qantas gives nod to singapore-virgin tie-up

QANTAS will not stand in the way of Virgin Australia pursing a close tie-up with Singapore Airlines.

It says the two Australian airlines need alliances because they are at a big disadvantage to their government-owned competitors.

In giving its tacit support to the planned deal, Qantas said heavy regulation, ''extremely high'' fixed costs, competition from government-owned airlines, and the tyranny of distance made it ''very difficult'' for Virgin and itself to recover its cost of capital on international routes.


''Unsubsidised end-of route operators [such as Qantas and Virgin Australia] are particularly disadvantaged,'' it said. ''These challenges are exacerbated by the increasing price and service sensitivities of modern travellers and the susceptibility of the industry to exogenous shocks that can quickly erode margins.''

The remarks are in a submission to the competition regulator, which is deciding whether to approve Virgin's planned alliance with Singapore Airlines on routes between Australia and Asia. Singapore Airlines is Qantas's main international rival.

But Qantas wants approval for closer ties with American Airlines on the Australia-US route.

It will also unveil details of a four-pronged plan to improve the performance of its international operations on August 24. Closer alliances with other foreign airlines, including Malaysia Airlines, are expected to be a core element of Qantas's plan.

Virgin's planned alliance with Singapore Airlines follows it winning approval for similar tie-ups with the Middle East's Etihad, Air New Zealand and America's Delta.

It is part of Virgin's plans to become an upmarket competitor to Qantas and secure about 20 per cent of Australia's corporate travel market.