Qantas seeking Emirates ‘lifeline’ – report

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Qantas and Emirates are closing in on a tie-up that would see the Aussie airline flying to Dubai for the first time. Photo –

Australian flag carrier Qantas said on Thursday it is holding talks with carriers including Emirates to give a shot in the arm to its struggling international arm.

Qantas saw its share price soar almost 10% after the revelation. The Australian airline has seen its fortunes slumping 83% during the first-half of this year.

“Qantas confirms it is in discussions with a number of airlines about potential alliances,” the company said in a statement which sent its shares, which have been trading at record lows, surge as high as AUS$1.10.

“These airlines include Emirates, among others.

“Qantas’s policy is not to comment on the nature or status of these discussions.”

Emirates chief executive Tim Clark told Dow Jones Newswires last month the Dubai-based airline was not interested in an equity investment in Qantas but could explore other types of commercial arrangements, such as codesharing.

The Australian Financial Review said that codeshare negotiations were at an advanced stage and would give Qantas access to the network of the largest international carrier in the world.

The newspaper said that the tie-up would help Qantas, which is primarily losing money on its international routes, for the first time rely on its new partner to transfer passengers to destinations in Europe, the Middle East and Africa.

The joint-initiave, however, would mean that most London and other European flights going via Dubai instead of Singapore, shadowing its long-standing partnership with British Airways.

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

It would also give the carrier scope to fly more aggressively to Asia, a stated goal of chief executive Alan Joyce.

In return Emirates would get access to Qantas’s market-leading share of Australian domestic traffic.

Many aviation analysts doubt if a tie-up with Emirates could save Qantas.

“It’s a good theory but code shares are band-aid solutions,” Neil Hansford, analyst from Strategic Aviation Solutions, said.

“Just by Emirates giving Qantas a bigger network won’t save a business losing $500 million.”

Qantas, struggling with soaring fuel costs and worsening global conditions, 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.

Moody’s rating agency lowered the airline’s long-term senior unsecured rating to Baa3 from Baa2 with a stable outlook in January.

The ratings agency on Thursday reminded Qantas a sustainable and profitable international business was key to 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,” he added.

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