Gulf airlines squeezed, says Qantas

QANTAS says its Middle Eastern rivals such as Emirates are struggling to compete on the key route between Australia and Europe and have been forced to reduce flights.

The airline's chief executive, Alan Joyce, said the Middle Eastern airlines were losing substantial amounts of money and faced a ''huge amount of competition'' on the so-called kangaroo route.

''Even Emirates are now struggling with some of the capacity in the Australian market. Emirates have just pulled a service out of Sydney,'' he said yesterday. ''They are finding it very difficult with lower load factors to compete with Qantas and British Airways.''

Qantas is eager to form alliances with other airlines but Mr Joyce said it did not see a need for one with any of the Middle Eastern airlines, which were competing aggressively against so-called ''Asian hub carriers'' such as Singapore Airlines and Malaysia Airlines.

''There is a battle of the hubs happening which Qantas, because of its relationship with British Airways, is staying out of, and its performance is stable,'' he said.

It has had an alliance with BA on the route for more than a decade.

Last week the competition regulator gave interim approval to Virgin Blue's planned alliance with the Middle Eastern Etihad Airline. Mr Joyce said Etihad did approach Qantas for a similar arrangement before it went to Virgin Blue, but he decided it did not make commercial sense.

He also said it would be hard for Virgin Blue to convince regulators to overturn their initial objection to its alliance with Air New Zealand on the trans-Tasman route.

But he said it would be positive for airlines if US regulators dropped their opposition to Virgin Blue's proposed tie-up with Delta on the US-Australia route because it would lead to a much-needed reduction in capacity.

''We believe [the alliance] is a positive thing for the trans-Pacific route to be granted because … rationalisation is needed,'' he said.

He expected the Australia-US route would become profitable for Qantas this year but it was dependent on a recovery in the business market and less fare discounting.

He said it was ''patchy in different markets'' across the Qantas network and Britain and the US were not experiencing the level of recovery evident in the Asia-Pacific region. The airline's yields on international routes had risen 12 to 14 per cent in the first quarter compared to last year.