Singapore Airlines (SIA) is reported to be close to reaching a tentative agreement with Ansett on a potentially wide-ranging alliance, encompassing commercial co-operation and the possible purchase of equity in the Australian carrier.

The two are expected to sign a memorandum of understanding as a first step towards negotiating a strategic tie-up, involving 50% Ansett shareholder Air New Zealand (ANZ). Reports suggest that the agreement would initially cover establishing codeshare services and joint ground handling.

SIA is also known to be keen to invest in Ansett, having already failed several times to acquire shareholdings in other international carriers, including Qantas. Observers suggest that the Singapore flag carrier could take as much as a 33% stake in Ansett, putting it on an equal footing with News Corporation and ANZ and giving it a 16% stake in Ansett International.

While News Corporation is believed to want to reduce its holding in the loss-making airline, the position of ANZ is unclear. In October 1996, the flag carrier bought TNT's 50% stake in Ansett Australia for A$350 million ($260 million).

"It's good for SIA and it's good for Ansett, but I'm not sure what ANZ gets out of it," says Goldman Sachs analyst Jean Louis Morisot.

ANZ recently signed a reciprocal marketing and codeshare agreement with United Airlines on routes between the USA and Australia via Auckland and on certain US domestic routes. SIA already partners Delta Air Lines and Swissair in the Global Excellence alliance, while Ansett has a five-year codeshare agreement with Malaysia Airlines.

A three-way SIA-Ansett-ANZ tie-up, however, would present a formidable challenge to the Qantas-British Airways partnership, particularly on the popular "kangaroo route" between Europe and Australia. SIA would also gain an important domestic-traffic feed into Australia.

Ansett in turn would receive a much-needed cash boost at a time when it urgently needs to purchase new equipment.

Most observers, however, warn that the real benefits of an alliance are unlikely to be realised until a final agreement can be reached on a single aviation market between Australia and New Zealand.

Source: Flight International