Shakey Alliances for Virgin Blue

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John Borghetti at Virgin Blue is getting some bad news lately with both the Department of Transport and the Australian Competition and Consumer Commission raising objections to proposed alliances. The DoT have said they don’t like the look of the alliance with Delta (aka Delta-V) while the ACCC have said the same about the proposed alliance with Air New Zealand. The ACCC have also said they’re going to expedite their review of the recently announced alliance with Etihad so hopefully that one doesn’t get blocked too.

While I wouldn’t necessarily say that these alliance plans are in tatters, they are certainly taking some body blows and aren’t looking too healthy. Unless Virgin Blue, Delta & Air New Zealand can put up some good responses to the various objections, the proposed linkages aren’t going to happen for a while.

So the big question from this is what will Borghetti do if the Delta & Air New Zealand alliances are blocked? He’s already shown he is not adverse to culling failing operations or routes as he has removed Pacific Blue’s domestic operations in New Zealand and pulled the V Australia 777s out of Johannesburg, Fiji & Phuket.

If he can’t get cosy with Delta across the Pacific, will he ramp up V Australia’s presence in the market or pull out entirely and settle for a code-share with Delta, channeling Virgin Blue’s domestic passengers onto Delta and taking their passengers around Australia. If he leaves the Pacific to a linkage with Delta, will he redirect the 777s to routes into Abu Dhabi to supplement flights from Etihad? Could he decide to drop the long haul 777s all together to focus on the Australian domestic market and short international flights to the Pacific and South East Asia with 737s and A330s?

It’s always an interesting time when an organisation changes CEO and direction, especially when that CEO is introducing new ways of operating (not to mention also bringing over a lot of their mates from the old job). The transition at Virgin Blue was fascinating to watch before this latest news hit the headlines but the tension has certainly been cranked up a few more notches. For now, the question remains: how will Borghetti’s strategy of expansion through strong international alliances adapt to this.

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