Air Transport

Having lost out, SIA accuses Canberra of protectionism

Australian low-cost carrier Virgin Blue last week resumed talks with the Australian government on launching trans-Pacific services between Australia and the USA after Singapore Airlines (SIA) was denied approval to fly between Sydney and Los Angeles.

The move has resulted in SIA accusing the Australian government of protectionism – “the interests of national carriers have won out over the wider, national interest”, it says – but has given Virgin Blue the green light to accelerate long-held ambitions to fly transpacific services.

Virgin Blue says it is still very early days in its discussions, declining to comment on specific routes, aircraft or whether Virgin Blue or a separate entity would operate the services. The airline has been looking at a two-year timeframe to launch services, but a stumbling block is that there are currently only four flights a week available to Virgin Blue due to the existing bilateral agreement with the USA. The airline believes it would need at least daily flights to make it viable.

SIA had sought to compete with Qantas and United Airlines across the Pacific from Australia, but its application was rejected. Australian transport minister Warren Truss says the government would consider trans-Pacific access on a case-by-case basis. If approval is granted to SIA in the future it would be for limited and phased services and would not be for “some years”, allowing Virgin Blue time to finalise its plans, he says. Virgin Blue would provide an alternative type of service, says Truss.

Qantas welcomed the government’s decision on SIA, although Australia’s review of its aviation policy was not all good news for Qantas. The government decided not to change the Qantas Sale Act, which limits foreign ownership. Qantas wanted to remove foreign ownership limits in order to reduce its cost of capital and allow it to compete more effectively, but Truss says that three-quarters of Australia’s bilateral agreements require Qantas to be substantially Australian-owned. The government also made no decision on depreciation rates, which Qantas had hoped for.

In light of the inevitability of international airline mergers, Truss recommends that the boards of Qantas and SIA consider an alliance – not one of the major issues the airline is considering, says Qantas.

EMMA KELLY / PERTH