Emirates, Qantas tie up on Australia service

If you can’t beat ’em, join ’em.

That seems to be the approach Qantas is taking with Emirates, a carrier they’ve seen heated competition with in recent years. Emirates has been very aggressive in attacking pretty much everyone in the "Kangaroo Run" market, making it increasingly difficult for other carriers to compete profitably. With this move Qantas will be terminating its partnership with British Airways and shifting its Kangaroo traffic to Dubai, Emirates’ hub, as of April 2013. Between the two carriers there will be 98 weekly flights between Dubai and Australia, many of them on the Airbus A380.

The deal will allow for integrated network collaboration, coordinated pricing, sales and scheduling between the two carriers. Similar to other major ATI agreements this effectively means that the two will operate as a single business when it comes to operations in the covered markets. And the covered markets are significant; there are 70 destinations in Europe, Africa and the Middle East served by Emirates with a single connection. Qantas will become the only carrier other than Emirates to operate into Dubai’s Terminal 3. The deal will also see an alignment of frequent flyer program earning, redemption and other benefits. Lounge access and elite recognition reciprocity will be part of the deal.

At first blush, this move appears to be good for Qantas customers in just about every way. They’ll have access to many more destinations with just a single connection and connecting in Dubai isn’t all that bad a situation. Additionally, according to Qantas CEO Alan Joyce, the move will allow several of the SE Asia flights to be re-timed to allow for better timing of the flights for passengers actually in those markets rather than the folks continuing on to Europe. And, with the most significant price competition now in a joint marketing and profit-sharing agreement, it would seem that Qantas will be able to stem some of the losses they’ve been seeing in their long-haul operations. Actually, this last one might not be so great for the customers but it is always good when the airline can avoid going out of business.

Then again, Emirates has historically been somewhat predatory in their pricing and other tactics. This could be a situation where joining forces doesn’t actually make things better for both parties. And it seems likely that Qantas would be the one to lose were that the case.

The move also raises a couple interesting questions around the future marketing plans for Qantas. Currently the carrier serves as a cornerstone of the oneworld alliance. That made connectivity with British Airways, Cathay Pacific and JAL in Asia quite reasonable. And connectivity with American Airlines in North America was similarly useful. Rumors have Qatar trying to edge in on oneworld, however, and Etihad has also just signed a similar deal with Virgin Australia. These developments within the Middle East – Australia market certainly will make things interesting. For the Americas market it certainly makes sense for Qantas to remain in oneworld. For the African, European and Asian markets the benefits aren’t quite so clear anymore, though having partners for local traffic in those regions will still be valuable and there aren’t many independents left.

Interesting potential for change, indeed.

More coverage here on the new Qantas/Emirate partnership from Australian Business Traveler.