Virgin 'opens new fronts in Qantas battle'

30 Oct 2012, 7:56 pm   -   Source: AAP

Australia's domestic airline industry will get a major shakeup from Virgin's deals with Tiger and regional flyer Skywest, analysts say.

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Virgin Australia's multi-million-dollar deals open up new fronts in its battle with Qantas and will cause a massive shakeup of the local airline industry.

The deals with budget carrier Tiger and regional flyer Skywest put Virgin in direct competition with Qantas at all levels of air travel - premium, budget and regional, analysts say.

Singapore Airlines' $105 million investment in Virgin, alongside major stakes held by Etihad and Air New Zealand, also gives it the financial clout mix it with Qantas.

"It looks like a good shakeup, it will certainly keep Qantas honest," Fat Prophets analyst Greg Fraser said.

Tiger Australia is set to be expanded to compete with low-cost flyer Jetstar, while Skywest could grow to rival Qantas' regional service QantasLink, he said.

Most significantly, Virgin's re-branding as a premium carrier would be finalised, stepping up competition for the lucrative business dollar.

Singapore's equity stake in Virgin also showed that airlines in the region were jostling to compete with Qantas' regional expansion, City Index analyst Peter Esho said.

"We see today's move by Singapore Airlines as a strategic shift down south to back Qantas' main domestic competitor," he said.

"As Qantas closes more Asian deals and looks at ramping up its Emirates code share alliance, competitors will be feeling the heat."

Virgin still needs regulatory approval for its bold domestic moves - and then the hard work will begin.

It needs to significantly increase the size of Tiger Australia and repair the damage done by that airline's grounding by safety authorities just over 12 months ago.

"There may be some hangover from that in terms of public perception, so there may be some marketing and promotional work required to perhaps build the trust from the public so they can feel safe flying on that airline," Mr Fraser said.

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