A new deal sprung this morning between Singapore Airlines-controlled Tiger Airways and Thai International adds to the competitive pressures which are causing the rush by Qantas to use its Jetstar subsidiary to offshore jobs and jets to avoid Australian costs.

If the MOU announced in Singapore this morning proceeds, there will be a Thai-Singaporean joint venture structured 51:49 by shareholder domicile called Thai Tiger Airways, flying routes to India, China, Indonesia and the rest of South East Asia from Bangkok starting in the first quarter of next year.

It takes the rivalry between Qantas and Singapore Airlines for supremacy in the trans-border franchising of low fare air travel to a new level.

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Tiger will have 100% owned divisions operating out of Singapore, and domestically within Australia, and a combined domestic-international entity in Thailand, pitched mostly at the intense demand for air travel along cultural and business routes from Thai cities to India, China, Vietnam, Malaysia and Indonesia.

Jetstar already has the Australian domestic and international operation, a Jetstar Asia subsidiary in Singapore, which is overwhelmingly owned directly and indirectly by Qantas, a 100% owned Jetstar NZ operation, and a 27% owned slice of Jetstar Pacific, its troubled Vietnam franchise.

(Qantas has been ordered by Hanoi to remove Jetstar signage and symbols from the Jetstar Pacific fleet by the end of October, and says it’s still “working toward a solution”.)

But Jetstar is also about to implement a plan to base some of its Australian registered wide-bodied longer range A330s in Singapore, to fly from there to Melbourne from December and to Auckland from next March.

These Qantas proxy jets will be flown and maintained by labour under Singaporean workplace agreements to avoid higher Australian piloting, cabin crewing and engineering charges.

This Singaporean strategy is seen both within Qantas and its unions as the prelude to basing a squadron of Boeing 787s in Singapore by about 2015, which would take over or re-start routes to Europe that Qantas says are uncompetitive for its Australian resourced full service operations.

It also demonstrates the Qantas commitment to tapping Asian growth markets that are already outstripping Australian sourced demand for air travel.

In this context Thai Tiger looks like a potentially far better vehicle for tapping that growth than the the Jetstar franchises have targeted in Singapore and Vietnam. Overall, it could give Tiger lower costs than Jetstar.

However Singapore Airlines has stumbled badly in the past in efforts to expand beyond its borders through mergers, acquisitions and strategic shareholdings, with previous failures in India and China and a ruinous foray into Air New Zealand/Ansett which ended with the collapse of Ansett in September 2000 and the loss of at least $700 million (unadjusted). All that Singapore Airlines has today is Tiger, and 49% of Virgin Atlantic, where the latter has failed to justify the investment.

All of which makes today’s Tiger play with Thai International one that is vital to Singapore Airlines intentions to grow its participation in Australia and Asia, and to contain the Jetstar invasion into what it sees as its turf.

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Peter Fray
Peter Fray
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