Australia is divided over whether to allow open skies with Singapore, as proposed when the two sides last held talks in February.
Such a deal with Singapore could have a dramatic effect on Australian aviation by opening transpacific routes to the US mainland. Qantas now dominates these routes, with only modest non-stop competition from United Airlines. Under open skies, Singapore Airlines (SIA) would gain fifth freedoms to fly these routes because of the existing open skies pact between Singapore and the USA.
Some Australian officials are concerned about the effect on Qantas of opening these important routes to such a powerful rival. SIA might draw more Star Alliance traffic than United now does. Yet, according to local reports, other cabinet members are impatient that Qantas seeks to tie the Singapore issue to a list of other demands.
Not only does Qantas insist on comparable fifth freedoms beyond Singapore to more cities in Europe, but it also argues that the quid pro quo for subjecting it to more competition on the Pacific should include a relaxation of foreign ownership caps, better procedures to challenge domestic airport fees and more flexibility to shift jobs offshore. Some cabinet members accuse Qantas of using the threat of open skies as a way to push this agenda.
Virgin Group head Sir Richard Branson is further disrupting deliberations by seeking to fly the same Pacific routes that SIA wants. Branson argues that the government should give preference to the majority-owned Australian airline he wants to launch over any foreign carrier such as SIA. This has brought a quick response from SIA, which chastises him for trying to "hide behind a curtain of protectionism".
Brett Godfrey, chief executive of Virgin Blue, predicts Branson will launch his Pacific airline if the government grants him the routes he wants. If that happens soon, Virgin Blue will stay on the sidelines. "If it could be held off we'd be happy to look at it in a couple of years," says Godfrey. "But if the decision happens now, we already have enough on our plate."
DAVID KNIBB BRISBANE
Source: Airline Business
