Qantas will shift its European hub to Dubai as it enters a 10-year alliance with Emirates that CEO Alan Joyce called the most significant in Qantas history.
The long-rumoured deal, which will take effect in April, moves “past the traditional alliance model to a new level” and will include reciprocal frequent flier benefits and coordinated pricing and scheduling, Mr Joyce said in a Sydney press conference with Emirates boss Tim Clark this morning.
The result of months of negotiations, the deal comes at a critical moment for Qantas, which lost $244 million last year driven by a $450 million loss from its international operations.
“This is the biggest arrangement Qantas has ever entered into with another airline,” Mr Joyce said. “This agreement represents a step-change for the aviation industry.”
Neither airline will take an equity share in the other as part of the deal, which Mr Joyce pointedly described as a “partnership of peers, based on shared standards and aspirations.”
But the details of the alliance also make clear which partner is the larger. Together, the two airlines will operate 98 weekly A380 and 777 flights between Australia and Dubai. Since Emirates currently operates 70 weekly flights to Australia with plans to increase that number to 84, it appears Qantas’s lone contribution will be single daily A380 flights from Sydney and Melbourne to London via Dubai.
The alliance will spell the end of the ‘Kangaroo Route’ to London via Singapore and Qantas’s 17-year revenue-sharing alliance with British Airways, which will be terminated on March 31 next year. Qantas will also withdraw from its loss-making Singapore-Frankfurt route and end its codesharing agreements with Cathay Pacific and Air France, though Mr Joyce said the airline would remain a member of the Oneworld alliance.
On the whole, however, the deal offers Qantas a number of key benefits. It allows the airline to minimise its direct exposure to a European market where it has proven unable to compete, while giving its passengers expanded access to Europe through Emirates’ network of 33 European destinations. Frequent flier reciprocity, including access to tier status benefits such as lounge access and priority check-in, also represents an important aspect for Qantas as it seeks to hold on to its most coveted customers while scaling back its own international operations.
The deal also offers the cache of closely associating the Qantas brand with an airline widely recognised as one of the world’s best, operating the world’s largest international network. Qantas will become the only airline besides Emirates flying out of Dubai Airport’s Terminal 3, which includes a new purpose-built A380 terminal. Qantas passengers will have access to more than 70 Emirates destinations in Europe, the Middle East and Africa.
Emirates, meanwhile, will gain access to Qantas’s domestic network of more than 50 destinations. The two carriers will also coordinate their services between Australia and New Zealand and Southeast Asia.
“The time was right to develop a long-term partnership with Qantas, the iconic Australian airline,” Mr Clark said. “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 shifting Qantas’s hub for European flights from Singapore to Dubai, the alliance will also allow Qantas to restructure its services to Asia. Mr Joyce said the airline will launch more dedicated capacity to Singapore and will re-time its flights to Singapore and Hong Kong to allow more ‘same-day’ connections. Qantas currently operates overnight flights to Singapore designed to facilitate onward connections to Europe.
“Qantas’s Asian services will no longer be a subsidiary of the ‘Kangaroo Route’,” Mr Joyce said. “Instead they will be dedicated to connecting Australians with our region, and Asian visitors to Australia.”
The alliance is pending regulatory approval, with the airlines planning to submit an application for interim authorisation to the ACCC in order to begin commercial planning.
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