Emirates and Qantas sign 10-year-deal as Aussies move in to T3
Qantas is to move its hub for European flights from Singapore to Dubai as part of its new partnership signed with Emirates today.
The 10-year-deal between the Gulf carrier and the ailing Australian national carrier brings to an end Qantas’ 17-year alliance with British Airways. The Australians hope the move will boost its struggling international division.
Starting next April, the move sees Emirates and Qantas coordinating on ticket prices and scheduling and there will be a benefit-sharing model. The deal is still subject to regulatory approval.
Qantas will be the only airline other than Emirates to operate out of Dubai Airport Terminal 3. The two airlines will jointly operate 98 weekly flights between Dubai and Australia, including four daily A380 flights
Emirates stuck to its decision not to take an equity stake in the Australian airline. It’s major UAE competitor, Etihad, has taken 10% equity in Virgin Australia. Both Gulf airlines will now be able to offer wider Australasian destinations to global customers.
"The time was right for developing a long term, future forward partnership with Qantas," Emirates airline President Tim Clark said in a statement. "Since our first flights began in 1996, Australia has long been a popular destination for Emirates leisure and business travellers, making it one of the top three destinations in our network."
"By establishing this partnership we are providing our passengers with additional connectivity in Australia and the region and the ability to utilise enhanced frequent flyer benefits and have access to premium lounges," he said.
Qantas had been a long-term critic of the expansion of the Gulf carriers into its home market and the airline’s international division was already suffering from a number of factors.
Last month, the airline reported a 245 million Australian dollar ($249 million) annual loss and blamed the result on rising fuel prices, a series of worker strikes. This was the first time the airline had reported a loss since it was privatised in 1995. The blame was laid on the international division, which lost AU$450 million ($465million)
Qantas believes that the alliance with Emirates and its new-generation business model could make the difference. "This is the most significant partnership the Qantas Group has ever formed with another airline, moving past the traditional alliance model to a new level," CEO Alan Joyce. "A key objective is to make Qantas International strong and viable, and bring it back to profitability," Joyce told reporters. "This partnership will help us do that."
Commenting on this morning's deal, analyst Saj Ahmad said: "Emirates deal with Qantas is significant in several ways. Aside from allowing Qantas to use the custom built Terminal 3 building in Dubai, that Qantas is now routing its key Sydney and Melbourne connections through the city proves that Emirates competitive edge has forced the ailing Australian airline into joining a partnership that is being driven entirely by Emirates management team.
“That demonstrates just how effective Emirates has been in the last decade or so at providing services to Australia as well as getting Qantas to open up its first GCC connection. The lack of a GCC destination was always a chink in Qantas' battle plan and frankly, anyone who doesn't operate to the GCC is not just missing out - they leave themselves vulnerable to the huge competitive edge that Emirates has. Qantas has learnt this lesson the very hard way.
“The integration of their frequent flier programs, the use combined usage of A380s as well as sharing Terminal 3 in Dubai will allow for much greater connectivity options for customers - especially when you look at how broad Emirates' global network is compared to Qantas. Qantas customers will be spoilt for choice and will likely leave Qantas in droves, much to Emirates delight.
By breaking off its deal with British Airways, the UK flag carrier is now on the rack. It has lost a long-time partner in Qantas on the fabled Kangaroo-route and now faces the spectre of even more competition in Dubai given that Qantas will fly there too from its key Sydney and Melbourne hubs.
“Of course, if BA were smart, they too would join Qantas and Emirates but whether they do so is unclear as it would leave the oneworld alliance in disarray - it's unlikely BA or Qantas could ever convince Emirates to join since the Arab carrier has often stated that it is not interested in joining any of the global alliances. And frankly, it doesn't need to.
“Either way, this strategy says more about how Emirates has forced Qantas into submission than it does about Qantas surviving in the future. With questions abound about Qantas' weak global strategy, this move will not allay fears for investors who will rightly question why Qantas didn't move sooner to partner up with Emirates when it was clear years ago that they could never compete directly."