Qantas ditches BA in tie-up with Emirates on European flights

Australian carrier ditches partner BA in bid to end losses on international flights

PUBLISHED : Friday, 07 September, 2012, 12:00am
UPDATED : Friday, 07 September, 2012, 10:55am

Qantas Airways will work with Emirates on European routes as it quits a 17-year partnership with British Airways in a bid to end losses on international operations.

The accord would let Qantas add more than 60 new one-stop destinations to its network, as it shifts its European hub to Dubai from Singapore, the Sydney-based carrier said.

The airlines will offer 98 flights a week to Dubai under the 10-year agreement, which is due to begin in April next year.

Qantas lost A$450 million (HK$3.6 billion) on long-haul flights in the year ended June. The carrier has struggled to compete with fast-growing Middle East airlines that have used hubs in the Gulf to offer a wider range of connections between Australia and Europe.

"This is the biggest arrangement Qantas has ever entered into with another airline," chief executive Alan Joyce said yesterday. "This agreement represents a step-change for the aviation industry."

The two airlines, the biggest and third-biggest by passenger numbers on routes from Australia, intend to co-ordinate pricing, sales and scheduling. They will also align their frequent-flier programmes, allowing passengers to earn points on both carriers' flights.

The deal would probably be worth more than A$90 million a year to Qantas, as it would boost the carrier's appeal to corporate travellers and grow its international business, said Sondal Bensan, a BT Investment Management analyst. The fund manager's parent Westpac Banking Corp owns 5 per cent of Qantas.

"It's a huge step in the right direction," Bensan said. "Take this in conjunction with the fleet deal with Boeing and it's a material change in both their balance sheet and their operating profit outlook."

Qantas last month cancelled an order for 35 Boeing 787 Dreamliners. It also got US$433 million in compensation and refunds from the planemaker.

Shares in the airline rose 6.7 per cent to close at A$1.20 yesterday, the biggest gain since July 26. Virgin Australia Holdings, which co-operates with Abu Dhabi-based Etihad Airways on competing routes to Europe, fell 2.2 per cent. Qantas has surged 24 per cent since a record low close of 97 Australian cents on June 8.

Qantas will begin services to Dubai from Melbourne and Sydney using Airbus A380s. These services will continue to London. The carrier will halt routes to Europe through Singapore and end flights to Frankfurt.

The deal will give Qantas passengers one-stop services to more than 70 Emirates destinations in Europe, the Middle East and Africa. Emirates will gain access to Qantas' domestic network covering more than 50 destinations. The two airlines will also co-ordinate Australia-New Zealand and Australia-Southeast Asia services.

The Australian carrier will also reorganise services to Asia to offer passengers a 25 per cent increase in connections through Singapore. The carrier would boost dedicated capacity to the city state as it shifted Europe services to Dubai, it said.

Qantas' tie-up with British Airways will end in March next year, according to a separate statement. Qantas will remain in the Oneworld alliance.

BA was looking for new partnership, chief executive Willie Walsh said.

"Asia has become a key market focus for [BA] and we're talking to a number of airlines about alternative options," Walsh said.

The end of the partnership with Qantas "won't have any negative impact on [BA's] financial targets".