Malaysia Airlines into oneworld–and out of Virgin as Singapore Air moves in?

MAS 747
Malaysia Airlines Boeing 747-400 departing London Heathrow. Photograph: AirSpace user apgphoto

Malaysia Airlines’ announcement today to join the oneworld alliance from late next year has deep implications for Qantas, who is sponsoring Malaysia’s entry, and Virgin Australia.

The ramifications for Virgin are more clear-cut, although official word is awaiting. Virgin and Malaysia can be expected to end their five-year-old interline and reciprocal frequent flyer agreement–and more critically, not pursue any deeper partnership, which makes the case for Virgin partnering with Singapore Airlines even more likely.

Update: A Virgin Australia spokeswoman says “there has been no decision to end our partnership” with Malaysia Airlines, but she declines to comment on the agreement’s future prospects.

Since last October when Virgin Australia chief executive John Borghetti announced his carrier’s preliminary Asian strategy, it has become clear Virgin’s preference is to have two partner Asian carriers: one in the north and one in the south. Virgin’s preference for a South Asian partner has, depending who you ask, been for for Malaysia or Singapore Airlines (although this page has favoured the latter).

Out of a Virgin-Singapore alliance, which sources familiar with the matter say is likely, Singapore stands to bolster itself against Qantas. It is a strategy playing out regionally, and put bluntly by Air New Zealand general manage for Australia Cam Wallace, who told sister publication Travel Today that there is “a pool of airlines working in a cooperative manner to create a powerful competitor to Qantas”. It’s the old my enemy’s enemy is my friend.

Borghetti has said his Asian strategy will be in place by the end of the year.

For Qantas, who is sponsoring Malaysia’s entry into oneworld, a number of options are opened up and it stands to gain the most if it operates direct flights to Malaysia’s hub at Kuala Lumpur, a proposition it has not commented on. Malaysia Airlines currently codeshares with oneworld carriers Cathay Pacific and Royal Jordanian and says it will develop partnerships with more members ahead of its official joining.

Malaysia joining oneworld potentially gives Qantas the east/southeast Asian partner presence it never managed to fully cultivate with Cathay Pacific; the two had a handful of codeshares out of Hong Kong, primarily into China, but did not take advantage of Cathay’s services to secondary European cities. Qantas favours having passengers connect to a regional British Airways flight out of London as part of its joint-service agreement with BA. The full story on the lacklustre Qantas-Cathay association is not clear, although hearing from Cathay chief executive John Slosar last week in Sydney, the carrier’s status quo and outlook is strong.

It remains to be seen if Qantas, forgoing its bias towards the BA JSA, will use Malaysia’s network for one-stop access to more of Europe (will Qantas ditch its arrangement with Air France in favour of Malaysia’s service to Paris?), the Middle East, and the Indian subcontinent–the very area the Virgin Australia-Etihad alliance targets. Partnering with Malaysia will also help Qantas overcome its weak links with Cathay that stand to grow once Virgin Australia partners with Asian airlines.

What also remains to be seen is what involvement, if any, Malaysia Airlines will have in Qantas’ Asian strategy, be it the existing operation or potential new subsidiaries.

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