Star Alliance tamps down Virgin Australia speculation

Star Alliance tamps down Virgin Australia speculation

Many Australian business travellers would consider the best Christmas gift they could receive this year would be to hear that Virgin Australia was joining Star Alliance.

But they may have to settle for something less ambitious being left under the tree, with Star Alliance CEO Mark Schwab (below) grinching out the bad news in an interview with travel trade website Skift.

"Domestic connectivity across the Australian market would be helpful to us" Schwab admitted, noting that the demise of Ansett Australia in 2001 had left Star with an obvious gap in its worldwide network.

Schwab continued that "There are only two major airlines in the Australian market. [Neither is] an obvious choice for us there."

(That other 'major airline' is of course Qantas, which is a founding member of the competing Oneworld alliance.) 

Schwab's observations coincided with the announcement that Virgin Australia would enter a strategic partnership with Star Alliance member Air Canada – news which once again made many business travellers reflect on Virgin's alliance-free status. 

However, Virgin Australia CEO John Borghetti has consistently downplayed suggestions of joining Star Alliance or SkyTeam, saying he "doesn't see the merit" in any of the global airline alliances.

"You never say no to anything forever, but I just don't see the merit in it and I don't see what we would gain," Borghetti told Australian Business Traveller back in March 2014.

"Whatever alliance we might go into, we would have to forfeit at least one of the anti-trust immunity deals we've got (with current partner airlines) and I'm not about to do that, so I just don't see a business case for it."

Having stitched up his own bespoke alliance on a 'best fit' basis with partners including Air New Zealand, Delta, Etihad Airways and Singapore Airlines, Borghetti described those one-to-one bilateral agreements as being "more more important that the multilaterals (of alliances)."

Star Alliance heavy-hitter Singapore Airlines hold a 20.09% stake in Virgin Australia, although Star sibling Air New Zealand sold out its stake in Virgin Australia in October 2016.

Virgin's US joint venture partner Delta belongs to SkyTeam, while Etihad Airways with a 21.83% stake belongs to none of the big three alliances.

David Flynn
David Flynn is the editor of Australian Business Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.
 

21 comments

  • Chris McKellar

    krisdude

    16 Dec, 2016 09:25 am

    Mark Schwab and John Borghetti comments re-enforces my belief that VA is not going to join any air alliances because it will become some what a nightmare for VA.

    It is easier and cheaper for VA to be air alliance neutral and offer Velocity members on a reciprocal basis with its respective airline partner.
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  • TheRealBabushka

    TheRealBabushka

    16 Dec, 2016 09:28 am

    I pity Virgin flyers. Cue negative comments and dislikes.

    Fact is those who have chosen Virgin, and those who did so to spite Qantas, do not really have a global alliance to facilitate arbitrage. You're stuck in a complex web of bespoke airline arrangements designed to maximise revenue for these airlines.

    Like Trump voters, they'll be kept on tenterhooks, while slowly coming to the reality that all the things they hope would transpire, will never be a reality.

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  • LP

    LP

    16 Dec, 2016 01:42 pm

    Your comment is a little unfair - I think many flying VA will be well aware of the differences between what VA offer vs oneworld and it is not a straightforward QF vs VA choice for a lot of flyers. It is far far easier to maintain platinum (or gold) status with VA than QF. 

    Family pooling and the large SC's that can be obtained flying SQ on relatively inexpensive flexi saver fares make it easy to maintain top tier VA when in some years I'd only make silver in QF which is effectively zero status.

    While a true alliance would be superior to what VA currently have, there is still coverage through Europe, Asia, South Africa & US via partners and that is a lot better than a QF silver status.


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  • kmsyd777

    kmsyd777

    16 Dec, 2016 03:32 pm

    I believe it eventually comes down to the individual circumstances and desires. 

    I earn status on VA (and family pooling helps a lot) and then transfer my points over to SQ for redemption. And there is generally heaps of availability on either their own metal or *A. 

    Unlike them, QF is terrible when it comes to redemption, agree that status perks might be somewhat better though. 

    We love travelling and usually able to take a couple of trips each year just by redeeming points and that too in J class. 
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  • reeves35

    reeves35

    16 Dec, 2016 09:31 am

    I really don't understand why there is an obsession with some people about VA joining an alliance.  The whole global alliance thing has never delivered what was promised when they were created back in the '90s.  At the time they were supposed to deliver things such
    • common FF scheme - never happened
    • common service standards - never happened (SQ and AI are about as far away in service levels as is possible)
    • common aircraft orders driving better prices from OEMS - never happened
    • common recognition of status - has partly happened but SQ & BA for example treat their First Class customers differently from First class customers travelling on alliance partners
    Most airlines have now moved into bilateral partnerships, even those already in a global alliance; the most obvious example being QF/EK.  

    It is hard to see what would be gained by VA joining a global alliance.  I assume VA has looked at it a number of times and both Star and Skyteam have courted them but it just doesn't make business sense.  
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  • downdata

    downdata

    28 Dec, 2016 11:16 pm

    You dont give a freaking damn because you only fly domestic or to 1/4 of the world which VA's "alliance" currently covers. Unless they have partnered with EVERY SINGLE SA carriers, their FF program is poorer in comparison. I am forced to pay a fortune on QA vs. VA's cheaper and better product because i know velocity is basically useless if you travel outside of ANZ (limited connecting options, non existent secondary city destinations). 
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  • russell

    russell

    16 Dec, 2016 10:50 am

    Why would Star Alliance want an LCC as part of their team anyway?
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  • FLX

    FLX1

    16 Dec, 2016 06:33 pm

    @russell:
    Not sure why but Star has already created the 'Connecting Partner' model over a yr ago to specifically capture shorthaul LCCs into the alliance under a diff set of enrollment/joining rules.  At least 2 LCCs are now in the membership processing/preparation stage and scheduled to join Star by 2017:  Mango(SA's subsidiary) and Juneyao(An independent Chinese LCC)

    I suspect the 'Connecting Partner' model is designed to help Star gain wider/denser network in some key geog regions not effectively covered by any current Star partners.

     Anyway, why would VA be considered as a LCC?  It has not been operating under the LCC model since 2011 /Borghetti era.  
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  • mcglynp

    mcglynp

    16 Dec, 2016 10:58 am

    I would expect any alliance would put a stop to family pooling in Velocity,  as it is far too easy to get Gold status under the current arrangement.   Not sure Virgin need an alliance,  it just needs to get a few more decent partnerships onto redemption table 1.  
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  • roby

    roby

    16 Dec, 2016 11:32 am

    Don't forget Star Alliance Connecting Partner Model is coming online next year. Perhaps VA would consider being part of CPM without needing to join as a full member. 
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  • eminere

    eminere

    16 Dec, 2016 11:54 am

    And this is why for the global frequent traveller QF still wins, hands down.
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  • Chris_PER

    Chris_PER

    16 Dec, 2016 12:24 pm

    Usually when there's speculation, it means it's true.
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  • Nathan Jordan

    nathanjordan

    16 Dec, 2016 12:30 pm

    Every second month (or week, reopening!) I seem to read a story with a headline somewhat like, “Virgin changes lounge access at *** again…”. I'm not saying that their competitor has a particularly lucid, or very easily understood programme with no ‘exceptions' either, but the reality is that it is vastly easier to come to grips with QF/OW and their peccadillos than it is with Virgin.

    I too, often feel that a large amount of their customers are the types who have left QF behind to cut off their noses to spite their own faces.
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  • mcglynp

    mcglynp

    16 Dec, 2016 01:17 pm

    More likely a large amount of their customers work for companies that demand cheapest flight of the day. 
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  • BJ01

    BJ01

    16 Dec, 2016 04:05 pm

    This I absolutely agree with. Virgin just make it too hard to understand what you are entitled too when travelling on their international 'virtual' alliance partners. To many nuances and exceptions dependant on too many variables which change every pancake Tuesday. I am tired of trying to keep up with it...I need simple!

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  • Craig

    crwilkins

    16 Dec, 2016 01:58 pm

    Something has to give at Virgin at some point, they've never turned a profit, their shareholders keep pumping money in and it's just going nowhere...the value proposition internationally for them is frankly confusing, I predict at some point Borghetti will go, AJ and QF have clearly outperformed him and maybe then an alliance will be on the cards....cant see them surviving in the current model long term
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  • Mal

    Mal

    16 Dec, 2016 02:32 pm

    A shame to hear, as joining Star Alliance would be a big deal for Virgin, but I am not sure if it would be big enough and sufficiently justify the costs (and possible breakdown of JVs with other airlines) in order to bring enough passengers across from Qantas, which is really the 'main game' for Virgin. Unless the airline can be sure that joining Star Alliance is going to mean a certain (and very big) number of premium travellers is going to decamp from Qantas and fly Virgin I can't see such a move making economic sense for Virgin.
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  • Nick Sydney 2

    neiljeram

    17 Dec, 2016 06:28 am

    Happy to use virgin locally. However with QF and EK I get to fly mostly in the A380 for the long haul.  VA do not have this option.  Choice of aircraft is important when one racks up 400k annually. 
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  • *maestro*

    *maestro*

    16 Dec, 2016 03:14 pm

    I am Australian, currently Star Alliance Gold Status with Lufthansa & Asiana and fly mostly premium cabins almost every week. When flying from Australia to North America, I always fly Air Canada, United or Air New Zealand. When flying domestically in Australia, I use whoever is cheapest at the time between Qantas and Virgin. If Virgin were part of Star Alliance, I would almost 100% use them exclusively for those routes and possibly also to Asia/Europe. But without them being in Star Alliance, my loyalty lies elsewhere.
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  • BrisbanePE

    BrisbanePE

    16 Dec, 2016 04:18 pm

    IIRC VA were initially partnered with UA, but back then you couldn't even interline bagagge with VA and the codeshare arrangement seemed to disappear.
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  • FLX

    FLX1

    16 Dec, 2016 06:43 pm

    @BrisbanePE:
    Pretty sure you know why UA and VA hv been drifting further apart across the Pacific......something to do with an outfit @ Atlanta.....
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