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Joyce predicts profit return for Qantas


Adam Haigh

Emirates Airlines president Tim Clark and Qantas chief executive Alan Joyce get friendly.

Emirates Airlines president Tim Clark and Qantas chief executive Alan Joyce get friendly.

THE 10-year alliance with Emirates will see Qantas' international unit break even by 2015, chief executive Alan Joyce said yesterday.

"This is a big step in the right direction for Qantas International," Joyce said on the ABC's Inside Business program. "We see a path through to this business breaking even by financial year 2015. We do want to make sure Qantas International goes back to profits."

Last week Qantas announced a revenue and cost-sharing agreement with Emirates, the world's largest airline by passenger traffic, in an attempt to reverse its first full-year loss in at least 17 years. The carrier lost $450 million on international routes in the year to June 30.

Competition from Etihad, Emirates Airlines and Qatar Airways has contributed to Qantas International losses as the Middle East-based airlines are able to offer a wider range of one-stop flights to Europe.

Virgin has also expanded its international reach by co-operating with Etihad and Singapore Airlines.

The two airlines will co-ordinate pricing, sales and scheduling under the new accord, which still requires approval from the Australian Competition and Consumer Commission. Qantas has dropped its revenue- sharing pact with British Airways.

Qantas has struggled to compete with Middle East airlines, which have built hubs in the Persian Gulf to offer a wider range of connections to Europe. Under the Emirates accord, Qantas will shift its European transfer hub to Dubai, which will be served by 98 flights a week from Australia by the two airlines.

"This enhances competition," Mr Joyce said. "We're already seeing the competition react to this. We don't take it for granted, we know the regulators have to review it, but we think there is a very strong case for the approval of this alliance."

Emirates, Qatar and Etihad are exploiting the Gulf's position on inter-continental flight paths to build hubs served by waves of departures. That's won them a higher share of lucrative long-haul traffic and is pressuring earnings at network operators including British Airways and Qantas.

"Qantas to Europe and to Asia would have had problems without this deal with Emirates," Mr Joyce said. "We've made it very clear that we had to fix those two problems."

Standard & Poor's has cut the airline's credit rating to the lowest investment grade BBB- with a stable outlook. Mr Joyce's interview with ABC was recorded before S&P's statement.

"Qantas' business risk profile has weakened because of the structural pressures affecting the airline's international business," Melbourne-based analyst May Zhong said in the S&P statement. "Persistent pressures have eroded Qantas' market share and inflicted losses on the airline's international operations in the past few years."


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