Etihad Airways, which has a minority stake in Virgin Australia Holdings, is in discussions with the carrier to boost their partnership.
The airlines continue to see strong commercial benefits from the alliance, particularly on the joint codeshare agreements on each other's networks, Peter Baumgartner, Etihad Airways' chief executive, said in a statement to The National.
"Together we continue to explore areas of potential expansion for both strategic and operational synergies," he said.
The third-biggest Arabian Gulf carrier, which had purchased a 20 per cent stake in Virgin Australia in 2012, is currently undertaking a company-wide review of its global business. Etihad restructured its business over the past year but is yet to reveal details of its future plans. The airline will adopt a "strategic" approach to expansion and future collaborations after pulling out of its investments in Alitalia and Air Berlin, Tony Douglas, Etihad Aviation Group's chief executive, said in April.
The alliance between Etihad and Virgin Australia is “ongoing” and the airlines held talks on the sidelines of the International Air Transport Association meeting in Sydney last week to discuss further co-operation, Rob Sharp, Virgin Australia group executive, said.
“We were talking about things we can do to continue to enhance that relationship,” Mr Sharp said. “For us, the demand from Australia over to Abu Dhabi, and likewise back, is strong, the relationship is very sound.”
Virgin Australia, which counts among its other shareholders Singapore Airlines and China’s HNA Group, is also watching out for the jump in fuel prices and rising airport fees in Australia.
“The whole industry cost base is rising and the timing of it depends on your hedge profile,” he said. “The infrastructure is another cost rising quite dramatically particularly here in Australia so we’re looking at how to manage that.”
Rising costs will not necessarily mean a spike in air fares because prices depend on competition and seat capacity in the market, he said.
"We're closely monitoring it because clearly two major costs are increasing and at some point that will start to impact our decision making," Mr Sharp said. "There's no one answer for that except there is growing pressure on the industry."
The airline’s international growth plans are focused on North America and China and leveraging its alliances in Singapore, Hong Kong and Abu Dhabi, Mr Sharp said.
Etihad will halt its flights to Perth in western Australia from October 1, as part of an ongoing review of its network performance, the airline said in April.