7 Sep 2012

Qantas, Emirates agree to work together

7:34 am on 7 September 2012

Qantas and Emirates have agreed to work together on trans-Tasman services as part of a new worldwide alliance.

Under the 10 year partnership deal, Qantas will shift its hub for European flights from Singapore to Dubai, and allow Australia's national carrier to connect to Emirates' network in Asia and North Africa.

The two airlines will also co-ordinate their flight schedules and prices, including those between New Zealand and Australia.

Qantas lost $A244 million in the last year, due in part to losses in its international business.

Chief executive Alan Joyce says the deal with Emirates will help fix that.

"A key objective is to make Qantas international strong and viable and bring it back to profitability, this partnership will help us do just that".

Mr Joyce says the airline remains committed to reaching break-even in its international business in the 2015 financial year.

Mr Joyce declined to comment on analysts' estimates the alliance will save Qantas $A90 - $A100 million annually, or provide the airline's own forecasts for cost savings.

He says over the long term he sees the Emirates partnership as a platform for growth.

NZ travellers should benefit

While Qantas is focused on restoring its fortunes in Europe and Asia, Mr Joyce says those flying between Australia and New Zealand will also benefit through greater frequency of flights and the potential for new routes.

Analysts say it's too early to say what impact the move will have on Air New Zealand.

The airline has 50% of the trans-Tasman market, and a tie up between Qantas and Emirates will provide stronger competition.

That may lead to lower fares, while travellers could also benefit from Qantas saying more Australian destinations may be available from New Zealand's main airports.

But flying to regions outside the main Australian cities has not been profitable in the past.

Air New Zealand may also benefit from Qantas and Emirates co-ordinating their schedules, which may reduce the chance of half full planes flying at the same time.

Investors ignored the deal, with Air New Zealand's share price rising 3% to $1.12 on Thursday, and brokers say shareholders are still lapping up the airline's own forecast of double its pre-tax normalised profit of $91 million this financial year.