SYDNEY: The bad-tempered battle between Virgin Australia Holdings Ltd and Qantas Airways Ltd over Australia’s skies is a proxy for increasingly tough regional competition among carriers including ambitious Gulf airlines Etihad and Emirates.
The Australian rivals are already losing money in a bitter price war. Now they’re trading barbs over Virgin Australia’s move to tap its major shareholders — Etihad, Singapore Airlines, Air New Zealand — for A$350m ($330m) in new capital to bolster its balance sheet.
Analysts expect Virgin Australia to funnel some funds into its business class offering, upgrading onboard and lounge facilities as part of its drive to lure customers from Emirates-backed Qantas. The Australian business travel market, a high-yielding sector, is estimated by analysts to be worth as much as $3.8bn. That domestic prize, combined with the potential for loyal customers flowing through to crowded regional routes in the Gulf, Japan and China, makes the country very attractive to the trio of Virgin Australia investors and Qantas’s alliance partner Emirates.
“Australia is an important travel market in its own right,” said CIMB analyst Mark Williams. “It’s the second- or third-largest market for these carriers outside their home market.”
Although Australia has a small population by global standards, its relative wealth, far-flung cities and lack of high-speed rail give it an outsized domestic aviation market. The Melbourne-to-Sydney route ranked fifth in the world by passenger numbers in 2012, according to Amadeus, a specialist provider of IT services to transport companies globally.
Etihad has labelled Australia a “key and long-term” market, even in the face of the price war that helped push both Qantas and Virgin Australia into a net loss in the latest financial year.
reuters
