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Chalk Up Another Win for the Star Alliance

Winners and losers weigh in as Branson sells stake in Virgin Atlantic to Singapore Airlines.

While the last two weeks of the year in the airline industry are traditionally low on news and high in passenger boardings, this year the reverse has happened.

Passenger boardings, as we warned last month, have fallen off the revenue cliff.

We aren't talking the Y2K thing here, which makes folks afraid that airplanes are going to fall out of the sky at the stroke of midnight Jan. 1. We're talking pre-Christmas bookings that were as soft as Santa's billowy white beard.

This year, you could easily have called your friendly airline three days before Christmas and found a ticket to Grandma's -- and not a high-fare ticket. In most cases, it would have been a low-fare, almost, dare we say it, a


ticket. We flew on what should have been an extremely busy day for the industry -- the Tuesday before Christmas -- and planes were less than half full.

No one really has an explanation. But look for the effect to be striking on this month's unit-revenue-per-available-seat-mile figures.

And if you think January is going to provide relief to these abysmal numbers, think again. Our sources who have looked at January's bookings say the numbers are exceptionally soft right now.

On the other hand, while this is usually a black-hole period for noteworthy industry news, this year it has been just the opposite. Quite a few things have come out lately -- the most significant being the announcement last week by Richard Branson, chairman of

Virgin Atlantic Airlines

, that he had sold 49% of his flagship airline to

Singapore Airlines


This move has some pretty wide-reaching ramifications for more than one airline.

First, the alliance between Virgin Atlantic and Singapore represents a very direct competitive threat to

British Airways

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. The pairing of Virgin Atlantic's legendary Upper Class service and Singapore's equally excellent reputation for passenger service creates an extremely formidable European/Asian connecting network for the high-yield international passenger.

We like this alliance. Virgin gets roughly $960 million of capital, and the deal pairs two very similar airlines in terms of passenger-service philosophy. On top of that, the airlines' route systems mesh extremely well.

Meanwhile, in Australia, shares of Australian flag carrier

Qantas Airlines

hit a new 11-month low last week on the news of the new alliance.

The stock had already been hit hard two weeks ago, when Branson announced the launch of

Virgin Australia

, a new Australian low-fare domestic carrier. Qantas and domestic carrier


have long held onto a quasi-monopolistic fare structure inside Australia. Branson's new venture, which is slated to begin operations early next year, and which is being strongly supported by the Australian government, promises headaches for Qantas.

The Singapore/Virgin deal doesn't help matters. Not only does this news directly affect Qantas, it also hits British Airways, which owns 25% of Qantas and is partners with it in the

Oneworld Alliance

. The Singapore/Virgin alliance is a blow to Oneworld. No doubt about it.

Closer to home, a domestic airline also loses with this alliance. Although the impact is not as obvious as in the case of British Airways or Qantas, it's just as significant -- if not more so.

Over the past several months, we've received indications that

Delta Air Lines


had the inside track to bring Virgin into its fledgling still-unnamed alliance with

Air France

. From what we had understood, this deal -- much like the deal with

British Midland

that got away -- was, in the words of one person close to negotiations, "Delta's to lose."

Well, it appears that this one is now history.

Why? Simple. Singapore Airlines is one of the newer members of the Star Alliance -- the



United Airlines



-based Star Alliance.

We find it hard to fathom that Branson would enter into such an agreement with Singapore, which is a member of Star, thinking he was then going to couple with Delta in some form or fashion.

We just don't think that one is going to fly, as they say.

So, the winners in this holiday commingling of the airline titans? Virgin, Singapore, United, Lufthansa and the Star Alliance.

And the losers? British Airways, Qantas, Delta, and the



American Airlines

/British Airways-backed Oneworld Alliance.

Holly Hegeman, based in Barrington, R.I., pilots the Wing Tips column for At time of publication, Hegeman held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at While she cannot provide investment advice or recommendations, she welcomes your feedback at