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Airlines Race to Cement Ties With Asian Partners

Airlines Race to Cement Ties With Asian Partners

LONDON—The jockeying for position by international airlines to grab a bigger share of the fast-growing Asian air-travel market gathered pace Wednesday as Singapore Airlines Ltd. C6L.SG +1.11% raised its stake in Virgin Australia Holdings Ltd.VAH.AU +1.10% and Abu Dhabi’s Etihad Airways bought into India’s Jet Airways (India) Ltd. 532617.BY +12.99%

The deals came just a day after Air France-KLM SA AF.FR +0.09% said it was looking for a new partner in the region, now that Qantas Airways Ltd.QAN.AU +3.87% has teamed up with Emirates Airline.

Reuters

If the Jet Airways stake sale is completed, this would be the first such deal since India last year allowed foreign airlines to buy stakes in local carriers.

Experts say that the shift to faster growth markets, especially in Asia, is sure to continue, given the region’s relatively robust economic prospects compared with Europe and the U.S.

U.S. and European national carriers are eager to break into Asian-Pacific markets for traffic to feed into their national hubs, while Asian carriers are expanding their businesses beyond their home markets by flying more passengers to Europe and the U.S. “Each of the different deals and [buying of] stakes we are seeing are part of the overall journey…the direction hasn’t changed, and these are just further steps along the way,” said Roger de Peyrecave, a partner at PricewaterhouseCoopers who follows the aviation sector.

Airlines are also increasingly making deals to improve their growth prospects, rather than relying on developing new routes on their own. “Organic growth is fine, but for a foreign carrier to start operations on its own out of any Asian country, it would have to go through quite a lot of lengthy and costly regulatory procedure,” said Ashley Steel, head of KPMG’s transportation unit.

“In any event, [a foreign airline] would never get majority control because of ownership and control rules, so minority stakes, code-shares, alliances and joint ventures are the way to go,” she said.

Singapore Airlines’ recent moves underscore the shift away from a largely consolidated trans-Atlantic market to the Asian-Pacific region. The small island nation’s flag carrier is spending US$125.8 million to nearly double its stake in Virgin Australia just a few months after it sold its 49% stake in U.K.-based Virgin Atlantic to U.S. carrier Delta Air Lines Inc. DAL +9.06%

 

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