Excerpts from an article by the AP:

SINGAPORE (AP) — Singapore Airlines on Friday dismissed talk of a potential merger with Qantas, saying the issue could only be considered if the Australian government allows greater competition on the prized trans-Pacific route to the United States.

On Thursday, Australian Prime Minister John Howard threw his weight behind the idea of a merger between two of Asia’s biggest — and most profitable — airlines after a meeting with counterpart Lee Hsien Loong on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea.

“This issue has already been discussed and debated extensively in recent months,” Singapore Airlines spokesman Stephen Forshaw said. “We’ve said all along that for mergers to happen, there needs to be considerable regulatory liberalization. It is an idea ahead of its time.”

Interesting. First of all, Singapore and Qantas both are bastions of their respective alliances – SQ is a big Star player, and Qantas was a founding member of oneworld. So if they did merge, which alliance would win out? The problem with this is that Qantas is partly owned by British Airways – another oneworld member. And Singapore owns 49% of Virgin Atlantic – BA’s archrival.

But the issue that’s the focus point isn’t alliances; it’s a route: Los Angeles – Sydney, which is only flown by United and Qantas as of now. According to the AP article, Qantas has about 75% of the market share on that route, which also constitutes 15% of its total profit. Singapore wants in on the route, so it can pick up passengers on the Singapore-Australia-Los Angeles circuit.

I believe that Singapore, which will only allow a merger if the Australian government is more allowing of competition on the trans-Pacific routes, is playing hard-to-get. If the Australian prime minister is backing the merger, then they will probably do some things to appease Singapore.

Both airlines are world-class nonetheless. Singapore is known for its fantastic service (think Raffles class) and Qantas is known for its profitability and safety record.

Advertisements