Qantas has told the Australian Competition and Consumer Commission (ACCC) that its proposed ten-year alliance with Emirates is a strategic imperative if it is to reverse the “terminal decline” of its international operations.
Painting a dire picture of the state of its international business as it seeks approval for the tie-up, Qantas said it would be forced to stop flying to Europe if the deal with Emirates is rejected.
“In the absence of the authorisation, it is likely in the medium to long term Qantas will retreat to a ‘virtual network’ rather than an operating network,” Qantas said in its submission to the ACCC. “Under such a scenario, Australians will lose the benefit of Qantas operating a strong locally based international network airline. This is not in the national interest.”
Qantas said its international operations face “structural cost disadvantages” against other carriers that left it increasingly incapable of competing with Middle Eastern and Asian airlines that benefit from more favourable tax regimes, lower labour costs and more advantageous geographic positions.
It remains to be seen how the ACCC will view the submission, which goes well beyond the typical codesharing alliance to include coordinated pricing, sales and scheduling as well as benefit sharing through reciprocal frequent flier programs. Qantas and Emirates have applied for interim approval for the deal in order to begin commercial planning.
The airlines say the deal would provide significant benefits for Australian consumers by providing an expanded global network and enhanced frequent flier benefits while forcing other carriers to offer more competitive fares and products.
Responding to concerns the tie-up might lead to a reduction in flights between Australia and New Zealand, the carriers said they were willing to offer a formal commitment not to reduce overall trans-Tasman capacity. Qantas said it was also considering introducing flights between Adelaide-Auckland and Perth-Auckland.
Pending approval, the Qantas-Emirates alliance is scheduled to launch in April.