Struggling Qantas reaffirms Emirates tie-up

Both airlines said a partnership agreement was unaffected by the news that the Australian carrier had losses topping Dh770 million.

Emirates reaffirmed its belief in the alliance – but also made clear that it will not become an investor in Qantas. David Gray / Reuters

Qantas says its partnership with Emirates Airline will not be affected after the Australian airline reported the equivalent of more than Dh770 million in losses, slashed thousands of jobs and eliminated dozens of aircraft from its fleet plans.

"There will be no impact on our partnership with Emirates," Luke Enright, a Qantas spokesman, Luke Enright, told The National.

Gareth Evans, the Qantas chief financial officer, added: “Emirates is clearly the right partner for us to Europe. The customers are telling us that and the economics is telling us that.”

He added that the alliance “has enabled us to restructure our Asian network to focus more on point-to-point and focus on re-timing those flights to when customers want to fly to Asia”.

Emirates also reaffirmed its belief in the alliance – but also made clear that it will not become an investor in Qantas, which has argued that it is at a disadvantage because it must be majority-owned by Australians.

“Emirates’ relationship with Qantas is built on strong commercial foundations and continues as before – providing more choice, convenience and value to travellers aboard both carriers,” an Emirates spokesman said. “Emirates’ long-term expansion strategy is based on organic growth, and we remain committed to that. There are no plans to acquire a stake in Qantas or any other airline.”

On February 13, Emirates expanded the alliance to include a codeshare agreement with Jetstar, the Qantas low-cost unit. Emirates said that the agreement would give its passengers access to 27 new routes and six new destinations in Australia, New Zealand and Asia.

As part of the alliance, Qantas flights to Europe stop over in Dubai rather than in South East Asia.

Qantas’s loss of A$235m (Dh771.4m) for the second half of last year compares with a profit of A$109m a year earlier. The company’s shares fell 9 per cent yesterday but are up 5.5 per cent so far this year.

The company said it would cut 5,000 jobs out of its total workforce of 32,000.

The carrier also plans to sell or defer the purchase of 50 aircraft. It is deferring orders for eight Airbus A380s and three Boeing 787 Dreamliners that it had ordered for Jetstar.

Alan Joyce, the Qantas chief executive, said the airline needed to make hard choices.

“When it comes to Jetstar in Asia, we need to take the right decisions in accord with current market circumstances and our balance sheet,” Mr Joyce said. “There are many examples of Australian companies that have failed because they weren’t able to make hard decisions. Qantas isn’t one of them.”

Qantas has been hit by high fuel costs, aggressive competition from Arabian Gulf carriers and slow international demand. It also faces fierce competition at home, highlighted by a price war with Virgin Australia.

While Virgin Australia is majority owned by foreign carriers (Etihad Airways has a 19.9 per cent stake, while Air New Zealand and Singapore Airlines have comparable shares), Qantas by law must stay primarily in Australian hands.

“Heavy competition is bad enough, but Qantas’s problems are made all the worse by restrictions on ownership and that it is forced to retain a structure that limits foreign ownership to 49 per cent,” said Howard Wheeldon, a private consultant at Wheeldon Strategic Advisory in the UK.

“Deep down I suspect that if Qantas is to survive this storm the Australian government is going to need to reconsider its stance as well. Deregulation should be about what it says on the meaning that Qantas should be allowed to compete of a level playing field and attract investment from whoever it likes – including sovereign governments.”

* The National, with additional reporting by Dow Jones

Follow us on Twitter @Ind_Insights