Qantas has inked an alliance agreement with Middle Eastern rival Emirates aimed at stemming the Australian airline's losses on the highly competitive route between Australia and Europe.
After months of negotiations and endless speculation, Qantas today unveiled the terms of a 10-year alliance with Emirates on routes to Europe via Dubai, due to begin next
The two carriers plan "a new global aviation partnership", promising customers "a seamless international and Australian network, exclusive frequent flyer benefits and world‐class travel experiences."
"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,’’ said Qantas chief executive, Alan Joyce, in a statement. ‘‘It will deliver benefits to all parts of the group.
As part of the deal, Qantas will shift its hub for European flights from Singapore to Dubai and enter "an extensive commercial relationship" with Emirates.
Neither airline will hold shares in the other, but instead will focus on building an "integrated network", including coordinated pricing, sales and scheduling, the carriers said in a statement.
The arrangement, which requires approval from the Australian Competition and Consumer Commission (ACCC), is expected to start in April next year.
Qantas shares got an early lift on the confirmation of the tie-up, rising as much as 6 cents, or 5.3 per cent, to $1.185.
Final talks
The Emirates chief executive, Tim Clark, arrived in Sydney yesterday for the final negotiations with his counterpart, Qantas's Mr Joyce.
The deal is heralded as a significant breakthrough for Qantas, which has been struggling to revive the fortunes of its international flying operations.
‘‘Together with Emirates, Qantas will provide a unique one-stop hub service, as well as deeply integrated frequent flyer and customer benefits,’’ Mr Joyce said.
Under the deal, Qantas will fly daily Airbus A380 services from both Sydney and Melbourne to London via Dubai. Between the two airlines there will be 98 weekly services between Australia and Dubai.
BA agreement ends
However, the pact will see the demise of Qantas's longstanding revenue-sharing agreement with British Airways on the so-called kangaroo route between Australia and Britain.
Qantas will terminate its agreement with BA from March 2013 as a result of the Emirates deal. The British Airways agreement began in 1995.
‘‘Over the past 17 years, the joint business with British Airways has been central to the Qantas network,’’ Mr Joyce said.‘‘However, global operating conditions have changed and partnership with Emirates is the right strategy for Qantas.’’
Qantas says it will not have to leave the Oneworld alliance of carriers. The changes, though, will also see Qantas ditch its codesharing agreements with Cathay Pacific and Air France.
Deal value
Macquarie Equities's transport analyst, Russell Shaw, has estimated the value to Qantas of a code-share alliance with Emirates at as much as $90 million a year in pre-tax earnings.
He described a tie-up with Emirates as the "missing piece in the earnings bridge" for Qantas in helping to turn around its premium international operations, which lost $450 million in the year to June.
Despite the deal with Emirates, Mr Shaw said Qantas still faced challenges in the medium term in improving its network in Asia to help it to compete against Cathay Pacific and Singapore Airlines.
Qantas also faces a short-term hit to its earnings in the domestic market in the current financial year as it seeks to repel the challenge of Virgin Australia. The latter is seeking to grab a bigger share of the lucrative corporate travel, which Qantas has dominated since Ansett's collapse in 2001.
It is not the first time Qantas has courted a relationship with the Middle Eastern airline, which is renowned for its desire to go it alone. Qantas did form a code-share agreement with Emirates in the 1990s but abandoned it a short time later.
After months of negotiations and endless speculation, Qantas today unveiled the terms of a 10-year alliance with Emirates on routes to Europe via Dubai, due to begin next
The two carriers plan "a new global aviation partnership", promising customers "a seamless international and Australian network, exclusive frequent flyer benefits and world‐class travel experiences."
"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,’’ said Qantas chief executive, Alan Joyce, in a statement. ‘‘It will deliver benefits to all parts of the group.
As part of the deal, Qantas will shift its hub for European flights from Singapore to Dubai and enter "an extensive commercial relationship" with Emirates.
Neither airline will hold shares in the other, but instead will focus on building an "integrated network", including coordinated pricing, sales and scheduling, the carriers said in a statement.
The arrangement, which requires approval from the Australian Competition and Consumer Commission (ACCC), is expected to start in April next year.
Qantas shares got an early lift on the confirmation of the tie-up, rising as much as 6 cents, or 5.3 per cent, to $1.185.
Final talks
The Emirates chief executive, Tim Clark, arrived in Sydney yesterday for the final negotiations with his counterpart, Qantas's Mr Joyce.
The deal is heralded as a significant breakthrough for Qantas, which has been struggling to revive the fortunes of its international flying operations.
‘‘Together with Emirates, Qantas will provide a unique one-stop hub service, as well as deeply integrated frequent flyer and customer benefits,’’ Mr Joyce said.
Under the deal, Qantas will fly daily Airbus A380 services from both Sydney and Melbourne to London via Dubai. Between the two airlines there will be 98 weekly services between Australia and Dubai.
BA agreement ends
However, the pact will see the demise of Qantas's longstanding revenue-sharing agreement with British Airways on the so-called kangaroo route between Australia and Britain.
Qantas will terminate its agreement with BA from March 2013 as a result of the Emirates deal. The British Airways agreement began in 1995.
‘‘Over the past 17 years, the joint business with British Airways has been central to the Qantas network,’’ Mr Joyce said.‘‘However, global operating conditions have changed and partnership with Emirates is the right strategy for Qantas.’’
Qantas says it will not have to leave the Oneworld alliance of carriers. The changes, though, will also see Qantas ditch its codesharing agreements with Cathay Pacific and Air France.
Deal value
Macquarie Equities's transport analyst, Russell Shaw, has estimated the value to Qantas of a code-share alliance with Emirates at as much as $90 million a year in pre-tax earnings.
He described a tie-up with Emirates as the "missing piece in the earnings bridge" for Qantas in helping to turn around its premium international operations, which lost $450 million in the year to June.
Despite the deal with Emirates, Mr Shaw said Qantas still faced challenges in the medium term in improving its network in Asia to help it to compete against Cathay Pacific and Singapore Airlines.
Qantas also faces a short-term hit to its earnings in the domestic market in the current financial year as it seeks to repel the challenge of Virgin Australia. The latter is seeking to grab a bigger share of the lucrative corporate travel, which Qantas has dominated since Ansett's collapse in 2001.
It is not the first time Qantas has courted a relationship with the Middle Eastern airline, which is renowned for its desire to go it alone. Qantas did form a code-share agreement with Emirates in the 1990s but abandoned it a short time later.
