Green signal for Emirates-Qantas alliance
Muzaffar Rizvi / 21 December 2012
Emirates and Qantas on Thursday received a go ahead signal from Australia’s competition watchdog who granted tentative approval to their strategic alliance, which is due to come into effect in April.
The analysts said the ruling will also brighten prospects for a long-term deal with budget carrier Jetstar, wholly owned by the Qantas Group.
In a draft ruling, the Australian Competition and Consumer Commission, or ACCC, said the benefits of the proposed partnership, such as coordinating ticket prices and schedules, would outweigh the reduced competition and provide the public improved products and services from both the groups.
The two airlines had proposed a 10-year alliance, but the commission only approved the partnership for five years. The Australian watchdog said it is likely to clear the partnership, albeit with conditions, when a final decision will be announced in March 2013.
The implementation of the partnership remains subject to the ACCC’s final determination and regulatory approval in other jurisdiction.
“The ACCC considers that the alliance is likely to result in material, but not substantial, benefits to Australian consumers,” ACCC chairman Rod Sims said in a statement.
Emirates and Qantas have welcomed the ACCC’s initial approval for their partnership and said the alliance will provide customers with a seamless international and Australian network, exclusive frequent flyer benefits and world class travel experiences.
Since the deal announced in September, the two airlines already started initial preparations that do not require regulatory approval, including connecting IT systems, designing frequent flyer benefits and establishing an operational base for Qantas in Dubai.
“Australia is one of the top three destinations in the Emirates network, popular for our business and leisure travellers alike. The partnership with Qantas means we can add regional destinations like the Gold Coast and Hobart to the growing list of places we offer Emirates customers worldwide,” President of Emirates Tim Clark said.
Qantas Group chief executive officer Alan Joyce said the ACCC’s draft determination was an important step towards delivering a better travel experience for millions of customers.
“We put a strong case to the ACCC that outlined the benefits of this partnership, both for travellers and for Australian tourism,” Joyce said.
London-based StrategicAero Research’s chief analyst Saj Ahmad termed the ACCC ruling a great step forward — especially for Emirates, as it will get access to the lucrative Australian market.
“The two airlines can now work towards pooling together their strategy and routes to effectively offer customers in both Northern and Southern hemispheres, one-stop connections via Dubai,” he said.
Ahmad said the ACCC has flagged up concerns about Tasman routes and it’s likely that once competition concerns are addressed, the Emirates-Qantas pact will be granted the full 10-year agreement as the airlines had initially planned for.
“We will now focus on responding to the issue raised by the ACCC in relation to the trans-Tasman as we move to securing final approval of this landmark partnership,” Joyce said.
Both Clark and Joyce said that the two airlines received a very strong customers’ support for the partnership.
“The feedback since the Emirates and Qantas partnership was announced has been positive and reinforces what a strong match the two brands are for each other,” Clark said.
“Our customer research has shown very strong support for the Qantas and Emirates partnership, particularly in terms of increasing one-stop access to Europe, cutting travel time and offering frequent flyer benefits,” Joyce said.
Struggling Australian carrier Qantas is seeking the alliance with Emirates as it aims to turnaround its loss-making international service by shifting its operational base from Singapore to Dubai. Its proposed 10-year partnership with Dubai-based airline will end its existing 17-year relationship with British Airways.
With Emirates partnership, Qantas will be able to add more than 60 one-stop destinations to its network. In return, Emirates will gain access to Qantas’s domestic network covering more than 50 destinations.
Prospects for Jetstar deal
Ahmad termed the ACCC’s initial approval a positive step that may pave the way for a long-term deal with the Australians carrier’s budget arm Jetstar in order to boost its services to Asia-Pacific region.
“Going forward, we’ll see Emirates and Qantas offshoot low-cost airline Jetstar also work out a long-term deal too. All round, this is a major development and a positive for Emirates.”
According to another analyst, Qantas venture will help Emirates to reduce its costs and add capacity in Australia without hitting a limit on international flight rights.
“Prospects for Jetstar deal are bright, but the progress will not be made until the Qantas accord receives final regulatory approval in March, he concluded.
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