Qantas attempted to break up the alliance between Singapore Airlines and Virgin Australia and turned to Emirates when the approach was rebuffed by the Singaporeans.
The Australian Financial Review has learnt that Qantas executives approached senior figures at Temasek, the state-owned investment vehicle of Singapore and majority shareholder of Singapore Airlines, in an ambitious move to press the advantages of a tie up with Qantas.
The approach was made to Temasek, which owns 56 per cent of Singapore Airlines as part of a $S200 billion portfolio, rather than the Asian carrier because of the frosty relationship between management at the two airlines, sources say.
Qantas pulled out of discussions with Temasek when it became clear the management of Singapore Airlines was not interested in an alliance. It decided to pursue the deal with Emirates, leaving the Singapore option off the table for now, according to sources.
Temsaek is believed to still be open to a tie up between Qantas and the airline it effectively controls. The deal would have encompassed the two premium airlines and their low-cost subsidiaries, JetStar, Tiger Airways and Scoot. As Qantas tries to reverse losses at its international division that ballooned to $450 million last year, Mr Joyce and his management team have been reaching out to potential partners around the world.
Another tie up of similar scope to the Emirates alliance in Asia is considered vital to the future of the mainline Qantas brand within the region - a far more important market than any other in the Qantas network.
Over the past year Qantas has held discussions ranging from preliminary soundings to late-stage negotiations with almost 10 airlines, including Emirates, Singapore, Malaysia Airlines, China Eastern and Latam Airlines in Chile. A Temasek spokeswoman declined to comment. Qantas spokeswoman Sophia Connelly said: "There is always speculation about Qantas. We are regularly in discussions with various airlines, both for Qantas and Jetstar, and we don't comment on those discussions."
Virgin took the airline industry by surprise when it announced a long-term strategic alliance with Singapore, the second largest carrier flying out of Australia after Qantas, a deal which vastly enhanced Virgin's appeal to the corporate market it is targeting within Australia.
Should Singapore entertain a deeper alliance or even a more basic code share arrangement with Qantas, it would be considered a tough deal to secure regulatory approval, considering the respective market shares of the two airlines on the route.
Australian Competition and Consumer chairman Rod Sims said on Thursday yesterday that he would closely examine issues concerning the reduction of capacity or price increases stemming from airline alliances.
"We are aware that Emirates prices generally are lower than Qantas prices. Naturally, we'll look at the price issue closely," Mr Sims said.
Qantas has not abandoned its plan to establish a premium subsidiary airline of its own in Singapore, but with that project on the backburner until economic conditions and the company's financial position improves, a partnership was viewed as the most viable avenue to grow its network in the short term.
Qantas CEO Alan Joyce, who has been in Singapore this week for an investor roadshow, said the Emirates tie up went some way to solving Qantas' problems in Asia because it allowed flights to be retimed to better suit travellers in the region, rather than having a schedule based on connecting flights to Europe.
People close to the situation have suggested the Emirates deal should give Mr Joyce greater confidence to be aggressive in Asia with more point-to-point services to Singapore, Hong Kong, Tokyo, Beijing and Shanghai.
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