Qantas looks at splitting licence as Emirates studies closer tie-up

Sydney: Qantas Airways Ltd, seeking to turn around losses on international flights, is looking at getting separate licences for its international and domestic businesses amid interest from Emirates in an enhanced tie-up between the carriers.

Qantas has a group looking at whether a split licence would be the best way of running the businesses after announcing a restructure on Tuesday, Chief Executive Officer Alan Joyce told a media event in Sydney on Friday.

"We're exploring that as we speak," he said. While Qantas' constitution and a 1992 Australian law cap foreign investment in the carrier at 49 per cent, second-ranked Virgin Australia Holdings Ltd recently separated its international and domestic businesses to get around similar rules.

Qantas last week said it will split its businesses into domestic and international units, a move that could lead to Emirates buying a stake in the Sydney-based carrier's domestic service, according to Deutsche Bank. Such cooperation may help Qantas revive overseas operations that have lost market share to Middle East carriers able to offer one-stop flights to a larger number of European cities.

"There's no subtext behind this," Joyce said. While the carrier is in talks with Emirates about connections between its international network and Qantas' domestic business, Joyce said he had no comment about any other talks between the carriers.

However, an Emirates Spokesperson told Gulf News in a statement that "Qantas is a major interline partner and while we meet with such partners occasionally to explore commercial and customer opportunities, any specific options in this case are speculative."

Benefits for both

Tim Clark, president of Emirates, the largest international airline, last week said both carriers would benefit from a tie-up, the Australian Financial Review reported.

"If I was a shareholder I'd love that," Neil Hansford, chairman of consultants Strategic Aviation Solutions, said by phone yesterday from Salamander Bay, Australia. Emirates could take a stake of as much as 30 per cent in a Qantas domestic unit, with its share of debt and equity worth as much as A$1.9 billion (Dh6.8 billion), Sydney-based Deutsche Bank analyst Cameron McDonald wrote on Thursday.

The carrier has no interest in buying stakes in other airlines, Thierry Antinori, its executive vice-president for passenger sales, told reporters in Lisbon on Thursday.

Qantas' international business lost A$200 million in the year ended June 2011. Joyce has already pared overseas flights and delayed the arrival of new Airbus A380s to cut costs. Airlines worldwide are also contending with fuel prices that have risen about 50 per cent in two years and the turmoil in Europe, which has damped demand for international travel.

Qantas and partners, including British Airways, only fly one-stop to five destinations in Europe and the Middle East.

Virgin Australia is able to fly one-stop to 19 destinations in the region from Sydney, Melbourne and Brisbane through a tie-up with Abu Dhabi-based Etihad Airways.

Qantas could potentially add more than 40 one-stop destinations through an Emirates deal.

The airline also said on Thursday that it will add 25,800 seats a week on services between some of Australia's largest cities. Adding capacity may harm ticket prices as carriers struggle to fill planes amid weak consumer demand, Russell Shaw, an analyst at Macquarie Group Ltd, wrote in a note on May 4.