This morning’s confirmation of Andrew David, former chief operating officer of Virgin Australia, as the next CEO of Tiger Airways Australia raises the question as to whether Tiger’s major shareholder, Singapore Airlines, will pursue some degree of integration of that troubled investment into Virgin Australia in order to cut its losses.
On paper, connecting the dots this way has been a talking point for airline insiders ever since Singapore Airlines pledged its support for the disgraced domestic Tiger venture, which was grounded by CASA as a threat to public safety for six weeks from the start of July.
The notion of Tiger becoming Virgin Australia’s second brand the way Jetstar become the budget carrier brand of Qantas has been hanging in the air ever since the June 7 announcement of an alliance between Virgin Australia and Singapore Airlines.
The disastrous commercial consequences of the July grounding for Singapore Airlines’ 32.9% stake in Tiger Australia has added strength to the speculation of such a tie-up, but there has, so far, been no indication from Virgin Australia or Singapore Airlines as to the substance of the rumours.
Singapore Airlines faces an uphill struggle to convert Tiger Australia from a liability to an asset. It needs help. David was considered a natural successor to Virgin Blue’s founding CEO and minority stakeholder Brett Godfrey, before John Borghetti was recruited from Qantas early in 2010, and took over that role in May last year.
Borghetti has since relaunched Virgin Blue as Virgin Australia and taken it upmarket as part of a strategy to win corporate accounts from Qantas, and Qantas has taken Jetstar up-price to a level where it sometimes tries to sell its bare bones product for more than the fares posted by the full-service Qantas domestic product. Tiger in that sense is now unopposed as a true low-fare product.
So whether Tiger becomes a marketing or even equity linked second brand for Virgin Australia, such a course would be a temptation for Singapore Airlines and Virgin Australia after the carriers overcame their past differences earlier this year.
It is likely to remain a temptation even if both carriers reject the notion outright.
Of parallel concern to Qantas investors are reports that its plans for an Asia-based premium carrier using single-aisle A320s, and a non-Qantas branding in conjunction with a partners in Malaysia, Singapore or China, are running late, and might not see it able to start service until 2013.
At the moment that plan seems to be in disarray and constant references by Qantas sources to the Malaysia potential have been received with disbelief among those familiar with the risks of doing business with Tony Fernandes, the founder of AirAsia, who has been far more successful with his low-cost franchise than either Qantas with Jetstar or Singapore Airlines with Tiger.