Garuda Indonesia and Singapore Airlines, the flag carriers of Indonesia and Singapore, respectively, have been granted a conditional approval by the Competition and Consumer Commission of Singapore to start a joint venture on flights between the two countries and more. All that is left for the two airlines is a go-ahead from the Indonesian Commercial Competition Supervisory Commission (KPPU). Even so, Indonesian media has reported that the KPPU is expected to green-light the joint venture before the new President is inaugurated in October. This brings the two traditional rivals closer to the coordination of flight schedules and fares between several routes, which include the following:

As a point of reference, both airlines already have existing services between Singapore and Jakarta, Bali, and Surabaya. Since Garuda Indonesia does not currently have services in the remaining routes, it would be safe to assume that Singapore Airlines will operate the remaining services as codeshare flights.

This arrangement is expected to benefit Garuda Indonesia given Singapore Airlines’ dominant position in the aforementioned routes. After all, the Indonesian flag carrier has historically lagged on these flights, whether in its offering or having satisfactory flight loads. The joint venture will allow the two companies to effectively compete as one airline, eliminating any existing competition.

Reciprocal Benefits

Apart from schedule and fare coordination and revenue sharing, the joint venture is expected to introduce reciprocal frequent flyer benefits between GarudaMiles and Singapore KrisFlyer. So far, all that has been announced merely covers earning and redemption opportunities on codeshare flights between the two airlines.

It would be interesting to see if the two airlines will pursue a closer relationship in providing reciprocal benefits for frequent flyers. For instance, we’ve seen Qantas and China Eastern offering their elite frequent flyers lounge access on codeshare flights operated by the other party. For one, it would be very exciting to see Garuda Indonesia Business Class passengers being directed to the SilverKris Lounge in Singapore. On the other hand, Singapore Airlines already operates its own lounges in Jakarta.

This Can’t Be Good for Consumers

Garuda Indonesia and Singapore Airlines are the only two full-service carriers servicing Singapore – Jakarta and Singapore – Bali. Well, that is if you don’t consider Batik Air to be a full-service carrier (which is an argument for another day). In any case, this joint venture effectively destroys the rivalry of Garuda Indonesia and Singapore Airlines on flights between Indonesia and Singapore.

The joint venture effectively establishes a duopoly on full-service flights between the two countries. This is particularly the case given how low-cost carries like AirAsia, Jetstar, Citilink, and Scoot operate in vastly different market segments to these two airlines. I’d expect fares to rise further as a result.