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Australia gives final backing to Qantas-Emirates deal Qantas-Emirates deal gets final backing from Australia
(about 3 hours later)
Qantas Airways has been given final approval from Australia's competition authority for its alliance with Dubai-based Emirates. Qantas Airways has won a final approval form Australia's competition watchdog for its partnership with Emirates.
The two will co-ordinate ticket prices and flights. The deal means Qantas' hub for European flights will move from Singapore to Dubai. The alliance is seen as key to Qantas' attempts to turn around its loss-making international operations.
It also means the end of Qantas' long-standing partnership with British Airways on UK-Australia routes, The Australian carrier's international division has been hurt by slowing demand from key markets, growing competition and higher fuel costs.
The decision was given preliminary approval in December. The alliance with Emirates, agreed last year, will see the two collaborate on pricing, sales and flight scheduling.
The go-ahead allows the two to combine operations for five years, half the time originally bid for. "Qantas is an Australian icon and the future of its international business is much brighter with this partnership," said Alan Joyce, chief executive of Qantas.
"Customers are already responding very strongly to the joint network that Qantas and Emirates have built, and to the frequent flyer benefits that extend across it, with a significant increase in bookings."
'Game-changing partnership'
Qantas has taken various steps to try and revive its international operations, including cancelling flights on loss-making routes, cutting jobs and restructuring come of its maintenance operations.
The efforts helped it narrow losses in the division A$91m ($95m; £63m) in the six months to the end of December, from A$262m a year earlier.
Many analysts have said that a successful alliance with Emirates may help it cut flights further and focus on more profitable routes instead.
They say that with Emirates flying to more than 70 destinations in Europe, any such move would be an easy one to make and would still help Qantas service its customers who fly to those destinations.
Qantas has already said that it will stop flights to Frankfurt.
Meanwhile, the alliance with Emirates will also see Qantas shift its hub for European flights to Dubai from Singapore.
Tim Clark, President of Emirates said the alliance will help connect Australian consumers to major markets.
"This is a truly game-changing partnership that brings together two of the world's best airlines," he said.
"Dubai is a leading global hub and through it, our two airlines will connect Australia to Europe, the UK and Northern Africa more smoothly than ever before."
Conditional approval
The Australian Competition and Consumer Commission (ACCC) said it thought the benefits of the alliance outweighed the drawbacks.The Australian Competition and Consumer Commission (ACCC) said it thought the benefits of the alliance outweighed the drawbacks.
Its chairman, Rod Sims, said: "The ACCC considers that the alliance is likely to result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency." "The ACCC considers that the alliance is likely to result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency," said Rod Sims, chairman of the ACCC.
It had been concerned about the effect of an alliance on routes to New Zealand, but it insisted the two maintain all routes between the two countries, despite overlapping services and the deal is conditional on this. However, the watchdog gave approval for a period of just five years, half the time the airlines had originally bid for and made it conditional on the two carriers maintaining their pre-alliance capacity on routes between Australia and New Zealand amid concerns about reduced competition.
Qantas' chief executive Alan Joyce said in a statement: "Qantas is an Australian icon and the future of its international business is much brighter with this partnership." "The one exception is the trans-Tasman, where Qantas and Emirates compete on four routes which accounted for around 65% of total passenger capacity between Australia and New Zealand in the year to 30 June 2012," said Mr Sims.
Qantas has been struggling in recent years, and last year reported its first loss since it was privatised in 1995, thanks to high fuel costs and rapidly increasing completion in the region. "On these routes, the ACCC is concerned that Qantas and Emirates will have the ability and incentive to reduce or limit growth in capacity in order to raise airfares."
The plan still needs approval from the New Zealand authorities.