[EDITOR'S NOTE: To read more about the FIFO market, read our Ground Support Worldwide International feature published last October.]
Virgin Australia will inject $8 million into alliance partner Skywest as the two airlines boost their services to mining companies in Western Australia and Queensland.
Yesterday, Virgin's chief financial officer, Sankar Narayan, said Skywest would use the funds to grow the turboprop services it operates on behalf of Virgin, which are targeted at resource-rich regions such as Emerald and Gladstone in Queensland.
The Australian Competition and Consumer Commission has proposed to approve an alliance between the carriers that will allow them to offer an integrated service to the corporate market.
"This is about getting the two businesses closer after the regulatory approval last week," Narayan said. "This is to fund the [turboprop] growth. We want to make sure that our partner and us have an unconstrained ability to grow that business. If we are working together, then we might as well be part of the equity upside."
He said there had been no discussion about the two companies undertaking a full merger.
Virgin's international strategy has focused on partnering with carriers including Singapore Airlines and Etihad Airways to build a long-haul network without the expense of adding new aircraft.
Domestically, it forged an alliance with Skywest to tackle the regional and fly in, fly out (FIFO) market in which Qantas holds the lion's share of corporate accounts and business from regular passengers.
Qantas is beefing up its capacity in the FIFO sector and on key resources routes. It plans to increase its dedicated FIFO fleet beyond the 12 aircraft it will have in place by the end of the year.
Skywest will operate flights using Virgin's brand and livery on the inside and outside of the aircraft.
"It's a tighter and deeper relationship with SkyWest," said Narayan.
"It seems natural for us to partake directly as Virgin and also as an investor of Skywest. It's also pretty hard to get a meaningful chunk of Singapore [Airlines]."
Virgin said it had grown its regional operations "significantly" since it started the joint service with Skywest in October.
It said its fleet of four ATR turboprop aircraft would increase to 12 by the end of the 2013 financial year.
In a separate statement, Skywest executive chairman Jeff Chatfield said the company expected revenue from its joint business with Virgin to exceed that from his airline's legacy passenger business by the end of the year.
Chatfield said the investment highlighted Virgin's confidence in Skywest and "our ability to tap into future growth opportunities in the Australian regional market".
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