Last roll of the dice?

The document claims that its average cost per employee is US$92,000, whereas Emirates average staff cost is just US$47.000.

At the same time Qantas has warned that it would be forced to quit Europe altogether and shrink its international operations if the deal doesn’t go through.

“If Qantas International cannot reach appropriate commercial arrangements with structurally advantaged alliance partners, it will have no choice but to materially contract its operations and will, over time, only operate to a very small number of ports where it is competitive and can make an appropriate return on capital,’’ said the submission.

“This will not include Europe.’’

Of course that decline is well and truly underway with Qantas’s share of international passenger traffic dropping from 36 per cent in 2002 to just 19 per cent this year.

Even when its low cost subsidiary’s Jetstar’s international traffic is added the group’s share is only 27 per cent.

In New Zealand the national airline – which wins award after award for its innovation – commands 45 per cent of the market.

In its submission to the ACCC, Qantas and Emirates have promised a significantly expanded global network, improved connectivity and greater choices for passengers and freight customers of both airlines.

While not citing examples, the two airlines say they will be able to deliver cost savings and thus lower fares through joint purchasing.
However, Qantas does claim that by using Emirates flights with more direct routings fares could come down by $330 to some destinations.

There is absolutely no doubt there will be major efficiency gains from ports like Perth and Brisbane where Qantas will use Emirates Boeing 777-300ERs.

Qantas argues it needs the “urgent strategic imperative” of the Emirates alliance or it will become increasingly marginalised and retreat would be the only option if it is not approved.

“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,” it warned.

“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.’’

The submission described the deal as “a measured and balanced response to the economic realities of the highly dynamic and competitive international aviation industry.’’

“It will deliver significant benefits to Australian consumers, including eliciting competitive responses from domestic, trans-Tasman and international competitors that will further stimulate competition to and from Australia.’’

The proposed alliance received a major boost from Transport Minister Anthony Albanese who told The Australian that it was potentially a very good deal for the travelling public and one which he hoped the ACCC looked upon favourably.

“Qantas clearly, in the way that aviation’s organised globally, needs to have partnerships,’’ Mr Albanese said. “Emirates is a strong partner.’’

Leaving all the rhetoric from unions and disgruntled adverting executives aside and the raft of mistakes made by previous Qantas managements, the Australian national airline is in deep trouble.

There is no doubt it is a perfect storm. Put simply it cannot compete with international liberalisation just as Ansett could not compete with domestic de-regulation over ten years ago.

If Qantas doesn’t have a robust international division its domestic business and frequent flyer business will start a slow and certain decline.

Partnerships are the cornerstone of aviation and having Emirates as a partner would ensure the survival and growth of Qantas as we know and love it.

The ACCC is certain to approve the deal and if not the government should change the legislation to ensure the deal goes through.
Qantas’s future depends on it.