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State wars: Qantas to promote NSW

Qantas Airways (ASX: QAN) has inked a deal with the NSW government in a $30 million partnership to attract more visitors from the US, UK, Europe, China, Japan and south-east Asia.

Both parties will invest $15 million each to promote Sydney and regional NSW to international visitors, after Qantas scrapped its deal with Tourism Australia in November last year.

NSW Premier Barry O’Farrell says Qantas would match the government dollar-for-dollar in the three year deal. “We will be aggressively targeting big spending leisure and business travellers from overseas which will be a boon for our hotel, restaurant and retail sector,” he said.

Qantas boss Alan Joyce said Qantas had brought 1.2 million visitors to Sydney in 2012. He added, “Sydney is the gateway to Australia with more than 50 per cent of all international visitors to Australia arrive at Sydney Airport. So it’s fitting this is the largest partnership we have ever entered into with a state government.”

Qantas canned its deal with Tourism Australia last year after falling out with Geoff Dixon, former Qantas boss, and chairman of Tourism Australia. Mr Dixon was part of a group of investors, including former ad exec John Singleton and investment banker Mark Carnegie, who bought into Qantas last year, and agitated for a change of strategy. Mr Joyce accused Mr Dixon of a conflict of interest, which was denied.

That put paid to a deal worth $44 million over four years and 40 years of collaboration prior to the fall out.

NSW currently gets 2.8 million visitors each year compared to Victoria’s 1.8 million, according to The Australian, and NSW has plans to increase its tourism expenditure to over $36 billion by the end of 2020. The deal announced today will also encourage more Australians to visit NSW for both business and leisure.

The news will be a boost for NSW, with news out today that Victoria’s Avalon had been cleared to receive international flights from the Philippines, giving Melbourne two, curfew-free, international airports, against Sydney’s single airport with a curfew between 11pm and 6am.

Qantas is taking several strides to compete more effectively against the likes of Virgin Australia Holdings (ASX: VAH) domestically and other international airlines. The recently approved tie-up with Emirates, should see Qantas’ international division return to profitability, while the airline expands its Asian presence. Qantas has also revamped its uniforms for 12,600 workers, and is rumoured to be looking at selling its long-term terminal leases at four airports, which could bring in as much as $1 billion.

In the past six months Qantas shares have soared by more than 33%, compared to the S&P / ASX 200 Index’s (Index: ^AXJO) (ASX: XJO) 9%, with investors taking a liking to the airline’s new strategy.

Foolish takeaway

More than 50% of all international visitors currently arrive at Sydney Airport – something Qantas and NSW want to take advantage of – before Victoria, with its two international airports in Melbourne, starts to gain traction.

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