Third airline raises stakes in delicate game of poker (AFR)
(please note that this is an extract as it appears on another board from this weekends Australian Financial Review.)
Third airline raises stakes in delicate game of poker Just two weeks before its business is sold. the board of Sydney Airports Corporation met on Wednesday at the epicentre of a fascinating behind-the-scenes poker game being played out over a new third entrant into Australian aviation - which may happen sooner than anyone thinks. Having paid a deposit of 10% or $19.2 million, on Monday to buy the Ansett domestic terminal, SACL management is now negotiating new leases over the terminal with Australia's only national airlines, Virgin Blue and Qantas. They each want long-term leases for one of the two concourses, and they want them exclusive to make life more difficult for any new third domestic airline - most likely Singapore Airlines, but possiibly Emirates or Dragon Air. These three airlines are believed to to be negotiating with the Ansett administrators to buy the defunct carrier's operating certificate and other assets needed to start a new domestic operation. But is there a third player actually on the horizon? Enter Singapore Airlines. I understand Singapore is the most serious of the three parties negotiating with Ansett administrators Mark Korda and Mark Mentha to buy the Ansett airline operating certificate (AOC) and associated assets, which the two Marks have carefully preserved for sale. This is a delicate business, No AOC has been sold like this before and there is no precedent for valuing it. Mentha and Korda kept it from being cancelled by the aviation authorities because they have retained the Ansett chief pilot on their payroll and kept the engineering facilities in running order. As a package with the AOC, the administrators are offering for sale the reservation system, leases on 18 Airbus A320 aircraft, engineering facilities and valid enterprise agreements. They say those agreements, plus the fact that all the fixed assets, such as the terminals and head office, have now been sold, means that a reborn Ansett (with a different name, of course, and no terminals of its own) would have a lower cost base than Virgin Blue. Most of the staff including pilots and flight crews, are still looking for jobs, by the way, and would be available. This means that anyone who is thinking of paying good money for Ansetts AOC must be in a hurry. otherwise they would take 12 months to get their own. The key is Singapore. The Star Alliance, of which Singapore is a lead member, is being slaughtered in the Australian market place by Qantas and its Oneworld partners. Singapore would do the same if the roles were reversed, but right now the feeder flights to and from the flights in and out of Australia by Singapore and its Star Alliance partners are costing a fortune, and the situation can't go on. Singapore must either get Virgin Blue into Star Alliance or start its own domestic operations. But Virgin is an unlikley starter because joining Star costs tens of millions of dollars, and Virgin doesn't have the systems to handle it anyway. Joining Star would proberly involve a fundermental change to the Richard Branson/Chris Corrigan business model. So despite all Singapore's reluctance to risk an entry into the Australian market as a third start-up airline, reality is intervening. For Virgin Blue owners, Corrigan and Branson, Singapores entry into Australia with a very low-cost base would be a disaster. Instead of looking at an enormously profitable 25-30% of the market shared with Qantas, they would be back to 15% and once again struggling to cover costs. That's why they are keen to tie up the Sydney terminal space through an exclusive arrangement. But even if SACL were prepared to give it to them, which must be unlikely since it would make SACL appear hypocritical as it has promoted the "common user" idea previously, the timing makes it impossible. With the airports sale just two weeks away it would be a courageous SACL board indeed that ageed to a 10-year exclusive lease, even though the Government hasn't told it not to. Alan Kohler |
If true this is NOT surprising. With the old AN well and truly GONE SQ can come in cheap, pick up the pieces and star anew and develope a system that is, at least initially, based around optimum * connections, as well as obvious SYD-MEL-BNE routes, and transcons.
They'll be in trouble though with terminal sace, just as VS was, but still I'd use the old DJ terminals if it meant getting * credit to fly around the country. Of course, rumours like this have been flying around for awile now, so we'll just have to wait and see. ------------------ RichardMEL, UA 1K A Star Alliance Member. |
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