Qantas / Emirates tie up (Partnership inc. Codeshare, Status)

[Must...Fly!]

I assume you meant does not get approved.

Yes, my apologies.

I think the concern might have to do with the percentage of the market EK control. Add QF as the flag carrier and you have a not insignificant amount of seats that are controlled, essentially, by the one pricing structure.

However I think it does fail to take in to account the myriad of other options of getting to London/Europe, including the developing Canton route.

 

[chrisb]

Qantas / Emirates tie up (code shares)

The ACCC may also be concerned about what QF plan to do with BNE, PER and ADL. I can see PER being abandoned by QFi

 

[MarcB]

Page three of today's Australian Financial Review has an article on the ACCC. Two paragraphs refer to the QF/EK proposal:

The ACCC chairman also said that the regulator was close to a draft decision on the proposed 10-year strategic alliance between Qantas Airways and Emirates.

"We are concerned that a reduction in competition on certain routes will result in consumers paying more," he [ACCC chairman Rod Sims] said. "There aren't large benefits from the transaction, I know Qantas and Emirates talk up the benefits but it is all about the [level of] consumer detriment," he said.​

Does not sound positive.

What exactly does he mean by "its all about the [level of] consumer detriment"? Is he saying that the transaction is only about consumer detriment? Or is he saying that's the test for assessing the transaction? Either way, I think it's a pretty bold position to adopt when there is very recent history of the ACCC approving alliances here, there and everywhere when it comes to VA. By the Sims test, how exactly have consumers benefited from the VA alliance/partnership with other major competitors such as SA and EY on the Europe routes?

As an aside, I think it's poor form for him to be making such statements, which could materially affect the share price, prior to an official announcement by the ACCC.

 

[Must...Fly!]

The ACCC may also be concerned about what QF plan to do with BNE, PER and ADL. I can see PER being abandoned by QFi

Short term, no I don't think so.

Though I am increasingly concerned long term. Every chance EK could extend a flight from Singapore to Perth. Or Hong Kong to Perth, or Perth to Auckland and remove QF from the game all together.

Of course, QF could run those sectors on their own metal to hook up with ex-Asia EK flights but that would seem doubtful.

 

[Must...Fly!]

As an aside, I think it's poor form for him to be making such statements, which could materially affect the share price, prior to an official announcement by the ACCC.

Dixon and his mates paid him off

[/tinfoil hat theory]

 

[Danger]

The ACCC may also be concerned about what QF plan to do with BNE, PER and ADL. I can see PER being abandoned by QFi

I'm confident Perth won't be abandoned. Although it seems reasonably likely that one of the double-daily Singapore flights will be cut, there is talk of a direct PER-AKL route. Early days, though.

 

[chrisb]

Qantas / Emirates tie up (code shares)

I'm confident Perth won't be abandoned. Although it seems reasonably likely that one of the double-daily Singapore flights will be cut, there is talk of a direct PER-AKL route. Early days, though.

I think it'll be handed over to JQ for SIN and EK for DXB and beyond.

It would be nice if they finally picked up Perth to NZ. It's long overdue. Last time I did PER-SYD-CHC there were apparently 40 connections doing the same, and that was on a 737.

 

[JessicaTam]

The ACCC have commented on a possible draft decision. Regardless of that decision, it does give QF the opportunity to address any misgivings that the ACCC may have in order to improve their submission.

 

[wandering_fred]

I'm confident Perth won't be abandoned. Although it seems reasonably likely that one of the double-daily Singapore flights will be cut, there is talk of a direct PER-AKL route. Early days, though.

Perhaps QF will not abandon PER for its FF members. But I suspect it will be abandoned for QFs OW partners.
Or will BA be code sharing on JQ?

As well except for SIN, QF abandoned PER internationally a long time ago (IMHO).

Happy wandering

Fred

 

[simongr]

But more pragmatically I think QF will be rather royally screwed if this approval doesn't get up. They've worked quite a bit to get to this; it's going to be months of wasted work (time and money), and I'd harbour that the market is not going to like this and the share price will go through the floor.

Not only the amount of effort to get the deal together but also the delay to any new strategy - if this fails then not do they not have a strategy to address the profitability but they are going to have spend a lot of time working out a new strategy and then actually put it in place.

 

[anat0l]

The ACCC have commented on a possible draft decision. Regardless of that decision, it does give QF the opportunity to address any misgivings that the ACCC may have in order to improve their submission.

Be that as it may, a negative decision will at best force the revised proposal from QF/EK to be a lot more passive, which may come at the detriment of the initially purported benefits or new routes possible. And I still forecast that a negative decision will have a detrimental effect on the Qantas share price (if this initial comment hasn't had such an effect already).

 

[oz_mark]

Not only the amount of effort to get the deal together but also the delay to any new strategy - if this fails then not do they not have a strategy to address the profitability but they are going to have spend a lot of time working out a new strategy and then actually put it in place.

If they have a strategy and a plan, they should also have a contigency. We have seem part of that before, when they said they were going to route through Dubai rather than Singapore whether or not the deal gets the nod.

 

[JessicaTam]

Be that as it may, a negative decision will at best force the revised proposal from QF/EK to be a lot more passive, which may come at the detriment of the initially purported benefits or new routes possible. And I still forecast that a negative decision will have a detrimental effect on the Qantas share price (if this initial comment hasn't had such an effect already).

I agree; it is not a good time to be a shareholder. I was just stating that nothing is final yet.

 

[simongr]

If they have a strategy and a plan, they should also have a contigency. We have seem part of that before, when they said they were going to route through Dubai rather than Singapore whether or not the deal gets the nod.

I agree - but how many strategies do you need to have as a contingency? Was RedQ a red herring or the original strategy that the EK alliance was a contingency for? If this alliance doesn't get up then it is unlikely that a different alliance will fare better.

EDIT
Down 1c today

 

[browski]

What percentage of the market will a combined EK and QF hold for these destinations ex-Australia:

London
Frankfurt
Dubai
Auckland

I'm guessing it is very high.

 

[lovestotravel]

Page three of today's Australian Financial Review has an article on the ACCC. Two paragraphs refer to the QF/EK proposal:

The ACCC chairman also said that the regulator was close to a draft decision on the proposed 10-year strategic alliance between Qantas Airways and Emirates.

"We are concerned that a reduction in competition on certain routes will result in consumers paying more," he [ACCC chairman Rod Sims] said. "There aren't large benefits from the transaction, I know Qantas and Emirates talk up the benefits but it is all about the [level of] consumer detriment," he said.​

Does not sound positive.

So what IF this doesn't go ahead

What does QF do then ?

 

[Must...Fly!]

I agree - but how many strategies do you need to have as a contingency? Was RedQ a red herring or the original strategy that the EK alliance was a contingency for? If this alliance doesn't get up then it is unlikely that a different alliance will fare better.

EDIT
Down 1c today

Possibly, but I think it has more to do with the pure number of seats the alliance would control

What percentage of the market will a combined EK and QF hold for these destinations ex-Australia:

London
Frankfurt
Dubai
Auckland

I'm guessing it is very high.

QF control JQ to AKL too.

That's a better way of putting my concerns/thoughts as to why they might put this down

Though it hardly seems fair that VA are allowed to forge alliances with massive carriers just because they're small yet QF may be refused the opportunity to profit from international.

 

[markis10]

What percentage of the market will a combined EK and QF hold for these destinations ex-Australia:

London
Frankfurt
Dubai
Auckland

I'm guessing it is very high.

Not as high as you might think based on data that we do have, using Sept as an example:

[TABLE="width: 1034"]
[TR]
[TD][/TD]
[TD][/TD]
[TD]Inbound[/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD]Outbound[/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Scheduled Operator[/TD]
[TD]Service to/from[/TD]
[TD]No. of[/TD]
[TD]Pax[/TD]
[TD]Seats[/TD]
[TD]Seat[/TD]
[TD][/TD]
[TD]No. of[/TD]
[TD]Pax[/TD]
[TD]Seats[/TD]
[TD]Seat[/TD]
[/TR]
[TR]
[TD][/TD]
[TD][/TD]
[TD]Flights[/TD]
[TD]Carried[/TD]
[TD]Available[/TD]
[TD]Utilisation %[/TD]
[TD][/TD]
[TD]Flights[/TD]
[TD]Carried[/TD]
[TD]Available[/TD]
[TD]Utilisation %[/TD]
[/TR]
[TR]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[TD][/TD]
[/TR]
[TR]
[TD]Air New Zealand[/TD]
[TD]New Zealand[/TD]
[TD] 606
[/TD]
[TD] 96 608[/TD]
[TD] 119 372[/TD]
[TD]80.9[/TD]
[TD][/TD]
[TD] 607[/TD]
[TD] 98 304[/TD]
[TD] 119 572[/TD]
[TD]82.2[/TD]
[/TR]
[TR]
[TD]China Airlines (b)[/TD]
[TD]New Zealand[/TD]
[TD] 13[/TD]
[TD] 2 029[/TD]
[TD] 3 991[/TD]
[TD]50.8[/TD]
[TD][/TD]
[TD] 13[/TD]
[TD] 3 060[/TD]
[TD] 3 991[/TD]
[TD]76.7[/TD]
[/TR]
[TR]
[TD]Emirates (c)[/TD]
[TD]New Zealand[/TD]
[TD] 120[/TD]
[TD] 20 328[/TD]
[TD] 38 321[/TD]
[TD]53.0[/TD]
[TD][/TD]
[TD] 120[/TD]
[TD] 21 347[/TD]
[TD] 37 986[/TD]
[TD]56.2[/TD]
[/TR]
[TR]
[TD]Emirates (c)[/TD]
[TD]United Arab Emirates[/TD]
[TD] 314[/TD]
[TD] 87 974[/TD]
[TD] 100 452[/TD]
[TD]87.6[/TD]
[TD][/TD]
[TD] 302[/TD]
[TD] 86 814[/TD]
[TD] 100 786[/TD]
[TD]86.1[/TD]
[/TR]
[TR]
[TD]Etihad Airways[/TD]
[TD]United Arab Emirates[/TD]
[TD] 90[/TD]
[TD] 24 261[/TD]
[TD] 25 111[/TD]
[TD]96.6[/TD]
[TD][/TD]
[TD] 90[/TD]
[TD] 23 209[/TD]
[TD] 25 111[/TD]
[TD]92.4[/TD]
[/TR]
[TR]
[TD]Jetstar[/TD]
[TD]New Zealand[/TD]
[TD] 171
[/TD]
[TD] 21 891[/TD]
[TD] 30 570[/TD]
[TD]71.6[/TD]
[TD][/TD]
[TD] 174[/TD]
[TD] 24 168[/TD]
[TD] 31 098[/TD]
[TD]77.7[/TD]
[/TR]
[TR]
[TD]Qantas Airways[/TD]
[TD]Germany
[/TD]
[TD] 29
[/TD]
[TD] 9 528[/TD]
[TD] 10 721[/TD]
[TD]88.9[/TD]
[TD][/TD]
[TD] 30[/TD]
[TD] 10 108[/TD]
[TD] 11 089[/TD]
[TD]91.2[/TD]
[/TR]
[TR]
[TD]Qantas Airways[/TD]
[TD]New Zealand[/TD]
[TD] 453[/TD]
[TD] 48 422[/TD]
[TD] 71 573[/TD]
[TD]67.7[/TD]
[TD][/TD]
[TD] 452[/TD]
[TD] 50 922[/TD]
[TD] 71 544[/TD]
[TD]71.2[/TD]
[/TR]
[TR]
[TD]Qantas Airways[/TD]
[TD]UK[/TD]
[TD] 60[/TD]
[TD] 25 233[/TD]
[TD] 27 509[/TD]
[TD]91.7[/TD]
[TD][/TD]
[TD] 60[/TD]
[TD] 23 930[/TD]
[TD] 27 506[/TD]
[TD]87.0[/TD]
[/TR]
[TR]
[TD]Qatar Airways[/TD]
[TD]Qatar[/TD]
[TD] 43[/TD]
[TD] 9 849[/TD]
[TD] 11 289[/TD]
[TD]87.2[/TD]
[TD][/TD]
[TD] 43[/TD]
[TD] 10 547[/TD]
[TD] 11 289[/TD]
[TD]93.4[/TD]
[/TR]
[/TABLE]

 

[simongr]

Some comments on market shares

London - probably one of the biggest sticking points
Frankfurt - one flight a day out of SYD via and isn't QF dropping FRA after the alliance
Dubai - given that QF don't currently fly to DXB I don't think that them starting to is going to make a material difference
Auckland - One extra flight per day again wont make a dramatic difference

 

[MarcB]

I think one of the most concerning issues here is that the ACCC is focussed on price as the lever. There are a number of other factors that influence consumers besides price - do they not get a look in? Competition isn't just about how much you can buy an airplane seat for!