Qantas/Emirates deal takes off

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Qantas Airways’ (QAN.AX) plans to revitalise its international operations are on track, after the Australian Consumer and Competition Commission (ACCC) gave interim approval to its planned tie-up with Emirates.

The consumer watchdog authorised the airlines to start coordinating passenger and freight operations. ACCC chairman Rod Sims said because of the long lead times required to market and sell tickets before the companies begin long-haul services, the ACCC had given its interim approval.

He said that a draft review had formed the view that the public benefits from the alliance were likely to outweigh any public detriment. Although, the interim approval doesn’t allow the two to cooperate on services between Australia and New Zealand at this stage.

Qantas rival, Virgin Australia Holdings (VAH.AX) opposes the partnership, suggesting the alliance needed to prove that it would benefit Australians first. Still, Virgin is unlikely to complain too much, it already has an approved alliance in place with Etihad Airways, and is waiting for approval to takeover regional airline Skywest Airlines (SXR.AX).

Under the Qantas/Emirates plan, Qantas passengers will fly to Europe via Emirates’ home port of Dubai, rather than through Singapore. Customers will then have access to more than 70 Emirates destinations in Europe, Africa and the Middle East. Qantas is also canning its flights to Frankfurt, and has ended its long partnership with British Airways.

Qantas chief Alan Joyce says the alliance, when fully operational, should provide a boost to tourism in many parts of Australia.

“Through this partnership and with interim authorisation, Emirates will now be able to market Qantas destinations like Hobart and the Gold Coast to their customers, which is a real benefit for Australian tourism,” he added.

Both airlines will also align their frequent flyer programs, including access to lounges and priority check-in, as well as accrue frequent flyer points on both Qantas and Emirates.

Foolish takeaway

The first step in Mr Joyce’s plan to turn around Qantas’ loss-making international division is on its way. Qantas shareholders may have to wait some time for the results to flow through to them, if at all, given airlines have been notoriously bad businesses in the past.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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