As alliances have become more complex, and perhaps seemingly anti-competitive, airlines have been eager to promote any new route additions as direct results of alliance authorisation. Recent examples include Japan Airlines (JAL) opening the first Tokyo link to Boston – and with the Boeing 787 – and attributing it in part to its alliance with American Airlines while All Nippon Airways (ANA) will open a 787 link to San Jose, which the carrier also attributed to its alliance partner, United. In contrast to the glamour of these long-haul routes with high profile aircraft are the new Darwin-Sydney and Darwin-Singapore routes to be respectively started by recent partners Virgin Australia and SilkAir, the subsidiary (subsidiary!) of Singapore Airlines (SIA). Yet what the routes lack in public visibility they make up for in opportunity.
SilkAir's Darwin-Singapore route to challenge Qantas Group
SilkAir is the quiet achiever within the SIA Group, posting operating profits whereas SIA mainline has reported operating losses. It serves regional routes that have lower premium demand on its fleet of A319s and A320s, the only narrowbody aircraft at the SIA Group; SIA mainline only operates widebody aircraft.
SIA has been able to encircle the Australian market with services to Perth, Adelaide, Melbourne, Sydney and Brisbane but not Darwin. Its partly-owned LCC Tiger Airways tried serving Darwin, both from Singapore and Melbourne, but withdrew, leaving the Qantas Group holding a staggering 75% of seats at the airport. Of Jetstar's 10,000 weekly international seats, 2800 – more than a quarter – go to Singapore. Qantas mainline does not serve Singapore, leaving Jetstar the only direct option to Singapore. SilkAir will add approximately 1100 seats into Darwin.
Darwin Airport capacity share by carrier (seats per week): 23-Jan-2012 to 29-Jan-2012
Source: CAPA – Centre for Aviation & Innovata
The demand for lower cost services is evident but prior to receiving alliance approval with Virgin Australia late last year, SIA would have been challenged to promote the service on its low-profile subsidiary. The immediate and easily quantifiable result of codesharing with Virgin Australia, which the two intend to do in due course, is the increased exposure and ability to sell seats. Less immediate, but potentially more significant, is the long-term gain from Virgin and SIA being able to promote an integrated network that is a viable alternative to Qantas' formidable network (in fact, with SilkAir offering more service than Jetstar, the Virgin/SIA alliance could be stronger in Darwin). That possibility to create competition to Qantas is at the heart of not only the Virgin-SIA alliance, but Virgin's entire business plan.
Virgin could have entered instead of SilkAir, but Virgin's fleet is desperately bulking up its domestic network while the SilkAir fleet has a degree of flexibility as the aircraft operating the back-of-the-clock Darwin route would largely otherwise sit at Changi overnight.
Virgin Australia's Darwin-Sydney route about domestic network, not international connections
SIA and Virgin Australia announced their respective new routes simultaneously, leaving some to wonder if SIA and Virgin were hinting at a less convenient one-stop option to Singapore, or the more remote consideration of forming a hub in Darwin to rival Jetstar's curtailed Darwin hub. The routes, however, are largely independent of each other; they just so happen to involve Darwin. That was partially evident from SilkAir's service starting on 26-Mar-2012, a week before Virgin's 02-Apr-2012 commencement. Additionally, SilkAir will only serve the route four times per week whereas Virgin's Darwin-Sydney service will be daily.
The possible connections between the two became more estranged when Virgin Australia on 23-Jan-2012 announced the scheduling of its route. The service arrives in Darwin at 13:50 with the return service departing at 14:40. SilkAir's timetable is almost the exact opposite, with services arriving in Darwin at 1:45 and leaving at 2:30. But with each carrier starting their respective route for individual reasons – for Virgin, to link Australia with Darwin, and for SIA, link Asia to Darwin – and not a joint cause (such as linking Australia to Asia via Darwin) the two can operate independently. Transfer traffic even with optimised schedules would have been low.
Virgin's opportunity in Darwin is rounding out its domestic network. Virgin serves Darwin from Brisbane, Melbourne and Perth whereas Qantas' network also encompasses Adelaide, Alice Springs, Cairns, Gove Nhulunbuy and Sydney. Of the 2500 seats Virgin will add to Darwin, representing a 40% increase for the carrier, Virgin could expect the occasional SilkAir passenger continuing on to Sydney after a stay in Darwin, but its biggest gains will be a more comprehensive network to take on Qantas.
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