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The kangaroo diverts to Dubai as Qantas, Emirates get cosy

What the QFEK does this mean is the question for travellers after this morning’s broad outline of a 10-year “beyond just a code share” deal announced this morning by Qantas (QF) CEO Alan Joyce and Emirates (EK) president Tim Clark.

For Melbourne and Sydney travellers, Qantas’ daily A380 flights to London will, from April, fly via Dubai not Singapore, and offer a dramatic improvement in connectivity to dozens of cities Qantas never sold or only sold as time wasting connections onto British Airways services at London’s infamously dysfunctional Heathrow airport.

That long-term alliance with BA is dead, from March 31, and so is the kangaroo route as it is currently known, but there are major winners and losers from the new deal, subject to ACCC approval, which ought not be taken for granted, at least not in full.

Qantas drops the shutter on any customers it might still have for flights to Europe originating in Queensland, South Australia and Western Australia who will be expected to take Emirates services, for which large expansion plans were coincidentally announced by the Dubai carrier in recent weeks as hints of the proposed deal between Emirates and Qantas began to slip into the media.

However Emirates, and other foreign carriers, have largely destroyed the Qantas market share in those states on those routes already, since Qantas only offered very uncompetitive and inconvenient connections.

The benefits the deal promises to bring may however greatly improve Qantas offerings from all state capitals to Asia, with a broad but not yet detailed commitment made to add more frequency and capacity to Singapore and Hong Kong.

There will also be close coordination between Qantas and Emirates flights across the Tasman, which could prove very important given the size and spread of that market, although the statement did not mention Jetstar’s presence on the New Zealand routes, or anywhere else, as Emirates has refused point blank to put its passengers on Jetstar flights.

For frequent flyer points junkies, the commitment to give full reciprocal earn and burn and status recognition between the Qantas Club and Emirates Skywards schemes will be a huge plus, as both programs are considered exceptionally generous by world standards.

Joyce also hinted at — yet declined to — elaborate on fleet changes to better serve Asia following the concentration of its A380 operations to London over Dubai.  The statement will raise hopes that the Dreamliner 787-8s that Jetstar is supposed to receive in the second half of next year might yet become Qantas 787-8s.

The major question analysts have been asking, as to what the deal might do to the Qantas balance sheet, was not addressed by the Qantas CEO, but was welcomed with an upwards spike of more than five percent in its share price in early trading.

The risk, in terms of consumer reactions, may be in the scope of Emirates flights that already serve Australia, which offer same airline flights to all of the cities that Qantas now says it can serve by flying to Dubai and transferring its passengers to those same flights for the last part of the journey.

It has always been a fundamental condition of ACCC approval of airline alliances and code shares that the parties undertake to retain if not expand their existing capacity on overseas routes, which means Emirates will continue to dominate flights to dozens of cities that Qantas, from April will try to sell as a combination of its flights and Emirates flights mid journey.

While Emirates remains a smaller carrier in the Australian market than Qantas in total, it is already a larger carrier to Europe in its own right, including London, where today it has three A380 rotations compared to two by Qantas, and additional flights using 777-300ERs it intends to replace with the giant Airbus as demand grows and has to be fitted into the finite slots available at London’s airports.

3
  • 1
    Rooboy22
    Posted Thursday, 6 September 2012 at 2:15 pm | Permalink

    add Northern Territory Qantas customers to that - at the moment we fly Jetstar to Singapore - and then pickup a Qantas flight. Smart travellers book flights from Singas - much cheaper than flights from Darwin. What are our options when this partnership comes into action??

  • 2
    Posted Thursday, 6 September 2012 at 2:29 pm | Permalink

    Thanx for this report. I didn’t bother reading any other report of the deal since I expected Crikey’s to be so informative.

  • 3
    The Pav
    Posted Thursday, 6 September 2012 at 6:09 pm | Permalink

    It’s incerdible that Qantas just writes off WA as a market.

    A strong economy, large migrant population often visiting home

    How much business have they lost?

    And Joyce says he’s a good manager!

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