Wednesday September 03, 2014

ACCC gives draft approval for Qantas/Emirates

As Emirates climbs on news of the draft approval, Virgin will be steeled to compete vigorously against the partnership. (Seth Jaworski)

The Australian Competition and Consumer Commission (ACCC) has given draft approval to the proposed Qantas-Emirates partnership.

The approval, granted for five years of the planned 10-year arrangement between the airlines, will allow Qantas and Emirates to coordinate pricing, sales and capacity.

Qantas CEO Alan Joyce said the draft determination was “an important step towards delivering a better travel experience for millions of customers”.

He added: “Our customer research has shown very strong support for the Qantas and Emirates partnership, particularly in terms of increasing one-stop access to Europe, cutting travel time and offering frequent flyer benefits. We will now focus on responding to the issue raised by the ACCC in relation to the trans-Tasman as we move to securing final approval of this landmark partnership.”

Emirates’ CEO Tim Clark said with Australia being one of the top three destinations in the Emirates network, “the partnership with Qantas means we can add regional destinations like the Gold Coast and Hobart to the growing list of places we offer Emirates customers worldwide”.

Since lodging the application, both airlines have been preparing elements of the arrangements that have not required formal approval, such as connecting IT systems, frequent flyer reciprocity and establishing an operational base in Dubai for Qantas.

The federal government, the state governments of Victoria and Queensland, Australian Tourism Export Council and the National Tourism Alliance have all thrown their weight behind the application, for which final determination from the ACCC is due on the eve of the partnership starting in March.

Meanwhile, Virgin Australia’s proposal to acquire a 60 per cent stake in Tiger is coming under strong scrutiny from the ACCC, which considers the resulting removal of Tiger as a competing airline in the domestic market as a tangible negative needing close consideration.  The ACCC’s focus will be to determine whether there is an over-riding benefit in Virgin Australia’s acquisition of Tiger resulting in improved competition in the domestic market.

Comments

12 Responses to “ACCC gives draft approval for Qantas/Emirates”
  1. Mary says:

    Bring back Geoff Dixon. He may have been a hard man to deal with but atleast he didn’t give away Qantas’ flying to a desperate deal. Emirates are never going to allow Qantas to serve other cities onwards from Dubai other than London. Why would they ad an aircraft with the flying kangaroo when they could just add another one of there own.

    I get that QF international is struggling but this has got to be the worst alternative.

    Joyce took the easy way out: he didn’t find this deal – Tim Clark came to him.

    And as for the Virgin and Tiger deal. I don’t think it will reduce competition a great deal. It will just force Tiger to be a more sensible player.

    On the other hand if it isnt approved, I can’t see Tiger sticking around in Australia for much longer.

  2. Mark says:

    I wish we could replace Alan Joyce with retired CEO Air NZ Rob Fyfe… or anyone else who is currently available for that matter. AJ has sold QF short and to EK does not lessen the situation. EK will plunder what is left of QF International. What will happen is that AJ, one way or another, will be removed from his position and he will leave with a golden parachute and QF will be left like a lame duck for the rest of the Asian companies to be picked apart – SQ, CX and even Virgin!

  3. Mark (different to above) says:

    As a regular flyer to Europe and with Qanats, I do not like this move at all. They are forcing us through Dubai with no Qantas alternative. I flew to London last week via Singapore (QF) and cannot believe they are abandoning this transit hub!! Not impressed with the little Irish man at all. SIA are rubbing there hands knowing the extra passengers they are going to get in 2013 and beyond and are already anticipating this by adding capacity.

  4. Patrick Kilby says:

    Mary and Mark there is one thing you forget and that is Emirates has problems with traffic rights in Europe, which Qantas has but not the capacity. It makes sense for QF to fly places it has rights to and Emirates does not e.g Berlin for starters. I can see QF A332s and 789s going to these places with Emirates code shares. Makes a lot of sense. There is a mutuality here that people are not aware of. Note Virgin is happy to do deals, but somehow QF is not allowed to hmmmm!. Next will be a deal with China Eastens in China and again there will be squeels of sell out etc. Alliances are now the way for all and sundry, and that is the way of the world

  5. Mary says:

    There is no uproar about Virgin because they do not essentially have their own international network. Qantas is a sell out. And more and more Australians will lose jobs with Qantas as they allow carriers like Emirates to take over their routes.

    I find it hard to believe Emirates finds it hard to get traffic rights in Europe but yet they have the largest network?

    And QF 787′s? Last I checked the all wise and all knowing Alan Joyce has cancelled them and only left the company with options….. And that’s exactly what they are. They will never be obliged to take them.

  6. Brenton says:

    Mary – Clearly you have an unreasonable bone to pick against QANTAS.

    The overwhelming majority of aviation and business analysts have commented that the QF-EK deal is beneficial for QANTAS. One major complaint for QF customers and a major competitive negative is that they need to backtrack through LHR to get anywhere in Europe outside of CDG, FRA, FCO and HEL. This will now majorly change. There is no way QF could fly to that many European ports (even when QF was very strong 15-20 years ago they did not – remember those ‘closed skies’ days?)

    So in your opinion Virgin can have a ‘virtual network’ but QANTAS can’t… that makes no sense. If Virgin gets another 15 B777′s should they have to cease their partnerships because they have enough planes to have their own international routes? In any case, the only route being canned and handed over to EK will be Frankfurt in Oct 2013. Even without EK, QF intended to ditch this route as it losses them money. Will further routes be dropped in the future for EK? Possible, but in my opinion the only practical route to drop is Aus-South Africa and I think thats unlikely – but possible.

    The fact is that QF has extremely high labour costs in comparison to its competition – particularly is Asian neighbours. This is not the unions fault or QF’s, it just a fact that our wages are high in comparison to other countries… in the global aviation industry this has major impact on your business. It was time to for QANTAS to deal with it.

    You hard it hard to believe EK have issues with traffic rights in Europe? Well, you better go and do your research. The Germans won’t let them fly to anymore cities and as Patrick has stated EK wants to fly to Berlin but they are not allowed too. The Canadians have also restricted them to Toronto.

    Joyce has many flaws… he just cannot relate to the public is one of them. But I give him massive credit for actually trying to fix some major structural issues with QANTAS. He may not be doing everything I think he should and some things I don’t agree with, but he is at least tackling the issues and not sticking his head in the sand and continuing with the same.

    I just wish QF could get on with CX better -because it will be a massive coup for Virgin if CX is announced as their Virgin’s North Asian partner.

    And finally, what is with everyone saying QF should hire ex Air NZ CEO’s? They have long-haul profitability issues like QANTAS and are also dropping some long-haul routes.

  7. Tom says:

    Oh Mary, Mary, Mary…

    What does it matter whether Qantas has it’s own international network at all?? Qantas will be expanding it’s network into Asia. Qantas cannot currently operate profitably into Europe on it’s own – this is well established – which is why it partnered with an airline with truly global reach that can operate profitably. Once the true synergies of this partnership are realised – and Qantas International is returned to profitability -, we may, as Patrick so ably mentioned, see Qantas operate additional services to Europe. The airline has mentioned on numerous occasions that they would like, with the benefit of an Emirates codeshare return to continental Europe.

    Just because Emirates has a large network doesn’t mean they have unlimited traffic rights. The Germans and Canadians have significantly restricted Emirates’ access into those markets. It is possible that Qantas could operate services into Germany, for example, without those restrictions but with an Emirates codeshare attached, thereby benefiting from the huge scale of the Emirates network.

    You are right indeed when it comes to the QF 787′s, but who honestly thinks that Qantas won’t eventually take them?? Hmmm? Not even the most negative analyst thinks so. Whether domestically or internationally, Qantas and the 787 have a bright future together. The whole purpose of cancelling those orders was to save cash NOW and significantly improve their balance sheet for the next few years. Those options (and very attractively priced ones too, if the rumours are correct) won’t have to be exercised until at least 2014, by which time Qantas International should be a profitable venture and ready to take them.

    In the meantime, I would expect that in addition to the reconfigured A330′s that will come from Jetstar, Qantas International will lease some more A330′s on a short to medium term basis to begin expanding into the huge and potentially very profitable Asian markets.

    Regards

  8. Steven says:

    Tom,

    Well we shall see within the next few years whether what Joyce promised will go ahead. I believe (like the majority of people I know who work with Qantas) that none of this will eventuate.

    As Mary pointed out. This deal wasn’t created by Joyce. It was created by Tim Clark. And with a large amount of A380s and 777s on order I can’t see Qantas getting their 787s anywhere near European routes through Dubai.

    And what makes you think it would be so easy for Qantas to acquire those routes? They too may have the same issues Emirates have had. Maybe if QF flew from Aus to Canada etc they would not have an issue but through Dubai is another story.

    That said. By the time QF receive their 787s(if they ever do) this deal will probably be five years old and Emirates may well have rights to those ports by then.

    Regards

  9. William says:

    The 787s were for Jetstar and the domestic trunk routes I thought? Qantas will never fly the 787 internationally as the A380 has a larger capacity and a lower seat/mile cost on the longer int’l routes. The 788 only holds 250 people dependant on layout, so it might be good for Jetstar on its Asia routes but it will never fly to Europe or the US.

  10. Patrick Kilby says:

    Just on the issue of rights QF already has the rights to those places in Europe that is why Tim Clarke wanted the deal; and yes 789s will fly long discance and that is why A332s are being are being given HGW versions and also expected also to fly long distances otherwise why give 789s an 8,000+m range. Brisbane or Perth Dubai and onwards in a 789 is not that dumb an idea. Getting nealry $200m compensation for delaying the 787 by one year (from 2015 to 2016) was well worth cancelling those orders, but keeping the options and bringing them forward 2 years. I can’t work out why people think that was dumb.

  11. Tom says:

    Hi Steven,

    I, unlike you, have healthy doses of optimism. This may (Note: MAY) be an excellent opportunity for Qantas to re-expand back into Europe. If Qantas is to succeed it needs positivity from everyone in Qantas – which obviously includes the employees.

    What the hell does it matter who created the deal??? The deal is far more beneficial for Qantas than most people think. Qantas has unlimited rights to fly through Dubai (like any airline). If Qantas want to fly their 787′s through Dubai, there is NOTHING Emirates can do to stop them. In all likelihood, Emirates would encourage them to do so…especially if they can fly additional services to destinations that are capacity constricted.

    In regards to your comment about Qantas acquiring those routes…if Australia has capacity and right to fly to places like Germany (we do, not sure of the specifics) Qantas or any Australian airline can fly them starting tomorrow. Germany can’t prevent it, nor can Emirates. Emirates only have these issues because of the protectionist aviation policies of the governments.

    I am one of those people (call me a cynic) who believe that Germany and Canada will never capitulate and give more rights (never meaning at least 10 years). They view Emirates as a predator. As long as Lufthansa and Air Canada have the ear of the government, they’ve got no hope.

    Regards

  12. stuart lawrence says:

    Alan Joyce is a poor manager of his employees and has gotten everyone off side that said. What Alan Joyce should have done was taken Qantas employees and passengers into a deal with Cathy pacific a really good airline and fellow One world Traveller with a really good long haul fleet 747 400 777 and airbus 340s and interesting European destinations Frankfurt Paris ROme and Milan and hey presto. i have been to Europe via hong Kong and can vouch for this form of travel. My parent went to Europe via Dubia and hated Dubia as a stop over. regards Stuart