There was huge news from down under last week when the rumored link between Qantas and Emirates was officially unveiled. This certainly creates some confusion around Qantas’s role in oneworld as the airline backs away from British Airways but it is without question the right move to make.
The Australia to Europe market is one of the most difficult around. There is no aircraft that can fly it nonstop due to the extreme distance. That distance also means that to fly it, you need to dedicate a lot of aircraft time to make it work. The result is that most European airlines have abandoned the market because they can’t generate the revenue to bother. Virgin Atlantic runs a flight via Hong Kong to Sydney but other than that, British Airways is it. (And whether either of them should be in the market is questionable.)
Australia from a BA Point of View
BA has long connected the Empire but it has cut services back dramatically in recent times. Long gone are flights to Perth, Melbourne, and Brisbane. Sydney service was recently scaled back as well. Instead of connecting through several different points in Asia, BA now runs a single flight via Singapore.
Part of the reason for this cut was that, of course, the flights didn’t perform well enough. But BA also felt comfortable knowing that its long-standing revenue-sharing agreement with Qantas on the so-called “Kangaroo Route” provided a great deal of service for those who wanted it. That worked for BA because it freed up a lot of airplanes, but it wasn’t a great deal for Qantas.
The Middle East Puts Qantas in a Pickle
Think about it this way. If you’re Qantas, you can send people to London and connect into the British Airways network. That isn’t really that appealing. Sure, you have better heft and service to London than you can offer on your own, but the connections from there aren’t great since travelers have to backtrack to most places in Europe. Most importantly, your customers have to stop twice; once in Asia and again in London. That may have worked for years, but then the Middle East woke up.
Emirates and others started to tap into the Australian market and promptly kicked Qantas in the butt. See, it’s easy to go nonstop from Dubai to Australia. In fact, for the upcoming southern summer, Emirates flies 19 times a week to Perth, 4 times a week to Adelaide, 21 times a week to Melbourne, 14 times a week to Brisbane, and 21 times a week to Sydney. Some of those go via Southeast Asia, but most are nonstop. And we are talking big aircraft here with a mix 777s and A380s. Emirates then goes beyond those cities into New Zealand and has started to take traffic there as well.
What does it do with all of those Aussies (and Kiwis)? It brings them to Dubai and then gets them with just a single stop to anywhere in Europe and Africa. The idea that you can fly Emirates with one stop from Adelaide to Birmingham in the UK is mind-boggling but it works. Why would you ever fly Qantas and BA if you could go far faster via Dubai?
This isn’t much of a secret. Emirates has made a huge name for itself in Australia over the last few years, but it isn’t just Emirates. Etihad now owns 10 percent of Virgin Australia and wants to do the same thing via Abu Dhabi. But clearly, Emirates and its expansive network is the real prize.
So what exactly is happening with this deal? Qantas is walking away from its agreement with British Airways and will enter into a new one with Emirates. There won’t be any equity exchanged, but it will be a “benefit sharing” operation with tight integration including coordination of pricing and schedules, or so they say. The details seem a bit fuzzy at this point but it’s not just a run-of-the-mill codeshare. It’s going to be deeper than that.
Qantas will now send daily A380s to Dubai from Melbourne and Sydney. Both those flights will go on to London, but that’s it for Europe. Qantas will axe its Frankfurt flight, as it should have done long ago. Really, I imagine it’s a national pride thing to even keep the London flight. Were I Qantas, I would just turn around in Dubai and let Emirates take people on to London as it’s doing in the rest of Europe. As part of this, Qantas will also end its codeshare with oneworld partner Cathay Pacific and with Air France.
Qantas Focuses on Asia
All these moves make sense for Europe, but they make even better sense for Asia. As Qantas put it, Asia has served a waypoint for Europe services and that meant that the times between Australia and places like Singapore and Hong Kong weren’t optimized for local traffic. The two Qantas flights from Singapore to Sydney, for example, both leave around 8p at night. The northbound trips both leave around 5p in the afternoon. That isn’t great for local traffic to bunch your flights up like that. Now Qantas can (as it should have done long ago) reschedule the flights for local demand.
What does this mean for oneworld? It shouldn’t mean much, to be quite honest. Sure, BA loses a big partner to Australia, but it should be able to route passengers via Hong Kong on oneworld partner Cathay Pacific if it wants to ramp that up. And it still has its own Sydney flights… for now. There are also rumors of Qatar Airways joining oneworld, and that would prove more feed. Besides, it appears that Qantas will remain part of oneworld for now, just a more distant partner in what is now a more fractured alliance. But Qantas will keep strong ties with Japan Air Lines – they have a joint venture for a low cost carrier in Japan – and presumably will keep strong ties to American here in the US. The alliance itself, however, is a bit weakened.
In the end, there is no doubt in my mind that Qantas made the right move here. Others may not like it as much, but that isn’t Qantas’s problem.