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Dec 17, 2012

Etihad's Australian tourism pact adds to pressure on Qantas

Etihad Airways helps fill the void caused by Qantas quitting Tourism Australia funding, and ensures that questions about the competency of Qantas management remain in the spotlight in a week when its bid to hand over more of its market to Emirates may get a 'Go' or 'No' from the ACCC.


The question in Australian tourism this morning is how does Qantas recover its relevance to promoting the country to the world?

On 28 November Qantas CEO Alan Joyce withdrew support for the Federal body, Tourism Australia, from the start of the next financial year from 1 July, meaning the loss of $44 million in cash, sponsored promotional travel and other time proven co-operative programs to raise the country’s profile in overseas markets.

The move was aimed at the conflicted position of his predecessor at Qantas, Geoff Dixon, in occupying the chair of Tourism Australia while also being a Joyce critic and party to a potential raid with private equity partners on the various assets that could be stripped out of the airline, notably $3 billion in cash, its frequent flyer program and the Jetstar franchise.

Almost three weeks later Dixon is still at the helm of Tourism Australia, and Qantas competitors are lining up to replace its promotional role, keeping in mind that these co-operative deals are not charitable in nature, but very well constructed programs that seek benefits for the airlines in specific markets by increasing the visitations that will benefit tourism industry stakeholders.

The latest airline to do this is Etihad, with a deal worth $6 million over three years. For a small yet ambitious carrier which also owns 10% of Virgin Australia Holdings, this is a big door opener.

These deals are good business. They make sense. And Qantas won’t be there in Tourism Australia from 1 July.

Or maybe it will. This is, like the death threats scare (which vanished), and the premium single aisle Asia based minority owned Qantas subsidising Red Q airline (which never happened), yet another headline generating tilt that has turned to nothing.

Qantas needs to get out of the situation it is in. It needs to rebuild its connections with national tourism.

This week the ACCC will indicate whether or not it proposes to anoint the proposed Qantas-Emirates business partnership in which Qantas gives all but the Sydney and Melbourne market to Europe to Emirates, and throws in part of its trade to both Asia and New Zealand into the biggest voluntary giveaway of one airline’s business to another airline in aviation history.

There is a degree of inescapable logic in Qantas severing its relationship with Tourism Australia. Under its announced plans with Emirates it won’t even fly between here and Germany from late in 2013, which is one of the most valuable markets for inbound tourism because of the German preference to spend a much longer time than most visitors in this country, travelling widely in the course of extensive itineraries.

With a footprint of only two A380s a day to London Heathrow airport under the proposed Emirates partnership from 1 April, and a Frankfurt flight in shut down mode, there is precious little relevance for Qantas in the Australia-Europe market.

All that it will get out of the partnership will be code-sharing deals, which may reduce the risks of being an international airline, but ultimately diminish the rewards by promoting the use by travellers and tour packaging companies of a different brand, in this case Emirates.

Not that Emirates isn’t enthusiastic in its support for Australian tourism. It even built a world class eco resort in the Wolgan Valley, on the western side of the Blue Mountains.

Singapore Airlines, Emirates, and now Etihad, are associating themselves with brand Australia by improving their co-operative agreements with Tourism Australia.  Qantas, by contrast, has made the mistake of being seen as a dummy spitter, even though the criticisms Joyce makes of Dixon’s involvement in a possible move to take control of its assets are matters of great concern that ought to be pursued and resolved elsewhere.


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