Singapore Airlines' latest linkup - with China Airlines - offers few clues as to whether it will join the Star Alliance.

The agreement by Singapore Airlines and China Airlines to form a strategic partnership caught many by surprise because it does not follow the pattern of pacts between members of the same global group. Instead, its seems to address more local concerns.

Within the next six months SIA plans to buy 5 to 10 per cent of CAL's shares and develop codesharing and frequent flyer reciprocity with the Taiwanese carrier. Initially, the two airlines will focus on shared routes, but they also plan to cooperate on ground services, cargo, fleet planning, and crew training. Dr Cheong Choong Kong, SIA deputy chairman and chief executive, says the agreement also gives SIA the right to increase its future equity stake in CAL.

For CAL, the accord fills a need for a stable, global partner that can help overcome some of its recent troubles. Since a fatal air crash in February, Taipei has tightened controls on CAL, freezing aircraft orders and blocking new routes. The foundation that holds most of CAL's shares recently purged all its directors, except for its chairman.

A private placement with SIA is consistent with earlier plans to reduce the foundation's stake in CAL. Last year the foundation planned to offer an initial 8.3 per cent of its CAL shares, followed by a second offering of the same amount. Together they would reduce its ownership to 54 per cent. No public offering is planned until market conditions improve.

British Airways and Chinese mainland carriers had both been mooted as possible CAL purchasers. Negotiations spanning several months with SIA were a well-kept secret. CAL chairman Hung-i Chiang says the deal was helped by a 'high degree of complementarity and a low degree of cultural difference' between the two airlines.

New accords between other airlines in the region are aimed more at global alliance-building. Air New Zealand is adding ties that should ease its entry into Star, including a codeshare with Lufthansa on Germany-New Zealand flights over Singapore. John Bradbury, New Zealand's chief air rights negotiator, predicts this may lead to an improved Germany-New Zealand bilateral.

Ansett Airlines and Singapore Airlines - both Air New Zealand partners - have also agreed to a comprehensive codeshare. Whether it leads towards Star depends on SIA's yet-undisclosed intentions. Following approval from Australia's Competition and Consumer Commission, SIA will sell Ansett one quarter of the seats on SIA's 55 weekly flights to Australia. SIA will codeshare on many Ansett domestic flights in exchange.

Meanwhile, Qantas and British Airways have added a fifth weekly UK-Australia codeshare via Singapore.

Source: Airline Business