The oft rumoured deal between Air Asia and Virgin Australia Group for the creation of an ultra LCC in the Oz market seems to be as dead as the Dodo.

On Wednesday ATW is predicting that Air Asia and Jetstar will form a partnership initially marketing based but over time it will morph into a bigger arrangement.

Comprising shared resources - virtual code sharing is expected to be the first fruits of the agreement giving the two carrier groups the opportunity to expand reach within the Asia/Oz market one of the fastest growing segments in the region.

With Air Asia X is now serving 3 destinations in OZ - Gold Coast, Perth and Melbourne. Jetstar is already well entrenched in Singapore through its Jetstar Asia and Jetstar Vietnam affiliates. Surprisingly there is little overlap between the two companies.

Now will this be a marriage of convenience or simply a series of marketing based dates? There are some basic issues that will need to be addressed. Qantas (Jetstar's parent) has been in league with Singapore interests who are not necessarily aligned with Air Asia. Air Asia X is making inroads into QF's long beloved Kangaroo route. A daily (now conventionally timed) flight on A330-300 aircraft is a fair number of daily seats to KUL. Does this also indicate a pulling back by QF from its relationship with BA?

For Virgin this reduces the options open to them. They are now looking westwards for their relationship with Delta to matter. If JAL and Delta come to an agreement then we could speculate that Virgin could become a fully fledged member of Skyteam - marking its transition from LCC to Full Service Carrier. Its already hynrid enough!

Cheers
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