1.
Qantas entered its alliance with Emirates primarily to strengthen its existing
business rather than to diversify into new markets. The partnership allowed
Qantas to retire older planes, cut loss-making international flights, and rely
more on flying into Emirates' hubs for passenger transfers. This strategic shift
was aimed at improving operational efficiency and reducing costs, particularly
in the competitive Australia-to-Europe market. The alliance also enabled
Qantas to enhance its product offerings and customer experience through shared
airport lounges and linked loyalty programs, which directly benefited its
existing customer base.
2. By aligning its international business with Emirates, Qantas faces several risks,
including:
Dependence on Emirates: Qantas may become overly reliant on Emirates for its
international operations, which could be problematic if Emirates' business
strategies or market conditions change.
Market Competition: The partnership could attract attention from other airlines,
leading to increased competition in the routes they serve together, particularly
from airlines like Virgin Australia and its partners.
Regulatory Risks: The Australian Competition and Consumer Commission
(ACCC) imposed conditions on the alliance, particularly regarding capacity on
overlapping routes. Changes in regulations or further scrutiny could impact the
partnership's effectiveness.
Potential Stake Acquisition: The risk of a foreign airline acquiring a stake in
Qantas could alter the dynamics of the alliance, especially if the new owner has
different strategic interests.
3. Qantas likely chose to form an alliance with Emirates rather than renegotiate its
agreement with British Airways for several reasons:
Strategic Fit: The Emirates partnership offered a more comprehensive and
cooperative model than a traditional code share agreement with British
Airways, allowing for better integration of services and shared resources.
Market Positioning: Emirates had a strong presence in the Asia-Pacific region
and was expanding rapidly, making it a more attractive partner for Qantas to
enhance its international reach and competitiveness.
Cost Savings: The alliance with Emirates was projected to save Qantas
significant amounts annually through shared operations, catering, and
maintenance, which would not have been possible with British Airways.
Changing Market Dynamics: The competitive landscape in international
aviation had shifted, and Qantas may have seen a greater opportunity for growth
and collaboration with Emirates, which was already successful in Australia
prior to the partnership.
