Virgin Atlantic appears intent on bucking the trend on the highly competitive Kangaroo route. As the UK carrier threatens legal action to gain access, the incumbents are reassessing their independent approach on the route.
Virgin's threat follows hard on the heels of a cooperation deal with Malaysia Airlines, which the UK independent's chairman Richard Branson describes as a 'an important stepping stone in flying to Australia.'
Under the deal with MAS which goes into effect in April, Virgin will wet-lease a Boeing 747-400 from the Malaysian carrier to launch three weekly flights from London/Heathrow to Kuala Lumpur. The year-long lease is intended to plug the gap, until Virgin takes delivery of its next B747-400 in March 1996. With Virgin coming on to the route with three frequencies, the UK-Malaysian bilateral allows MAS to increase its services by the same amount, taking its weekly total to 11. Both carriers will codeshare and offer each other blocked space on all flights. Virgin will also put its code on MAS' daily flight from Kuala Lumpur to Sydney and Melbourne.
Branson, who has wanted to launch direct flights to Australia for almost a decade, is now threatening to take legal action to ensure Virgin gains good market access on London-Sydney. Branson also claims that the British Airways-Qantas alliance has produced a duopoly and says he may take his case to 'the relevant authorities' in both countries.
Branson should be encouraged by the ruling of the Australian Trade Practices Commission, which blocked the BA-Qantas plan to pool resources on the Kangaroo Route. The TPC concluded the agreement would be detrimental to competition as the combined market share of the two carriers between Europe and Australia is estimated at 50 per cent.
Nevertheless Virgin, which already serves Australia indirectly through an agreement with Ansett over Hong Kong, appears to be going against the grain in a bid to establish its own Australia operation.
Attempts by BA and Qantas to end head-to-head competition were driven by the tens of millions of dollars the two carriers have lost between them over the past decade on services between London and Australia.
Now Lufthansa has decided to pull out of Australia next month after 40 years on the route. Instead, the German flag will continue to service Australia through its alliance with Thai Airways, transferring passengers at Bangkok. Lufthansa had already scaled back its Australian operations last year, but in January the board decided to go one step further.
Analysts suggest mounting cost pressures and severe competition on the route - 35 European and Asian carriers offer Australia-Europe flights - will force others to follow suit and forge new Kangaroo Route partnerships.
Source: Airline Business
