Last Friday, I blogged about how Australian flag carrier Qantas was rumored to announce a deal with its powerful Middle Eastern competitor, Emirates Airline of Dubai which would entail a code-share agreement and route swaps as part of stemming Qantas’ heavy losses on its international routes.
The speculation seems to be nearing its end as the Sydney Morning Herald reported a few hours ago that both carriers are inching towards an official announcement. Qantas’ chief executive, Alan Joyce, will be speaking at a media conference at a Sydney hotel at 10am AEST. Yesterday, Emirates chief executive, Tim Clark, arrived in Sydney for final negotiations with Qantas.
At present, Qantas is losing $450 million annually from its mainline international operations, which is one of its biggest pain points as the carrier struggles towards achieving profitability. Qantas has scaled back on its international network for years, particularly in Europe, while Emirates conversely has expanded its presence at Europe intensely throughout the same period.
Stay tuned for more details…
According to BBC News, Qantas has agreed to form a 10-year alliance with Emirates as a step forward in turning around its unprofitable international operations. The terms of the agreement entail joint collaboration on pricing, sales and flight scheduling, although there will be no equity investment involved from either carrier, according to the article.
Although subject to regulatory approval, including interim authorization to the Australian Competition and Consumer Commission (ACCC) the new partnership will introduce many structural changes to Qantas’ current long-haul business model and network.
For starters, Qantas will end the joint venture agreement with London-based International Airlines Group, the holding company for both UK’s flag carrier British Airways and the Spanish flag carrier Iberia in March 2013. The JBA was established in 1995 to enable close commercial cooperation on flights operated by both British Airways and Qantas between Australia and the United Kingdom. Both Qantas and BA operated focus cities out of Singapore, Hong Kong and Bangkok to connect their UK/Europe and Australia operations in the form of “scissor hubs,” but have since narrowed those operations down to centralize out of Singapore in recent years.
In a press release specifically related to the JBA termination, Qantas CEO Alan Joyce said, “over the past 17 years the joint business agreement with British Airways has been central to the Qantas network. However, global operating conditions have changed and partnership with Emirates is the right strategy for Qantas.”
While the JSA with British Airways will be discontinued, Qantas will continue to codeshare with IAG and other OneWorld carriers. However, current codeshare agreements existing with Cathay Pacific services to Rome from Hong Kong, as well as Air France services to Paris, will be discontinued in March 2013.
At present, Qantas flies two daily services (via Singapore) to London Heathrow, originating in Sydney and Melbourne, as well as a daily flight to Frankfurt, also via Singapore, originating in Sydney. As part of the network overhaul, Qantas will shift the two daily Heathrow services over to Dubai, and terminate its daily flight to the Frankfurt station entirely. Singapore will cease to remain Qantas’ stopover point for the “Kangaroo route” between the UK and Australia, which will now adopt a new name as the, “Falcon Route” operating between the same regions, except via Dubai instead.
At Dubai International Airport (DXB) in the United Arab Emirates, big things are about to happen. Both Qantas and Emirates will operate 7 daily services on all-Airbus A380 aircraft between Dubai and London. Emirates currently operates 5 daily frequencies on the London-Dubai corridor, 3 of which are on Airbus A380-800 series planes offering between 489 and 517 seats on each flight with a First, Business and Economy class cabin. With the addition of the two Qantas A380s as part of the new Falcon Route offering, which offer between 450 and 484 seats across First, Business, Premium Economy and Economy class cabins, the London to Dubai corridor may see as many as 3,553 daily seats offered each way, every day on these two airlines alone.
Onward between Australia and Dubai, the combined carriers will offer 98 weekly flights (14 flights a day) between Dubai and Adelaide, Brisbane, Melbourne, Perth and Sydney. Qantas will be the only non-Emirates carrier operating into Terminal 3 at Dubai in order to facilitate connections.
Across Europe, Emirates will open 33 new destinations virtually to the Qantas network, seven of them serviced by A380’s, along with 31 new destinations within the Middle East and Africa. Qantas’ highly lauded Frequent Flier program will be aligned with that of Emirates, offering expanded opportunities for mileage accrual and redemption. Baggage and interline agreements will be in place to allow seamless processing through all checked points irrespective of originating and terminating point in Oceania, Europe, Africa or the Middle East. Furthermore, the carriers will offer reciprocal lounge access across 5 continents.
From a scheduling standpoint, both Emirates and Qantas’ Trans-Tasman routes will be coordinated to provide greater flexibility of flight options. Qantas will also re-time services to Hong Kong and Singapore, opening up additional same-day connection options to funnel traffic to the rest of Asia. This will result in a roughly 40% increase in available seats from Australia to Asia, according to the official Qantas press release.
IAG’s chief executive Willie Walsh made it clear that the 17-year relationship between them and Qantas was ending on amicable terms. However, he did lace in a subtle remark by saying, “Qantas has made it clear that its international performance has been weak and the joint business won’t have any negative impact on IAG’s financial targets.” IAG appeared to insulate itself against any notions of substantial loss in the JBA termination by touting its own separate growth and focus on Asia independently of prior agreements with Qantas.