Qantas-Emirates benefits for Singapore scrutinised

2012-09-10 09:14

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Canberra - Singapore's Trade Minister Lim Hng Kiang on Monday acknowledged the city-state would be impacted by Qantas's tie-up with Emirates but said the air hub was looking to growth in Asia travel.

The Australian carrier's alliance with Emirates comes amid a bid to stem huge losses in its international business and will see Qantas shift its hub for European flights from Singapore to Dubai.

But the Singaporean trade minister said the state would work closely with Qantas which is set to terminate flights in Singapore and redeploy them within the bustling region where middle classes are set to boom.

"This is obviously a commercial decision, and Qantas moving its hub from Singapore to the Middle East will of course have some impact on us," Lim said during a visit to Australia.

"But at the same time there are air slots that Qantas can use, and the air traffic in Southeast Asia is growing, so we look forward to Qantas using those air slots to service the rest of Asia," he added.

"What we may lose in terms of the European flow we hope to rebuild again in the Asia and the ASEAN flow."

Qantas has described the 10-year partnership with Emirates, unveiled last week and subject to regulatory approval, as "momentous" for the industry and an important step in reversing its haemorrhaging international arm.

It will extend beyond code sharing and joint services to include coordinated pricing, sales and scheduling and a benefit-sharing model, although neither airline will take equity in the other.

Qantas chief Alan Joyce has described the alliance as key to addressing the airline's issues in Asia because it will free up aircraft that once used Hong Kong and Singapore as stopovers to terminate there and travel onwards in Asia.

"(That) makes us more competitive against Singapore (Airlines) and (Hong Kong-based) Cathay," Joyce said in a television interview on Sunday.

Though Qantas's domestic business is a strong performer its international arm is struggling with high fuel costs and steep competition, accounting for much of the airline's Aus$244 million ($253 million - about R2 billion at R8.20/$) loss in 2011-12.

The half-billion-dollar reverse in its fortunes in just 12 months and Qantas's first loss since privatisation in 1995 saw Standard and Poor's downgrade the Australian carrier's credit rating despite the Emirates deal.

S&P said the cut from BBB to BBB- -- still investment grade -- was due to "structural pressures affecting the airline's international business", particularly in Asia, which it said would not be easily resolved. - AFP

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