The proposed alliance between Emirates Airline and the Australian carrier Qantas has hit turbulence.
Emirates and Qantas drop fast-track regulatory bid
The proposed alliance between Emirates Airline and the Australian carrier Qantas hit some turbulence yesterday after both announced they were abandoning an attempt to fast track competition approval for their deal.
The news sent Qantas' shares dropping 2 per cent at one point yesterday, closing down 0.8 per cent at A$1.22 (Dh4.6)in Sydney.
After announcing their link-up early last month, Emirates and Qantas submitted an application for interim authorisation from the Australian Competition and Consumer Commission (ACCC) to allow them to negotiate route scheduling and airport-landing slots, coordinate booking systems and plan joint marketing campaigns before the regulator completed its formal assessment in March.
The proposed deal with Emirates is key to Qantas' strategy to turn around its loss-making long-haul operations by late 2014.
Any delay would have "serious adverse economic implications", Qantas has said.
But Qantas' rival airline Virgin Australia, has asked the ACCC to take its time studying the deal.
"It raises a number of complex issues across many markets, including ones in which the applicants would have a very large combined market share," Virgin said.
Singapore Airlines, a direct competitor with Qantas on the route between Australia and the United Kingdom also objected on the grounds that the alliance would end up dominating the route.
Several Australian transport unions objected to Qantas' interim approval request on the grounds that the move was anti-competitive.
Although Qantas would not link the decision to withdraw the interim application to the objections, the airline's head of corporate affairs, Olivia Wirth, confirmed that the carriers had chosen to wait for a full competition assessment. A draft decision is due in December.
"Qantas has decided that it can pursue slots for Qantas routes via Dubai without interim approval, which was one of the drivers for withdrawing the application," she said.
"We took a conservative approach to this issue for obvious reasons, but we are now comfortable that Qantas and Emirates can do a significant amount of preparatory work without interim authorisation. We're continuing to work with the ACCC as they consider our application for substantive authorisation."
Qantas has argued that if the tie-up was not approved, it would need to further scale back its loss-making European routes. At stake for Emirates is access to Qantas' extensive domestic travel network. The alliance may also help to fulfil the Dubai-based airline's goal of offering an around-the-world service using the Australian carrier for trans-Pacific flights.
Emirates and Qantas want the ACCC to authorise their alliance for 10 years, but the regulator has indicated it would do so only if it was satisfied that the flying public would benefit.
The Australian investment bank Macquarie Group predicted Qantas and Emirates together may end up with a 42 per cent share of the routes between Australia and the UK and an even bigger slice of its business-class segment.
The airlines' decision to amend their ACCC application came as Qantas announced it would begin flying passengers to Europe via Dubai, instead of through Singapore, from March 31. Switching its hub to Dubai for flights to Europe was a key part of the alliance deal with Emirates.