SINGAPORE (Reuters) - Emirates plans to end most of its flights between Australia and New Zealand as part of a renegotiated joint venture with Qantas Airways Ltd (QAN.AX) that will also see the Australian carrier quit flying to Dubai, the airlines said on Wednesday.
Qantas CEO Alan Joyce said the changes would allow both airlines to leverage their network strengths; Emirates with its Dubai hub and Qantas with its dominant position in Australia.
“You can assume it is a win-win,” he told Reuters by phone while declining to provide financial details of the arrangement. “We wouldn’t be extending for another five years if we weren’t getting a win out of it and Emirates certainly wouldn’t be.”
Unlike at the time of their original pact signed five years ago, Qantas is now in a relatively stronger financial position than Emirates, with the Australian carrier in August reporting a near-record annual profit after cost-cutting measures helped turn around the business.
Emirates in May posted its first annual profit drop in five years due to overcapacity, security concerns and a fall in regional business travel.
“Increasingly it is Qantas driving the Emirates partnership,” the CAPA Centre for Aviation wrote in a research note in August. “For Emirates this is not ideal but there are still very cogent reasons for the partnership and it would prefer a weaker partnership to none – or, worse, the prospect of Qantas working with one of Emirates’ competitors.”
Qantas had said in August it would stop flying to London via Emirates’ Dubai hub when the alliance was renewed. Qantas’ Sydney-London flight will instead stop in Singapore.
Emirates is set to keep a daily Sydney-Christchurch flight but quit the others between Australia and New Zealand from March. To partly make up for this capacity loss, Qantas said it will add more flights from Melbourne and Brisbane to Auckland.
However, the total number of seats between Australia and New Zealand on all airlines will fall by 3.7 percent after the changes, Qantas said.
Air New Zealand Ltd (AIR.NZ), the biggest flight operator between the two countries, is likely to benefit the most from the capacity cut, which could boost airfares.
Emirates President Tim Clark said demand on its Australia-Auckland flights had been hit after the launch of a non-stop flight between Dubai and Auckland last year and due to competition from new entrants like Taiwan’s China Airlines Ltd (2610.TW).
Emirates is evaluating the possibility of adding another non-stop Dubai-Auckland flight or a new non-stop Dubai-Christchurch flight in the future, Clark said.
“I guess if we had a smaller aeroplane we might not have” cancelled the New Zealand flights, Clark told Reuters by phone. “The A380 is just too big for the market.”
Reporting by Jamie Freed; Editing by Himani Sarkar