to reveal the level of growth the airline is targeting.
Virgin will be Singapore Airline's sole equity investment outside Singapore once it completes the sale of a 49 per cent stake in Virgin Atlantic to US airline Delta.
Mr Mak, in Australia for a whistle-stop tour of his airline's operations, said the alliance with Virgin was a "big piece" of its strategy for this country - its third-biggest market.
"Our involvement with Virgin is for the long term, and important enough for us to have a stake. When the opportunity came for us to increase the stake, we said, 'why not'," he said, referring to the talks to buy a 10 per cent stake from Virgin Group last month. "There is nothing like money to underline the importance of something you have."
But Mr Mak insisted that Singapore Airlines was not interested in using creep provisions under corporation law to raise its stake in Virgin further. Nor was it pushing for a board seat. Instead, he said it was focused on commercial areas of the alliance with Virgin such as joint selling of tickets. "The focus now is on getting things rolled out - on the commercial and operational side.
"We are very hopeful [passenger] numbers will continue to rise. With the growth we have put into the market, we are filling up the planes."
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free