Business

Qantas-Emirates deal gets final backing from Australia

Qantas chief executive Alan Joyce and Emirates president Tim Clark
Image caption Qantas and Emirates originally agreed to the tie-up in September

Qantas Airways has won a final approval from Australia's competition watchdog for its partnership with Emirates.

The alliance is seen as key to Qantas' attempts to turn around its loss-making international operations.

The Australian carrier's international division has been hurt by slowing demand from key markets, growing competition and higher fuel costs.

The alliance with Emirates, agreed last year, will see the two collaborate on pricing, sales and flight scheduling.

"Qantas is an Australian icon and the future of its international business is much brighter with this partnership," said Alan Joyce, chief executive of Qantas.

"Customers are already responding very strongly to the joint network that Qantas and Emirates have built, and to the frequent flyer benefits that extend across it, with a significant increase in bookings."

'Game-changing partnership'

Qantas has taken various steps to try and revive its international operations, including cancelling flights on loss-making routes, cutting jobs and restructuring some of its maintenance operations.

The efforts helped it narrow losses in the division A$91m ($95m; £63m) in the six months to the end of December, from A$262m a year earlier.

Many analysts have said that a successful alliance with Emirates may help it cut flights further and focus on more profitable routes instead.

They say that with Emirates flying to more than 70 destinations in Europe, any such move would be an easy one to make and would still help Qantas service its customers who fly to those destinations.

Qantas has already said that it will stop flights to Frankfurt.

Meanwhile, the alliance with Emirates will also see Qantas shift its hub for European flights to Dubai from Singapore.

Tim Clark, President of Emirates said the alliance will help connect Australian consumers to major markets.

"This is a truly game-changing partnership that brings together two of the world's best airlines," he said.

"Dubai is a leading global hub and through it, our two airlines will connect Australia to Europe, the UK and Northern Africa more smoothly than ever before."

Conditional approval

The Australian Competition and Consumer Commission (ACCC) said it thought the benefits of the alliance outweighed the drawbacks.

"The ACCC considers that the alliance is likely to result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency," said Rod Sims, chairman of the ACCC.

However, the watchdog gave approval for a period of just five years, half the time the airlines had originally bid for and made it conditional on the two carriers maintaining their pre-alliance capacity on routes between Australia and New Zealand amid concerns about reduced competition.

"The one exception is the trans-Tasman, where Qantas and Emirates compete on four routes which accounted for around 65% of total passenger capacity between Australia and New Zealand in the year to 30 June 2012," said Mr Sims.

"On these routes, the ACCC is concerned that Qantas and Emirates will have the ability and incentive to reduce or limit growth in capacity in order to raise airfares."

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