Thursday, September 6, 2012

Emirates and Qantas announce 10 year agreement

Image courtesy of

The aviation industry can certainly be quite volatile at times. Whilst many airlines are offering services with a continuously high load factor and producing year after year of profits, others have seen a real downturn in the industry and are making deeply concerning losses. Qantas is one such airline that has been struggling, particularly with its international route network. In July this year, Qantas announced that during the Australian financial year to June 2012, the airline’s international division had made a loss of $450m AUD. As with any
loss making company with a bleak outlook, things had to change.

Founded in 1920, Qantas grew as Australia’s flag carrier, however, with more and more airlines entering into the market, and regularly increasing fuel prices and other costs, Qantas has seen a sharp turn in its fortunes. The One World member as part of its strategic shuffle has created a partnership with Dubai based Emirates Airlines to help grow the business and return its international flights to profitable ones. In a dramatic move that sees its attention turn away from British Airways and the IAG Group, Qantas will be moving all of its stopover activity to Dubai from April 2013, subject to regulatory approval. This means that Qantas will be offering daily services to London via Dubai.

With a European route network of 70 destinations, the Emirates/Qantas agreement will be crucial for Qantas’ survival. Despite dropping Frankfurt, one of the airlines loss-making routes, Qantas passengers will be able to book flights to Dubai with Qantas, with onward connections to Emirates destinations in Europe. As part of the 10 year agreement, the two airlines will offer aligned frequent flyer programmes as well as seamless transfers through Dubai International Airport’s Terminal 3, the brand new, purpose built terminal in Dubai for the A380 aircraft, of which both airlines own. This strengthening agreement will see a combined 98 flights to Dubai from Australia each week.

Etihad Airways has developed its relationship with Qantas
rival Virgin Australia - image courtesy of Etihad Airways
It certainly seems to be a good move for failing Qantas, whilst Emirates will hope to see a much higher load factor on flights to Europe. Emirates direct competitor, Etihad Airways, recently upped its stake in Qantas rival Virgin Australia to 10%. The direct competition will be fierce as Etihad looks to expand its connections through Abu Dhabi. The real question, however, is will either lose out through this 10 year plan? Qantas will be restructuring its Asian routes to cater better for the business travel and will continue to operate flights to Singapore and Hong Kong, but onward journeys will be transferred to Dubai.

As a result of this move, the joint business between British Airways and Qantas will cease from March 31st 2013, although the airlines will continue to work together through the OneWorld partnership and codeshare agreements. British Airways will now start to look at alternative partners in Asia and with Malaysia Airlines now having joined the OneWorld Alliance, will we see a strong bond between the two?