Bloomberg News

Qantas Europe Sales Up 6-Fold on Emirates Alliance Deal

April 01, 2013

Qantas Airways Ltd. (QAN), the Australian airline that has vowed to restore profit at its international operations, said Europe bookings rose six-fold as an alliance with Emirates reduces flight times between the continents.

The agreement with the Dubai-based airline cuts average journey times by more than two hours from Melbourne and Sydney to the top 10 destinations in Europe, according to a statement from Qantas yesterday marking the partnership’s first flight.

The accord allows Australia’s largest carrier to shift its planes to more profitable Asian routes while reaching European destinations with a single stop in Dubai. Qantas Chief Executive Officer Alan Joyce pledged to return the carrier’s international business to profit after the Sydney-based company last year reported its first annual loss since at least 1993, according to data compiled by Bloomberg.

Dubai is “the geographical centerpiece of the partnership,” Tim Clark, Emirates president, said in the statement.

On the new network, passengers will be able to fly to 65 international destinations with one stop in Dubai, compared with the five one-stop destinations in Europe under Qantas’s previous alliance with International Consolidated Airlines Group SA (IAG)’s British Airways unit.

Qantas long-haul services have battled for passengers with Gulf carriers, including Emirates, while contending with fuel costs that eat away about half of revenue on a flight between Australia and London.

Combined Flights

The tie-up is probably worth about A$90 million ($94 million) a year before tax to Qantas, as it fills more seats on combined flights to Europe, New Zealand and Southeast Asia and drops the unprofitable Frankfurt service, Andrew Gibson, an analyst at Goldman Sachs Inc., said in a note to clients Feb. 22.

Qantas has gained 20 percent this year in Sydney trading, compared with a 6.8 percent jump for the benchmark S&P/ASX 200.

Qantas narrowed its loss on overseas routes in the first half to A$91 million from an A$262 million deficit a year earlier, after dropping unprofitable flights and retiring older planes, Australia’s largest carrier said Feb. 21.

Pretax earnings in the year ending June are expected to be A$211 million, the average of 11 analyst estimates, according to data compiled by Bloomberg. That compares with a pretax loss of A$349 million during fiscal 2012.

To contact the reporters on this story: David Fickling in Sydney at dfickling@bloomberg.net; Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net


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