Virgin Australia has taken a 60 per cent stake in its bargain-basement rival Tiger Airways, as well as buying out WA airline Skywest and strengthening its partnership with Singapore Airlines. What will that mean for the average passenger?
Virgin picked up its stake in Tiger for a relatively low $35 million, plus an additional $5 million if the airline meets performance targets. The buyout doesn't mean the Tiger brand is disappearing. It will continue to operate as a separate brand, aimed at budget passengers. (Translation: your hand luggage will be weighed and you'll be charged extra if it weighs too much.)
This is very similar to the strategy Qantas uses with Jetstar: a bargain-priced sibling airline with an orange logo. However, the integration between Virgin and Tiger will be even less pronounced than with Qantas/Jetstar. There will be no codeshare flights and no ability to earn Velocity points if travelling with Tiger. Jetstar does codeshare some flights with Qantas, and you can earn points if you pay a surcharge.
The one thing that will change is that a wider range of destinations and flights will eventually be offered on Tiger. The plan is to expand Tiger's fleet from its current 11 aircraft to 35, which should give it more range.
Tiger Australia reached a nadir when it was shut down by authorities last September for failing to meet Australian aviation safety regulations. It resumed flying in August 2011, but has continued to experience some glitches, including a fine last week for breaking spam email laws.
It's early days for the deal, which won't be completed until June next year and requires ACCC approval. I'd expect the change to mean that Virgin flights actually become a little pricier. Virgin has been aggressively pursuing business customers, a market dominated by Qantas. Having Tiger as a bargain-basement option means that Virgin may be less inclined to sell cheaper flights on its own network. It would be nice to see Virgin change its less generous baggage policy to reflect those changes, but I doubt that will happen in the short term.
With Skywest, the situation is simpler. Virgin is buying the entire airline and expects to integrate it, but it will maintain a separate management team. The parallel here is with QantasLink. The Skywest deal requires shareholder approval, and also won't be complete until June 2013. Skywest and Virgin already have a partnership to co-ordinate flights.
All this doesn't mean you can't get cheaper flights with the "premium" carriers. Planning is the key; check out our tactics for finding cheap flights for more specific ideas, and remember to examine baggage charges carefully.
Lifehacker Australia editor Angus Kidman really needs to try Skywest at some point. His Road Worrier column, looking at technology and organising tips for travellers, appears each week on Lifehacker.