Late last week, Australia’s competition regulator proposed reauthorizing a joint venture between Qantas and Emirates for another five years. The partnership, first launched in 2013, allows the two airlines to coordinate passenger and cargo operations, a practice typically illegal under Australian antitrust law.
The preliminary ruling is subject to a review of comments by competitors and other stakeholders and a final decision will be issued on July 12.
Before joining forces with Emirates, Qantas worked closely with British Airways, which remains a fellow member of the oneworld alliance. The Gulf carrier, however, offered the Australian airline and its customers more convenient access to more European destinations. Qantas and Emirates also work together on routes connecting Australia with New Zealand, Asia, the Middle East, and North Africa.
Australia’s Competition and Consumer Commission (ACCC) reviews such joint ventures every five years.
For Emirates, the alliance helps improve the marketability of its flights to Australia and New Zealand. Emirates counts Australia as one of its three largest markets worldwide ranked by passenger volumes and revenues, according to a regulatory filing. The airline currently flies from Dubai to Sydney, Melbourne, Brisbane, and Perth. It also operates flights to Sydney from Christchurch, New Zealand, and to Melbourne from Singapore.
That’s a lot of capacity to sell, and having Qantas connecting flights to offer is helpful. An example might be a traveler from London that needs to get to Adelaide. Emirates can take that person most of the way, before utilizing Qantas on the last leg of the journey. The antitrust immunity allows all of this to be planned, priced, and scheduled jointly.
An Airline Weekly analysis of Diio Cirium data shows that the largest connecting itinerary for people flying on the Emirates routes from Dubai to Sydney involves passengers connecting from London. Other popular origin points for the Gulf carrier’s Dubai-Sydney service include Beirut, Dublin, Manchester, and Tel Aviv. One reason why Dubai is considered such a geographically advantaged hub is its roughly equidistant position between Europe and Australasia.
The regulator did express concern that “the coordination may impact competition on the Sydney to Christchurch route, because Air New Zealand is the only other airline operating on that route.”
For many years prior to the Covid pandemic, Virgin Australia offered Sydney-Christchurch competition. It doesn’t anymore. The regulator proposed a condition that would require Qantas and Emirates to provide information that enables an ongoing assessment of the route’s “competitive dynamics.”
Why permit airlines to collude on activities like pricing and scheduling? The ACCC is convinced of the public benefits, highlighting “increased connectivity and convenience, and greater loyalty program benefits for consumers.” The airlines themselves, in their application to the ACCC, called the venture “fundamentally pro-competitive.” They also argued the cooperation is especially helpful as the airline industry — and Australia’s tourism sector — attempts to recover from the pandemic.
Not everyone agrees. The travel agency Axis Travel Centre urged the ACCC to reject the reauthorization, citing among other things, a “monopoly to European markets.” It added, “We believe that the continuation of any Qantas or Emirates joint partnership in its current form will detract from the choices and availability of fares [and] routes…”
Currently, Qantas itself does not fly to Dubai, which is unusual — typically, airline joint venture partners fly extensively to each other’s hubs. Qantas, however, stopped serving Dubai with its own planes in 2018, focusing instead on overflying the Middle East with nonstop flights to Europe — this started becoming possible with the advent of longer-range Boeing 787s. To London, for example, it now flies 787-9s nonstop from Perth. Once longer-range Airbus A350s arrive (currently expected in 2025), it will add London nonstops from Sydney and Melbourne.
For Qantas, such new routes should further reduce the strategic importance of the Emirates joint venture. The economics of the arrangement, however, are clearly good enough to make applying for another five-year renewal worthwhile.