The Australian government’s decision to deny fifth freedoms to Singapore Airlines (SIA) removes a major obstacle to plans by Virgin Blue to launch its own transpacific service.

The SIA decision announced by Australian transport minister Warren Truss ends months of controversy over Singapore’s request for an open skies accord that would allow SIA to fly beyond Australia to the USA. In the end the Australian government concluded that the reciprocal air rights would favour SIA far more than Qantas, and the benefits to fare competition or inbound tourism were inconclusive.

The decision included a review of aviation policies that Qantas sought on the grounds that some Australian rules handicap it in competing with foreign carriers such as SIA. But officials made no changes and specifically rejected Qantas requests for accelerated depreciation on aircraft and relaxation of the foreign ownership cap.

As part of their decision, Australian government officials repeated an earlier suggestion that Qantas and SIA consider a merger. Both airlines have quickly rejected that idea.

The debate over SIA occurred at the same time as a noisy dispute between Qantas and its unions over the prospect of outsourcing widebody heavy maintenance. Qantas raised the spectre of transpacific competition from SIA as another reason why it needed to outsource to keep down costs.

Geoff Dixon, Qantas chief executive, denies that he ever threatened widespread layoffs if Canberra gave the green light to SIA, but the local reports that job losses at Qantas were a major concern to cabinet members who voted to block SIA.

Pro-union politicians criticised cabinet for not explicitly linking the outsourcing and SIA issues, but transport minister Truss made the not-too-subtle point that it was in “the national interest” for Qantas to keep the skills needed “to serve not only Qantas aircraft, but the large jet aircraft in our defence forces”.

Since then Qantas has shelved outsourcing, opting instead to consolidate heavy maintenance within Australia on all widebodies except the Airbus A380 and, possibly, its A330s. It denies any deal with the government, and plans to revisit this decision in two years’ time.

With SIA out of the way, Virgin Blue is interested in transpacific service. The next step is to gain more frequencies, which it would need to make a profit. Only four a week are available under the current Australia-US bilateral. According to local reports, Australian and US negotiators plan to meet soon to discuss allowing more flights under the bilateral.

Virgin boss Sir Richard Branson says: “If we can get a daily service, which we really need to be profitable, then I think the chances are that Virgin Blue will go on that route.” ■


Source: Airline Business