Possible Qantas and Singapore Airlines Merger

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Comment is often made in regard to the difficulty in buying seats on the Pacific air route. This route is serviced by only two airlines, Qantas and United. Both tourists and business people have for some years experienced difficulty in obtaining flights that suit their schedule due to this prevailing duopoly.

As well, on a $ per mile flown basis the west coast USA /east coast Australia flights are some of the most expensive in the world. There is of course a good argument that increased competition would lower prices. Qantas regularly refutes this and argues that increased competition would force it to significantly cut staff and therefore reduce services.

Singapore Airlines has made a number of approaches to the Australian government in attempt to gain rights to fly the Pacific route – thereby opening up not only many hundreds more seats each week but also opening up the route to greater competition and thus lower prices. The beneficial flow on effect to tourism and business is obvious. Regrettably, last month the Australian government rejected the approach by Singapore Airlines and again rejected their bid to fly Sydney – Los Angeles.

As a result, over the last week there has been speculation that Singapore Airlines might try and wrest away from Qantas the stake held in the airline by British Airways and become, itself a major shareholder in Qantas, or indeed undertake a merger. Speculation is that both the Australian and Singaporean governments are supporting this move. It should of course be noted that Singapore Airlines is a government owned airline – Qantas is not. If talks continue as is rumoured, then both US and Australian businesses should soon benefit from more capacity on the Pacific route. Tourism in Australia would most likely be the major winner.

For information on this article, or on any other aspect of the Australian economy or business opportunities available, please email me.

David

david.taylor@agarcarlyon.com