The formatting is better and plenty more discussion of on the 777 purchase (non) decision in the
link.
Mr Joyce : I think it is a good example, that this is not the panacea or the holy grail that solves your international problems. He is
absolutely right: Air New Zealand have a large a large number of 777s and they recently replaced their 747s. But Air New Zealand are
going through the exact same problems as Qantas with its international operation. Air New Zealand recently reported that its international
business is losing over $50 million—a million dollars a week. Since Qantas is five times the size of that business internationally, that
is roughly the same proportion of the losses we are experiencing in our international business. The Australian dollar has affected us more
than the New Zealand dollar would have and we have got a lot more competition coming into this market. He says that the 777 has not
been the panacea for Air New Zealand and has not turned around their international business. Air New Zealand are going through a
comprehensive review of their business like we are.
Can I talk about the fleet decisions. My background has been in fleet planning for a number of different airlines. It is a topic I am very
passionate about and a topic I do know a bit about. If you go back on the history of this, it would be very easy for me, as the current CEO,
to blame the problems we have today on the previous decisions that were made on the fleet, because the fleet decisions were made back in 2000.
I think it was at that point that they made the decision to go with the A380s. People are glossing over the history of this. First of all, every airline's
fleet decisions are different. An aircraft that works for one airline may not necessarily work for another airline. Qantas has a unique operation
internationally. It has superlong-haul routes that operate all around the world and because we have these superlong-haul routes there are what
we call scheduling windows that work for the services for our biggest markets, which are to the UK and LA. For example, if you go to LA, at around
10 o'clock to midnight every night five or six Qantas aircraft all depart at the same time. Why is that? We like to get the aircraft out before midnight
because it is a good local time. We cannot move them any earlier. If we move them any earlier out of LA, they hit the curfew—for example, in
Sydney—or arrive at an unacceptable time at the other airports. That means we do not need frequency. We do not need another service to
Sydney between 10 and midnight every night out of LA.
The best aircraft for us is actually a bigger aircraft to allow us to grow. The A380 was the decision that we made in 2000 because it is the
best aircraft to LA. It has a lower seat-mile cost than the 777 because of its size. It is the same to London. If you look at a London schedule,
the timings that work to London are an early afternoon service out of Australia. It has to arrive in Singapore before midnight and it has to
depart Singapore at that time to get into London early in the morning—usually arriving at five o'clock. Other timing does not work. There is no
point in us adding more frequencies to the London market because it does not give us any benefits. Therefore, the A380 is the better aircraft t
o London and to LA because of those scheduling windows. Then I look at Asia. The next question is: 'Why didn't you go for the 777s into Asia?
That would have helped your operations there.' Certainly the 777 is a good vehicle but when we were making decisions back in 2008, the aircraft
did not have the range. Not only was it not the right size, in our mind, or have the right economics compared to the 380; it did not have the
range to go into North America or into Europe.
It was only in 2003-04 when Boeing produced the 777 300ER that the aircraft became a viable vehicle for us. At that stage we had already
committed to the A380 and we already were of the opinion that Boeing was going to produce a new aircraft, the 787. The 787 then became
a very interesting vehicle for us because not only is it a good vehicle into Asia also it has lower trip costs than the 777. Lower trip costs are
important because frequency into Asia does matter. The 787 is a smaller aircraft and allows us to put frequencies in, and we want to do is
service more destinations.
The 787 has another advantage: it is an aircraft we could use domestically. The 777 could not be used domestically. It is too big. It would
need major changes to the infrastructure at our domestic terminals. It is an aircraft within a domestic consideration that could have over 400
seats and it is too big to operate on a lot of domestic operations. As a consequence of that, we believe that the 787 was going to be a better
aircraft than the 777 and it gives us a leapfrog in technology, and that is why we went for the 787. It would be great if I could go back and
criticise the decision and say that we are fixing the fleet going forward to recover the international issues, but the truth is they are the right fleet
decisions, they were the right fleet decisions for Qantas's network and Qantas's operations, and I do fully support them.
CHAIR: Okay. It is unfortunately beyond your control that Boeing are not holding up their part of the deal in delivery.
Mr Joyce : Yes.
Rural and Regional Affairs and Transport Legislation Committee 06/02/2012