I don’t think this should surprise anyone given how industry dynamics are evolving, but Virgin Australia and Etihad Airways plan to end their longstanding partnership.
Virgin Australia & Etihad cutting ties as of June 2025
As of June 1, 2025, Virgin Australia and Etihad Airways intend to fully discontinue their partnership. With this, we’ll see the airlines end their frequent flyer reciprocity, codeshare agreement, and even interline agreement. Those with travel already booked as part of this arrangement will see no changes to their travel plans.
Etihad has been flying to Australia since 2007, and has had a partnership with Virgin Australia dating all the way back to 2010. In 2012, Etihad even bought a stake in Virgin Australia, which was back when Etihad was actively pursuing its strategy of investing in foreign carriers to build its own global alliance, which ended horribly.
Etihad’s stake in Virgin Australia went to zero when the airline entered voluntary administration in 2020, as the company is now under new ownership.
So, why would Virgin Australia and Etihad end their partnership, when it feels like this should be mutually beneficial? Keep in mind that Qatar Airways is in the process of buying a 25% stake in Virgin Australia.
Qatar Airways has quite the ambitious goals for this partnership, as Qatar Airways hopes to help Virgin Australia resume long haul flying, by operating wet leased flights between Australia and Doha, to get around the current flight limits that exist with the bilateral agreement.
As part of this agreement, Virgin Australia has committed to having Qatar Airways be its sole partner in the Middle East. Historically, Virgin Australia has gladly partnered with a bunch of foreign airlines, given that it just generated extra business for the airline, with limited direct competition. However, clearly the airline is now pursuing a new strategy.
This will leave Etihad without a partner in Australia
The Australian aviation market isn’t all that competitive, at least on the domestic side. You have Qantas, which belongs to the oneworld alliance, and has a close partnership with Emirates. Then you have Virgin Australia, which has historically partnered with a variety of airlines, but which is now working more exclusively with Qatar Airways.
In terms of connectivity within Australia, this makes the situation quite tricky for many airlines. Etihad flies to Melbourne (MEL) and Sydney (SYD), but will struggle with connectivity within the country. I can’t imagine Qantas wants to work with Etihad, and now the carrier’s partnership with Virgin Australia will end.
So, what does that leave? Rex was starting to grow quite a bit in Australia, but was losing too much money, and has now entered voluntary administration, and dumped its Boeing 737s. The airline no longer has a substantial network within Australia, aside from small markets.
Admittedly most traffic to Australia is to the major markets served directly by Etihad, but still, this does seem like it presents a new challenge for the airline.
Bottom line
Virgin Australia and Etihad intend to discontinue their partnership as of June 2025. The airlines have partnered for years, and Etihad even used to own a stake in Virgin Australia.
This development comes as Qatar Airways is purchasing a stake in Virgin Australia, with the intent of Qatar Airways being Virgin Australia’s only partner in the region, and Virgin Australia even potentially resuming long haul flights.
This development doesn’t come as much of a surprise. It’s just interesting how early this is being announced, before the Qatar Airways investment has even been finalized. It also puts Etihad in a tough spot when it comes to connectivity within Australia.
What do you make of Virgin Australia and Etihad cutting ties?
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