Qantas dumps BA as it signs 10-year flight-sharing deal with Emirates

10-year accord with Emirates will give Australian airline 60 more destinations in Europe as hub is moved to Dubai

PUBLISHED : Friday, 07 September, 2012, 12:00am
UPDATED : Friday, 07 September, 2012, 3:09am

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 will let Qantas add more than 60 new one-stop destinations to its network, as it shifts its European hub to Dubai from Singapore, the Australian 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 shares rose the most in six weeks on speculation that co-operation with the world's largest international carrier and changes to Asian services will help revive long-haul operations that lost A$450 million (HK$3.56 billion) in the year ended June.

The airline 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.

Neither company will buy equity in the other under the deal, which requires regulatory approval.

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

On August 23, Qantas cancelled an order for 35 Boeing 787 Dreamliners. It also got US$433 million in compensation and refunds from the planemaker.

The airline's share price rose 6.7 per cent to A$1.20 at the close of trading in Sydney, the biggest gain since July 26. Virgin Australia Holdings, which co-operates with Abu Dhabi-based Etihad Airways on competing routes to Europe, dropped 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 SAS A380s. These services will continue to London. The carrier will halt routes to Europe via 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 services on Australia to New Zealand and Australia to Southeast Asia routes.

The Australian carrier will also re-organise services to Asia to offer passengers a 25 per cent increase in connections via Singapore. The airline will boost dedicated capacity to the city state as it shifts 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, which has 12 full members.

BA is looking for new partnership, said Willie Walsh, the chief executive of International Consolidated Airlines, the British airline's parent company.

"Asia has become a key market focus for IAG and we're talking to a number of airlines about alternative options," he said. The end of the Qantas partnership "won't have any negative impact on IAG's financial targets".

Joyce has also already pared Qantas' overseas services, delayed the arrival of new A380s and split international operations into a new unit in a bid to end losses. The airline last month posted a net loss for the year ended June, its first on an annual basis since listing in 1995.