Qantas, Emirates ink 10-year partnership

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By KRISTEN GELINEAU, Associated Press

SYDNEY (AP) — Qantas Airways Ltd. on Thursday signed a 10-year partnership deal with rival Emirates, ending a long-term relationship with British Airways in a bid by the Australian airline to boost its struggling international division.

Under the alliance, Qantas will move its hub for European flights from Singapore to Dubai, coordinate with Emirates on ticket prices and scheduling and apply a benefit-sharing model starting in April 2013. The deal is subject to regulatory approval.

Qantas said it will end its 17-year alliance with British Airways on March 31, 2013.

Neither Emirates nor Qantas will take equity in the other under the deal.

"This is the most significant partnership the Qantas Group has ever formed with another airline, moving past the traditional alliance model to a new level," Qantas CEO Alan Joyce said in a statement.

The deal is an effort by Qantas to save its money-losing international operation. Last month, the airline reported a 245 million Australian dollar ($249 million) annual loss and blamed the result on rising fuel prices, a series of worker strikes and its international division, which lost AU$450 million. It was the first time since Qantas went private in 1995 that the airline — nicknamed the "Flying Kangaroo" — reported a net loss.

"A key objective is to make Qantas International strong and viable, and bring it back to profitability," Joyce told reporters. "This partnership will help us do that."

Qantas shares soared after the deal was announced. By late afternoon, they were up 6.4 percent to AU$1.20.

Emirates said Qantas will be the only airline besides itself to operate out of its base at Dubai International Airport's Terminal 3. The gleaming, shopping-mall like terminal opened in October 2008, doubling the airport's capacity to 60 million passengers annually.

Emirates said it and Qantas will jointly operate 98 weekly flights between Dubai and Australia, including four daily A380 flights.

"The time was right for developing a long term, future forward partnership with Qantas," Emirates airline President Tim Clark said in a statement. "Since our first flights began in 1996, Australia has long been a popular destination for Emirates leisure and business travelers, making it one of the top three destinations in our network."

"By establishing this partnership we are providing our passengers with additional connectivity in Australia and the region and the ability to utilize enhanced frequent flyer benefits and have access to premium lounges," he said.

Emirates is the world's largest carrier in terms of international passenger numbers. It earned $629 million in profit last fiscal year despite a big jump in fuel costs. It is fully owned by the Dubai government, but insists it operates without subsidies on purely commercial terms.

Another UAE carrier, Abu Dhabi-based Etihad Airways, has also been strengthening ties with Australia.

Etihad earlier this week announced it has increased its stake in Virgin Australia to 10 percent. It first disclosed that it was building a position in the Aussie carrier in June. It says it doesn't aim to become a majority shareholder.

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AP Business Writer Adam Schreck in Dubai contributed to this report.

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