Business | Aviation

Qantas in talks with Emirates on alliance

The revelation, which saw Qantas's share price soar more than 10 per cent, is part of the carrier's drive to turn around its fortunes

  • AFP
  • Published: 10:04 July 26, 2012

  • Image Credit: Bloomberg
  • "Qantas confirms it is in discussions with a number of airlines about potential alliances," it said in a statement to the stock exchange after its share price surged as high as Aus$1.10 on reports of the move. "These airlines include Emirates, among others"

Sydney: Embattled Qantas Airways said on Thursday it was in talks with carriers including Emirates to revive its international arm, an alliance that could see most of its London-bound flights routed through Dubai.

The revelation, which saw Qantas's share price soar more than 10 per cent, is part of the carrier's drive to turn around its fortunes after an 83 per cent slump in first-half net profit in the six months to December.

"Qantas confirms it is in discussions with a number of airlines about potential alliances," it said in a statement to the stock exchange after its share price surged as high as Aus$1.10 on reports of the move. "These airlines include Emirates, among others.

"Qantas's policy is not to comment on the nature or status of these discussions."

The Australian Financial Review said code share negotiations with Emirates were at an advanced stage and would give Qantas access to the network of the largest international carrier in the world. Qantas is primarily losing money on its international routes.

The tie-up would see Qantas fly to Dubai for the first time and rely on its new partner to transfer passengers to destinations in Europe, the Middle East and Africa, the newspaper said. This would mean most London flights going through Dubai instead of Singapore, signaling an end to its long-standing joint venture with British Airways.

The newspaper said a link-up with Emirates would allow Qantas to maintain a global focus without having to fly its own planes, as high fuel costs sap profits.

It would allow the carrier to fly more aggressively to Asia, a stated goal of chief executive Alan Joyce, while Emirates would get access to Qantas's market-leading share of Australian domestic traffic.

Qantas is struggling with soaring fuel costs and worsening global conditions and recently warned its underlying profit before tax was expected to drop from Aus$552 million (US$574 million) last year to Aus$50-100 million. In January Moody's lowered the airline's long-term senior unsecured rating to Baa3 from Baa2 with a stable outlook.

The ratings agency Thursday said a sustainable and profitable international business was key to Qantas maintaining an investment-grade rating over time. "A scenario involving a major tie-up with a Middle East or Southeast Asian based hub carrier could alleviate some of the strategic disadvantages that Qantas faces as an end-of-line carrier," said Moody's vice president Ian Lewis.

"We see a partial sale and/or strategic alliance as being a more realistic scenario than a full sale or wind-down scenario for the international business."
 

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