Emirates Wants to Extend Qantas Pact for Pacific Routes

Emirates, the airline with the most international traffic, said it wants to extend its alliance with Qantas Airways Ltd. (QAN) across the Pacific Ocean, allowing passengers to fly around the world on Airbus SAS A380s.

The carriers have scope to link Qantas’s A380 flights into Los Angeles with routes the Gulf carrier seeks to operate from its Dubai hub, Emirates President Tim Clark said in a phone interview. The partnership won provisional approval from Australia’s antitrust regulator last month.

“If the timing is right and the two aircraft meet, with Qantas and Emirates you could go around the world with A380s,” he said yesterday. “I’m sure we could do trans-Pacific business on Qantas metal as part of this overall deal.”

Emirates would push for the alliance’s extension into trans-Pacific routes only if Qantas’s Chief Executive Officer Alan Joyce and his management back the idea, Clark said. Shares of the Sydney-based airline have risen 39 percent since the partnership was announced in September, as Joyce restructures operations to end overseas losses.

“I would think Qantas would have mixed emotions about that,” Peter Harbison, executive chairman of consultants CAPA Centre for Aviation, said by telephone from Sydney. “It’s a market where they are still dominant.” Routes across the Pacific are some of its most profitable, he said. “You just have to go online and check the pricing to see it.”

Photographer: Brendon Thorne/Bloomberg

An Emirates Airline flight attendant stands in front of a Qantas Airways Ltd. aircraft during a media event in Sydney, Australia. Under the deal, Emirates will gain access to Qantas’ Australia and New Zealand network. Close

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Photographer: Brendon Thorne/Bloomberg

An Emirates Airline flight attendant stands in front of a Qantas Airways Ltd. aircraft during a media event in Sydney, Australia. Under the deal, Emirates will gain access to Qantas’ Australia and New Zealand network.

‘Qantas Territory’

Qantas fell 0.6 percent to A$1.565 at the close in Sydney, their sharpest fall since Dec. 14. The S&P/ASX 200 index also slipped 0.6 percent.

The Australian carrier is currently focused on getting approval for its existing alliance and moving its European hub to Dubai, Luke Enright, a spokesman for the airline, said by e- mail.

“Qantas sees lots of potential for our global partnership with Emirates,” he said.

Clark said a tie-up across the Pacific Ocean was left out of the discussions for the current Emirates-Qantas alliance because “the trans-Pacific is Qantas territory.”

Still, the regulator’s initial approval doesn’t prevent the carriers from exploring the option, he said. While the alliance will focus on long-haul routes to Europe and within Australia, the airlines want regulatory approval to work together worldwide, according to an Oct. 10 submission.

The companies could also link their routes into Dallas, the hub for AMR Corp. (AAMRQ)’s American Airlines, and Qantas could also fly the Boeing Co. (BA) 787 into Dubai once it starts receiving the composite-bodied planes, Clark said.

Deal ‘Energizing’

With budget carrier Jetstar, Qantas has just under half of about 33,000 seats available each week on flights between Australia and the continental U.S., Canada and Hawaii, according to data from CAPA.

Its main domestic rival, Virgin Australia Holdings Ltd. (VAH), has about 10,000 seats on its own aircraft and those operated by its partners, Delta Air Lines Inc. and Hawaiian Airlines Inc., the data show.

The deal between Qantas and Emirates was “energizing” regional airlines to strike new alliances, Clark said, citing a recent code-share agreement between Air New Zealand Ltd. and Cathay Pacific Airways Ltd., and Singapore Airlines Ltd. (SIA)’s decision to take a 10 percent stake in Virgin Australia.

China Eastern Accord

“All sorts of arrangements are taking place that you wouldn’t have even thought about,” he said.

China Eastern Airlines Corp., which operates code-share arrangements on Qantas flights into mainland China through its hub in Shanghai, is also now pushing to deepen that alliance, the Australian Financial Review reported today, citing its Oceania head Kathy Zhang.

Liu Shaoyong, the Chinese carrier’s chairman, will visit Sydney this month to advance talks on the tie-up, the newspaper quoted Zhang as saying. The two airlines are setting up a Hong Kong low-cost carrier under the Jetstar brand.

Shen Xiaosheng, a spokesman for the Shanghai-based airline, didn’t immediately respond to an e-mail seeking comment on the report.

Under the planned accord due to start in April, Emirates and Qantas intend to coordinate pricing, sales and scheduling, as well as aligning frequent-flier programs so passengers can earn points on both carriers’ flights. Emirates will gain access to Qantas’s Australia and New Zealand network under the deal.

Emirates is also studying ways to increase the range of the aircraft to allow it to run services to Los Angeles, as well as Houston and San Francisco, Clark said, and may need as many as 30 more of the double-decker jumbos.

India Airlines

It won’t make any bids for Jet Airways India Ltd. (JETIN) or Kingfisher Airlines Ltd. (KAIR), he said, because Indian carriers lack the control of operations, finances and their workforces that Emirates sees as necessary.

Jet is in talks with Etihad Airways PJSC, based in Dubai’s neighboring emirate of Abu Dhabi, about a stake sale, the Indian company said Jan. 3.

“If the Indians themselves can’t make a go of it -- if Vijay Mallya can’t, and Naresh is struggling, and Air India?” Clark said, referring to Kingfisher’s Chairman Mallya, his counterpart at Jet, Naresh Goyal, and the state-owned carrier. “If they can’t make it work, then who can?”

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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