Qantas is finally set to ink an alliance agreement today with Middle Eastern rival Emirates aimed at stemming the Australian airline's losses on the highly competitive route between Australia and Europe.
After months of negotiations and endless speculation, Qantas will today unveil the terms of an alliance with Emirates on routes to Europe via Dubai. Qantas's chief executive, Alan Joyce, will front a media conference at a Sydney hotel at 10am, AEST, this morning.
The Emirates chief executive, Tim Clark, arrived in Sydney yesterday for the final negotiations with his counterpart at Qantas.
The deal is expected to be heralded as a significant breakthrough for Qantas, which has been struggling to revive the fortunes of its international flying operations.
However, it will raise serious questions about the future of Qantas's longstanding revenue-sharing agreement with British Airways on the so-called kangaroo route between Australia and Britain.
The alliance with Emirates will require the approval of regulators including the Australian Competition and Consumer Commission. It will be a much-needed boost for Qantas whose shares are trading just 16.5 cents above an all-time low of 96 cents struck in June.
Macquarie Equities's transport analyst, Russell Shaw, has estimated the value to Qantas of a code-share alliance with at as much as $90 million a year in pre-tax earnings.
He described a tie-up with Emirates as the "missing piece in the earnings bridge" for Qantas in helping to turn around its premium international operations, which lost $450 million in the year to June.
Despite the prospects of a deal with Emirates, Mr Shaw said Qantas still faced challenges in the medium term in improving its network in Asia to help it to compete against Cathay Pacific and Singapore Airlines.
Qantas also faces a short-term hit to its earnings in the domestic market in the current financial year as it seeks to repel the challenge of Virgin Australia. The latter is seeking to grab a bigger share of the lucrative corporate travel, which Qantas has dominated since Ansett's collapse in 2001.
It is not the first time Qantas has courted a relationship with the Middle Eastern airline, which is renowned for its desire to go it alone. Qantas did form a code-share agreement with Emirates in the 1990s but abandoned it a short time later.