Virgin Blue Group has detailed the rationale behind its new partnership with Middle Eastern carrier Etihad Airways, explaining that it will allow the Australian company to benefit more from hub-and-spoke operations.

"For years there was always this issue of carriers that are strategically-positioned globally, that are able to hub and source markets, and then refer traffic," Virgin Blue Group CEO John Borghetti said in Sydney as the two sides unveiled the pact.

"The vision of Australia ever having that capability was virtually nil. What we've done is tip that on its head."

Etihad and Virgin's V Australia will codeshare on one another's flights between Australia and Abu Dhabi and destinations beyond Abu Dhabi. Etihad CEO James Hogan says passengers will be able to connect to 37 Etihad destinations within two hours of arriving in Abu Dhabi.

"That's the opportunity. It's one-stop. There's no back-tracking over London [for Australia-Europe flights]," Hogan says.

Borghetti adds: "Bilateral alliances are absolutely key. Bilaterals are where a lot of the value can be unlocked. They are really what will set us apart from other competitors in this market."

Virgin Blue will also gain from Etihad's bringing passengers to its domestic market, which Borghetti says remains the group's core business.

By next February V Australia will end its flights to Fiji, Johannesburg, and Phuket and only serve Los Angeles and Abu Dhabi with its fleet of Boeing 777-300ERs. From Los Angeles, V Australia plans to codeshare and interline with Delta Air Lines under a pending joint-venture application.

"It is a very effective way of maximising your return from a small number of aircraft," Borghetti says, referring to international hub-and-spoke models of the type Virgin Blue is leaning towards.

Etihad currently has an agreement with Oneworld alliance member Qantas under which Qantas codeshares to Abu Dhabi and Middle East destinations while Etihad codeshares to domestic Australian cities, and services between Australia and New Zealand.

But Hogan says the partnership is too limited. "We didn't have the ability to move into frequent-flyer programmes, expand the network, and [Qantas has] been very upfront in announcing that, with Jetstar, they'll operate into the Middle East," he says. "The game changed. It's not about being the biggest. It's about being smart."

According to Virgin Blue's network map, the carrier plans to codeshare to 29 Etihad destinations including Athens, Beijing, Chicago, Dublin, London, New York, Manchester, Moscow, Mumbai and Toronto.

Source: Air Transport Intelligence news