Qantas cuts Dreamliner order, prepares for Emirates alliance

Preparations have begun for the tie-up between Qantas and Emirates.
Preparations have begun for the tie-up between Qantas and Emirates. Photo: Nic Walker

Qantas has cut its order for Boeing 787 Dreamliners for its Jetstar subsidiary as the low-cost carrier prepares for slower growth on its long-haul routes.

Qantas was planning to replace 11 widebodied Airbus A330s in the Jetstar fleet with 15 Dreamliners, but has trimmed its order to 14.

The airline insists the move is unrelated to recent troubles affecting Dreamliner fleets, which have been grounded by US and Japanese airlines while technical problems are investigated.

Jetstar is still expected to pick up its first Dreamliner later this year.

Qantas chief executive Alan Joyce said plans for Jetstar to continue growing hadn't changed.

"While the plan is for Jetstar's long haul network to keep expanding we are using the flexibility in our agreement with Boeing to cancel a firm order knowing that we can replace it with one of our 50 options for this aircraft down the track, and with a full view of what market conditions are like at the time," Mr Joyce said in a statement on Friday.

With Qantas' 50 options to purchase Boeing 787-8 and the larger 787-9 aircraft from 2016, it could still put a 15th Dreamliner in the Jetstar fleet if it wished to and if conditions supported more growth at Jetstar.

The decision to reduce its 787 order was made late in 2012, Qantas said, before the Dreamliner's grounding by regulators in the US on Thursday and an investigation into the aircraft's lithium ion battery.

Mr Joyce said Qantas remained firmly committed to the Dreamliner and was confident current technical issues would be resolved by Boeing.

Meanwhile, Qantas said it was leasing a further five Boeing 717 aircraft and Bombardier Q400 turboprops, due to arrive in the second half of 2013, to support more regional flying.

Qantas said the changes would have no impact on the company's planned capital expenditure, expected to be $1.8 billion in 2012/13 and $1.9 billion in 2013/14.

Meanwhile, the airline will begin selling fares for flights on its new network with Emirates within weeks after the competition regulator allowed the airlines to begin laying the ground work for their alliance.

The Australian Competition and Consumer Commission has decided to allow Qantas and Emirates to begin implementing their alliance because of the "long lead time required to market and sell tickets before the commencement of long-haul services".

The regulator has not allowed them to begin early preparations across the Tasman route, after it raised concerns last month about the impact on flights between Australia and New Zealand.

The airlines still require final approval - expected in March - for their alliance. Last month the ACCC gave tentative approval for the tie-up, which is focused on routes between Australia and Europe.

The regulator's granting on Thursday of "interim authorisation" will allow Qantas and Emirates to begin discussions on joint sales and pricing strategy, system integration and testing, customer handling, joint marketing, and scheduling and capacity co-ordination.

"Under interim authorisation, the applicants will be able to begin activities that will enhance the product and service offerings to Qantas and Emirates customers," ACCC chairman Rod Sims said.

"In making its decision, the ACCC has accepted written assurances from the parties that should the ACCC ultimately decide not to allow the alliance to go ahead, the airlines will accommodate consumers' bookings."

Qantas said fares on a combined network with Emirates were expected to be available within weeks once discussions on pricing had taken place. It would be for travel from April.

After ditching their request for "interim authorisation" in October, the airlines reapplied last month after the competition regulator gave tentative approval for their deal.

The proposed tie-up covers routes from Australia to Europe, North Africa, the Middle East, Asia and New Zealand. It will result in Qantas shifting its hub for European flights from Singapore to Dubai.

The ACCC gave tentative approval last month to the alliance because it was likely to lead to "material, although not substantial" benefits to consumers.

But in that draft decision the regulator indicated that it intends to knock back the two airlines' request for anti-trust approval to be granted for 10 years, deciding that half that time frame is more appropriate.

Aspects of the deal still need approval from regulators in New Zealand and Singapore.

New Zealand's Transport Minister, Gerry Brownlee, will decide whether the two airlines can extend their alliance to the trans-Tasman route.

AAP with Matt O'Sullivan

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