(Sydney, AUS) - Australia's competition watchdog on Wednesday gave final approval for Qantas and Emirates to launch a "game-changing" global alliance, saying the tie-up will benefit passengers.
The decision by the Australian Competition and Consumer Commission, widely expected after a preliminary green light in December, allows the airlines to combine operations for five years.
Under the alliance, they will coordinate ticket prices and flight schedules and struggling Qantas will shift its hub for European flights from Singapore to Emirates' Dubai base.
It also means an end to Qantas's partnership with British Airways on the so-called kangaroo route to London, which has spanned nearly two decades.
"The ACCC considers that the alliance is likely to result in public benefits through enhanced products and service offerings by the airlines, and improved operating efficiency," ACCC chairman Rod Sims said.
The decision comes after a six-month review and just days before the first joint flight from Sydney to London, via Dubai, is scheduled on March 31.
However, the regulator said it was concerned that New Zealand was a key market where competition could be eroded.
To deal with this it imposed a condition on flights between Australia and New Zealand, forcing the airlines to maintain existing capacity on four overlapping trans-Tasman routes that were in operation before the alliance.
"With this condition, the ACCC is satisfied that the relevant net public benefit tests are met," the regulator said.
The alliance is seen as vital to the sustainability of Qantas, which last year posted its first annual deficit since privatisation in 1995, due to tough regional competition and high fuel costs for its international arm.
Qantas chief Alan Joyce called it good news for travellers and Australian tourism.
"Qantas is an Australian icon and the future of its international business is much brighter with this partnership," he said, with its share price rising 1.74 percent to Aus$1.75 (US$1.84) in afternoon trade.
"Customers are already responding very strongly to the joint network that Qantas and Emirates have built, and to the frequent flyer benefits that extend across it, with a significant increase in bookings."
With services to Asia no longer tied to onward links to Europe, Qantas recently announced that new direct destinations from Australia are being considered, including Beijing, Seoul, Mumbai, Delhi and Tokyo-Haneda.
For Emirates customers, it opens up Qantas's Australian domestic network of more than 50 destinations and nearly 5,000 flights per week.
"This is a truly game-changing partnership that brings together two of the world's best airlines and offers some of the highest quality travel experiences," said Emirates chief Tim Clark.
Dubai Airports has earmarked major funds to further expand the capacity of the international travel hub and expects to handle 75 million passengers by 2015 and 98 million by 2020.
Australian Transport Minister Anthony Albanese forecast lower fares for air travellers as a consequence of the deal.
"The Flying Kangaroo has a special place in the heart of all Australians and this is good news for Australian travellers and the Australian economy," he said.
"Millions of travellers stand to benefit from cheaper fares, reduced travel times and greater access to more destinations in the Middle East, Africa and Europe."