Qantas and Emirates to form major alliance

Australia’s Qantas Airways Ltd. and Dubai’s Emirates Airline announced today that they will form a 10-year alliance that will coordinate their pricing, ticketing, schedules and frequent flier benefits, Reuters reported.

"This is a partnership of independent peers, based on shared standards and aspirations," Qantas CEO Alan Joyce at a joint press conference with Emirates President, Tim Clark, in Sydney, CNN reported.

As part of the deal, Qantas will move its hub for European flights from Singapore to Dubai as of April 2013, CNN reported.

Also, Qantas will end its 17-year partnership with British Airways, Reuters reported. The Australian carrier will remain in the Oneworld airline alliance and still cross-sell seats with British Airways, a Oneworld spokesman said, according to the Wall Street Journal.

Qantas, whose international business is sinking under high fuel costs, is hoping to use the arrangement with Emirates to cut its international routes and concentrate on its profitable domestic and budget flights, Reuters reported. Qantas recently announced an annual loss of $256 million for the year ending June 30.

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For Emirates, the world’s largest passenger carrier, the deal represents a break from a past in which it shunned close commercial ties with competitors, according to the Wall Street Journal.

According to the Wall Street Journal:

"Intense competition from neighboring rival Etihad Airways, owned by the oil-rich sheikdom of Abu Dhabi, has prompted Emirates into a change in strategy. Etihad has recently taken minority stakes in a number of European and international carriers, including Virgin Australia and Air Berlin PLC."

A Qantas-Emirates alliance would step up competition against Singapore Airlines, which provides more than 40,000 outbound seats to Asia and the Middle East a week, Bank of America Merrill Lynch said in a July report, according to the Wall Street Journal. The alliance would offer 55,000 seats a week, flying to more locations and more frequently.

Qantas’ shares closed 6.7 percent up on news of the pending deal, which requires regulatory approval, Reuters reported.

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