Qantas/Emirates: Dubai gets an upgrade

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Qantas has ditched its alliance with British Airways for Dubai’s Emirates airline, in a further sign of the shifting balance of power from Europe’s legacy carriers to the Gulf.

As part of the 10-year deal, the Australian carrier will move its long-haul hub from Singapore to Dubai, where Emirates’s cavernous Terminal 3 building is already filling up to the rafters. The move dovetails with Dubai’s plan to ramp up capacity through Dubai airport to match the airline’s aggressive expansion plan and boost the number of passengers travelling through the emirate.

After its calamitous debt problems in 2009, the city has recovered thanks to a return to its basics: trade, travel and tourism.

The idea has meshed into the concept of Dubai as an “aerotropolis,” with the city of 2m residents – mostly expatriates – increasingly serving an emirate devoted to facilitating the flow of people, goods and, crucially, money for an ever expanding region.

Aviation and related businesses already account for a fifth of Dubai’s employment and almost a third of GDP, according to government estimates.

Once, Dubai wanted merely to be the hub for the Gulf. Now, its horizons have stretched to the extent where it wants to cement its position as the leading entrepôt between Europe and south-east Asia.

The deal with Qantas can be expected to shift even more Australian travellers onto Dubai’s Emirates, given the access it will bring to Qantas’s network of 50-odd domestic Australian routes.

Aussie accents are already a given for regular travellers on Emirates flights, especially on European routes.

Dubai will welcome as many new faces as possible. The city is already planning an increase of passenger capacity from 60m a year to 90m by 2018 as it spends $7.8bn on expanding the existing airfield, equivalent to twice the size of Heathrow’s Terminal 5.

The bigger question is the pace at which funds will be deployed at Al Maktoum airport at Dubai World Central, located on the other side of the city near the emirate’s large Jebel Ali port. Restricted to cargo for now, the airport is scheduled to expand into low-cost airlines and, later, to become a new hub for Emirates once construction is finished on a second phase, delivering an additional 80m passengers a year capacity.

As Dubai focuses on refinancing existing debt obligations of its $110bn debt pile, little thought has so far been given to funding this longer-term expansion plan.

But if there is one sector that could attract investor interest and bank funding, it would appear to be the city’s thriving aviation business.

Notching up wins like the Qantas agreement may persuade planners to take a longer term view about the state’s infrastructure requirements.

Related reading:
Qantas / Emirates – long haul to recovery, Lex
Qantas and Emirates discuss partnership, FT
Emirates feels the fuel squeeze, beyondbrics

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