Qantas to throw in the London/Frankfurt towel and tie up with Emirates?

Never state the impossible, as that is what could well be happening according to the Australian Financial Review.

Qantas and Emirates are edging together in a move to counteract the losses that the international division of Qantas makes, whilst taking a defensive posture over Etihad Airways with its recent increase in Virgin Australia.

The plans include a lot of Emirates code-sharing flights out of Dubai to 48 destinations across Europe, the ­Middle East and parts of Africa. In exchange, the Singapore stopover would be scrapped, with services terminating in Dubai.

For Qantas, the intended benefit will be to allow old aircraft to be retired, or further expansion in Asia, whilst reducing the costs. For Emirates, it claims a scalp and gets the passengers that route from Frankfurt and London, whilst gaining revenue from code-shares… and kill off the Joint Business Agreement that Qantas has with British Airways with the London – Sydney route.

The deal is in no way done and dusted, with multiple points in how to progress as well as the final shape of the agreement (be it simple code-sharing or full-on cooperation), and there are significant risks for Qantas if this goes through (for example Emirates F or C vs Qantas F or C – which will the business frequent flier go for and which offers the better value?  Or will the lure of Emirates be enough for some fliers to switch their allegiances to Emirates?)

Frankfurt already seems up for the chop, and with London at risk, this is a time of change for Qantas. Certainly, there is prestige running the Kangaroo routes, but prestige must sometimes be cast aside for operation costs. With British Airways and Qantas recently modifying their Joint Venture agreement to go through Sydney only (with Qantas and BA terminating services at Bangkok instead, and the rise of Hong Kong connections too), this is going to be a phone call that someone will have to make.

Qantas and Emirates are keeping relatively quiet, about the talks with Qantas only leaking bits of information and Emirates keeping making no comment.

If this goes through, this is going to ruffle a lot of feathers though

• I’d honestly expect the Joint Venture Agreement between BA and Qantas to be dissolved without a second thought
• The connecting traffic in/out of Heathrow from the Qantas flights will dry up overnight
• Theoretically, if this “doesn’t make business sense”, there could be a chance that British Airways may throw in the Sydney towel, and let Qantas do the dirty work between its Asian destinations
• Oneworld may be very annoyed with Qantas marrying up with a non Oneworld carrier. Whilst it may pave the way for Emirates to join Oneworld, Emirates hasn’t showing interest in joining an alliance for some years… and I don’t imagine that view has changed in the least.
• And I would guess that Etihad will look at their stake in Virgin Australia and consider its options extremely carefully with an eye to further increasing its stake.

This is going be one of the big things to watch if this comes off, as there will be major impact if it happens with how you go from one side of the world to the other, and the business implications are going to be massive too.