World

Airline tie-ups should benefit consumers

SIA, Lufthansa partnership approved by Competition Commission

The path is clear for Singapore Airlines (SIA) and Lufthansa to join hands and plan flights and schedules, as well as price and sell seats for Asia-Europe routes.

Last week, the Competition Commission of Singapore (CCS) granted approval for the two airlines to enter into a partnership that will also include revenue sharing for some flights.

SIA and the German carrier will also jointly market flights that include services from the region to points in Europe.

Typically, any agreement that seeks to reduce competition is bad for consumers.

In this case, there were concerns over the fact that SIA and Lufthansa are the only two airlines that operate direct flights between Singapore-Frankfurt and Singapore-Zurich, with a market share of more than 80 per cent for the sectors.

Potentially, they could gang up to reduce seats, to drive fares up.

That is why CCS insisted that SIA and Lufthansa are not to cut capacity on the two routes.

CRITICAL

Airline tie-ups will become more prevalent. For carriers like SIA, they could be critical.

While the demand for air travel is strong and will continue to grow, competition, especially from Middle-Eastern carriers with deep pockets, is stiff.

To put up a good fight against airlines like Emirates and Qatar Airways that are expanding aggressively, SIA must join hands with others like Lufthansa.

The challenge for watchdogs like CCS is to ensure consumer interests are not compromised.

In evaluating such partnerships, it is also important to consider the larger impact.

SIA and Lufthansa, for example, have agreed to boost capacity to and from Singapore which would benefit the overall economy.

Working together to plan flights and schedules will also make it more attractive for passengers to connect via Changi Airport, boosting Singapore's air hub status.

Singapore AirlinesaviationLufthansa