In this harem, who'll fly away with the bride?
"What are the risks of not investing?"
VIRGIN Australia's John Borghetti has amassed quite the airline harem - among them Air New Zealand, Singapore Airlines, Etihad and Delta. But it is one that he now has to delicately manage and keep happy.
And right now they are engaged in a dance of the seven veils looking to improve their position in the pecking order. In a corporate sense it means that all but Delta are seen as likely contenders to buy up to the maximum allowable shareholding in Virgin Australia of 19.9 per cent.
Air New Zealand is already there but industry experts reckon it is only a matter of time before the Singaporeans and the aggressive Middle Eastern carrier move up from about the present 10 per cent to that threshold.
There was lots of speculation on Monday that Delta might be jockeying to buy a stake in Virgin Australia - but it is probably misplaced. Delta is trying to snatch Singapore Airlines' 49 per cent of Virgin Atlantic but like most US airlines it is more interested in the trans-Atlantic routes than getting too involved in Australia where it operates a limited service.
The players that have staked a real claim in the Australian market are the remaining three who, in the past year, have demonstrated that they are keen to back up their airline business partnerships/joint ventures/expanded code shares with Virgin by taking shares in the Australian airline.
The question remains: Why do they need to intensify these operational links to Virgin Australia by acquiring shares.
As a pure investment play - which normal shareholders would undertake for dividend yield or capital gain - it doesn't stack up. So that can be scratched off the investment criteria list.
There are plenty of historical examples of airline alliances being accompanied by investments but few of this size.
Delta and Singapore Airlines had cross shareholdings but there is no evidence of any real gain. British Airways bought a holding in its partner Qantas but again it served a questionable purpose.
Qantas' new would-be alliance partner, Emirates, has stated clearly that it will not invest in the Australian airline's stock.
In the case of Virgin Australia the partner grab for equity smacks of a bit of game theory. Rather than what it is worth for them to invest, it should be viewed as, what are the risks of not investing?
Certainly having a significant equity stake in Virgin may provide them with some input into the strategy. But it's more a case that if one takes a stake the others may be disadvantaged by not being in the equity game.
Virgin's Borghetti has played it cleverly to date by not allowing representatives from any of Virgin Australia's partner airlines on the board. They have bought into the tent but not the board table.
To have allowed all these airlines onto the Virgin Australia board would lead to an untenable management by committee.
The exception to this is Richard Branson whose stake is now 26 per cent. He has been viewed as a potential seller for years but with a price expectation that no one has met. Branson is an established entrepreneurial business creator and trader using this Virgin brand. Thus he is also the wild card.
So if Etihad, Singapore Airlines or Air New Zealand wish to agitate using their Virgin Australia shareholdings they will cancel each other out.
They could act as a block to exercise control but this would happen only if Borghetti is seen to be taking the wrong strategic path, and there is no evidence of this to date. If all take their stakes to 19.9 per cent they will all be able to exercise negative control - block strategy rather than set it.
And when it comes to business relationships/partnerships the international aviation industry is one of the most complicated. It is an ever-changing matrix with master groups such as the Star Alliance and Oneworld being moved and stretched as member airlines divorce and form new bilaterals.
In a sense Borghetti has broken the mould in forming partnerships to create a high-end but low-cost virtual airline that feeds into the domestic base in Australia.
Its bilateral agreements with each of the major partners form a radial pattern with Virgin in the centre.
That seems simple enough but it doesn't stop there. Each of Virgin Australia's partners have deals with other airlines.
How far these tentacles can extend is a moveable feast. For example, can Virgin use Etihad to get ''behind the gate'' (in other words feed into the domestic routes) in Germany where the Middle Eastern airline has a 30 per cent stake in Air Berlin?
Strange as it may seem, being able to, for example, book a Virgin flight into a town in Germany, may be closer than you think.
My Qantas flight a few weeks ago to the New South Wales regional town of Wagga was marked as a code share with British Airways and the adjacent gate was a BA code share to Armidale.