Potential Emirates link to boost Qantas

5 Sep 2012, 5:44 pm   -   Source: AAP
Qantas and Emirates are rumoured to announce a partnership on routes between Australia and Europe. (AAP)

Qantas and Emirates are rumoured to announce a partnership on routes between Australia and Europe. (AAP)

Speculation is building that Qantas Airways and Emirates are set to announce a partnership on routes between Australia and Europe.

A potential partnership between Qantas Airways and Dubai-based Emirates could help save the Flying Kangaroo's struggling international operations, experts say.

While a deal is yet to be confirmed, speculation has been building that the two carriers will unveil a tie up within days, with Emirates chief executive Tim Clark believed to be headed to Sydney for talks ahead of the announcement.

News Limited websites on Wednesday suggested the deal could be unveiled as early as tomorrow.

Qantas is remaining coy, with a spokesperson saying it was the airline's policy not to comment on discussions regarding potential alliances.

"When Qantas has something material to announce, we announce it," the spokesperson said.

If a deal is announced, analysts expect it will involve a codeshare agreement covering flights between Australia and Europe, as well as some frequent flyer benefits, which do not require approval from the competition regulator.

A senior advisor at aviation consulting firm AVIADO Partners, Stephen Pearse, said he thought Emirates stood to benefit most from any codeshare arrangement between the two carriers.

"There is a lot more for Emirates to gain in terms of further access to the Australian domestic marketplace than I think there is for Qantas internationally," he said on Wednesday.

"That's because all the flights to places where people want to fly to in Europe for example are on Emirates' metal, not Qantas' metal.

"And 90 per cent of the traffic that Emirates brings into Australia today is dispersed around the country on Qantas anyway, so the extra passengers on Qantas domestic services from the partnership is going to be relatively small."

Qantas' international operations lost $450 million in 2011/12 due to intense competition from rival carriers, high fuel prices, the economic downturn in its key European and US markets and restructuring costs.

Chief executive Alan Joyce's plan to return the airline's international arm to profitability has been built around deepening alliances with other carriers, reconfiguring the fleet and changing maintenance and operational practices to reduce costs.

Macquarie Securities analysts Russell Shaw and David McGregor said a deal with Emirates would be a major positive catalyst to improving Qantas's international operations.

"We believe an Emirates deal is the missing piece in the earnings bridge recovering mainline international for the $450 million loss in FY12 to breakeven by the end of FY14," the pair said in a research note.

Access to Emirates's extensive northern hemisphere network would give Qantas the ability to offer its passengers one-stop options to more European cities than the current five it serves with its own aircraft or with codeshare services.

Further down the track, market watchers say having European-bound passengers fly through Dubai could also allow Qantas to re-time its flights to Singapore so that they can connect to flights headed to other parts of Asia.

Qantas has a long-standing joint-services agreement with British Airways for flights between Australia and Europe.

Qantas closed 1.5 cents lower at $1.125.

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