The ACCC has all-but approved the Qantas-Emirates partnership — cementing Qantas’ future as a cipher rather than an airline in its own right. What will be the impact on consumers and the tourism industry?
Now that the Australian Competition and Consumer Commission has made it clear that it will grant final but conditional approval to the Qantas-Emirates partnership, what will it mean for the future of Qantas, to consumers and to the tourism industry?
Starting with Qantas, the ACCC conditional approval is a sobering read. As its chairman Rod Sims said in many interviews this morning, the benefits of the partnership are material, yet not large.
He confirmed that there will also be a reduction of competition where Qantas and Emirates currently overlap, but that the strength of competition from other foreign carriers will not disadvantage consumers because of the alternatives on offer in those cases.
However the ACCC has made an exception in its finding to the Australia-New Zealand route, saying it will prevent Qantas and Emirates from reducing their total capacity on those routes. In short, the current blood bath on what is Australia’s largest set of tourism routes will continue.
Any airline can fly the Tasman, which is by head count Australia’s biggest set of tourism routes. Every week Emirates A380s and 777s are mixing it with China Southern A330s and assorted South American A340s to devastate the multitude of smaller 737s and A320s flown across the Tasman by Air New Zealand, Virgin Australia, Qantas and Jetstar that in total offer far more seats than there are passengers.
The decision also means that from April, when the Qantas-Emirates partnership starts, Qantas will exit the Perth, Adelaide and Brisbane to Europe routes in favour of trying to punt its customers on code-shared seats it will be allowed to sell on Emirates jets.
In Queensland, South Australia and Western Australia, the Qantas slogan — “You’re the reason we fly”, might fairly become “Qantas: we’re the reason you fly Emirates”.
However the ACCC isn’t the Qantas preservation authority. Sims this morning told reporters he wasn’t concerned about the profitability of Qantas in announcing the decision, but the maintenance and enhancement of the level of competition enjoyed by consumers and the tourism industry.
He said the risk that Emirates fares might rise to Qantas levels under the deal, or that there might be less (or no) Qantas seats in some markets would be offset by the competitive response of other foreign airlines, going so far as to mention Singapore Airlines and Etihad, who are major alliance partners of Virgin Australia.
The deal fits in with the clear concern by Qantas management to reduce its exposure to the risks and capital expenditure needs of being a significant international full service carrier.
It makes Qantas smaller. The Minister for Infrastructure and Transport, Anthony Albanese, said the ACCC decision “also provides Qantas the opportunity to invest in additional aircraft capacity and international services, especially to meet the growth in Asia but also its broader international network”. He is either trying to be funny, or has been seriously misled by his advisors.
What does it mean for Australian consumers? If you are an Emirates customer you’re sitting pretty. There is nothing in it to make you change to flying Qantas long haul, and in fact, even if you use flights departing Sydney or Melbourne for Europe, Qantas capacity in its own metal has been cut to just one A380 a day via Dubai, where you will have to change to Emirates flights to fly to anywhere but London anyhow.
Similarly, if you are a Qantas customer on the kangaroo routes, and you haven’t been disenfranchised by the attempted handover of your business to Emirates in Qld, SA or WA, you have fewer seats to buy on a real Qantas flight, and it would be much more convenient to fly all the way to whatever your final destination may be on Emirates, avoiding changing carriers in Dubai.
However there is an incentive to continue to fly Qantas within Australia because of the reciprocal but conditional benefits members of both the Emirates and Qantas loyalty programs will gain from the partnership.
Depending on how you use the Emirates network, you may do best by making sure you are in both programs since you will only get Qantas benefits on those Emirates flights that carry a Qantas code-shared flight number, which will not apply to all of the connections at Dubai.
This is same situation Virgin Australia Velocity members face with that airline’s alliance with Singapore Airlines. You won’t get Velocity points on all Singapore Airlines flights and vice versa if you belong to the Krisflyer scheme, so you may need to be in both airline programs to maximise your benefits, or with those of the other Virgin partners Etihad, Delta and Air NZ.
The real advantage of Emirates for the Australian economy is the new markets it has opened up between here and central Asia, the Middle East, Africa, eastern and western Europe, and centres other than London in the UK.
But it isn’t without competition to bring new markets to Australia, which is where its partnership with Qantas will meet challenges from Etihad, Qatar, Singapore Airlines and quite possibly Turkish Airlines in coming years, and of course, a full suite of China flag carriers.
The deal also co-opts Emirates to help Qantas serve Asia in so far as it has frequent flights from various Australian cities to Bangkok, Kuala Lumpur and Singapore, and has undisguised intentions to fly here through Indonesia once it can navigate the costly approvals this is likely to involve.
Being sold a Qantas seat on an Emirates jet to a major city in south-east Asia may seem unthinkable to some Qantas loyalists. Get over it. The future of Qantas is that of a cipher rather than an airline in its own right, and it’s a future its management has enthusiastically embraced.