The final years of Joyce’s tenure as CEO of Qantas will, to a large extent, be determined by the success or otherwise of Project Sunrise.
https://www.afr.com/chanticleer/aust...0191004-p52xsq
Chanticleer[img]https://static.ffx.io/images/$width_220%2C$height_220/t_crop_fill/e_sharpen:25%2Cq_85%2Cf_auto/25cc8c74f48b08a60ab02df02ab9d248a21c0ea2
Australia is Boeing's microcosm
Australia is the battleground for a bare-knuckle fight over which of Boeing or Airbus will supply aircraft for Qantas' so-called Project Sunrise.
Oct 5, 2019 —
Australia is also home to a particularly fierce battle between Boeing and its arch rival, Airbus, for technological supremacy in long-haul aviation. [img]https://static.ffx.io/images/$width_620/t_resize_width/e_sharpen:25%2Cq_85%2Cf_auto/36e443d620af63d2420091b4da12d33552162f93 Boeing's head of international, Sir Michael Arthur, was in Australia this week at an ideal time to prosecute Boeing's case to win a new contract with Qantas. Peter Braig
This bare-knuckle fight is over which company will supply the aircraft for Project Sunrise, which is Qantas chief executive Alan Joyce’s plan to launch non-stop flights from Brisbane, Sydney and Melbourne to London and New York.
The final years of Joyce’s tenure as CEO of Qantas will, to a large extent, be determined by the success or otherwise of Project Sunrise. It is assumed Joyce met Sir Michael but a Boeing spokesman refused to reveal his appointments.
It so happens Sir Michael spoke to Chanticleer about Project Sunrise on the same day the World Trade Organisation ruled European governments had broken WTO rules by giving Airbus illegal subsidies.After 15 years of litigation the WTO said the US could impose tariffs on up to $US7.5 billion ($11.1 billion) in European Union exports.
US Trade Representative Robert Lighthizer said the tariffs on certain EU goods would start on October 18. In the process of announcing the US response, Lighthizer reminded the world the subsidies had harmed Boeing in Australia.
He said the WTO arbitrator found the ‘‘EU aid for Airbus is causing significant lost sales of Boeing large civil aircraft, as well as impeding exports of Boeing large aircraft to the EU, Australia, China, Korea, Singapore, and UAE markets’’.
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Sir Michael is confident Boeing will win the Qantas contract, just as it was successful in winning the Perth to London long-haul route with Qantas. That contract generated about $100 million in publicity for Boeing and Qantas, according to research commissioned by Qantas.
‘‘We think we’ve got a fantastic offering,’’ Sir Michael says.
‘‘Qantas has a challenge that’s unique in the world, and that is the distance factor. From Australia, getting point-to-point to the furthest cities in the world, we think we have a solution for that.’’
He says Boeing likes competition but only on a level playing field. ‘‘We never mind a fight but what we don’t like is an unfair fight,’’ he said.
‘‘The WTO had a statement which said that if they had not had these subsidies some of their aeroplanes would not exist – we believe that’s unfair competition.’’
Joyce said Qantas is working independently with both Boeing and Airbus on the performance and design parameters. A few months ago Qantas received ‘‘best and final’’ offers from both Airbus and Boeing for the aircraft. Both have proven they can do ‘‘critical missions’’ with a commercial payload.
Joyce will be on two Sunrise Project test flights of 787 Dreamliners which are coming off the production line at Boeing’s plant in Seattle over the next few months. They will be positioned in London and New York before being flown non-stop to Sydney.
The success or otherwise of Joyce’s strategy is tied up with the completion of a range of other negotiations with unions and regulators. For example, Qantas has asked pilots for productivity gains in order to make the business case.
At the moment the Civil Aviation Safety Authority does not allow pilots to travel for periods beyond 20 hours and the trip from Sydney to New York would be about 21 hours.
The fight between Boeing and Airbus is getting to the pointy end, with Joyce flagging a decision by the end of the year. This deal will not result in huge volumes of new aircraft being sold to Qantas, but it will have significant flow-on effects for the winning airline.
Qantas is regarded as a global leader in safety and endurance flying and that means the rest of the global aviation market will be keenly interested in what Joyce finally chooses.
Boeing and Airbus have competed fiercely for decades. In fact, there are some in aviation circles who believe their contest to build the most fuel-efficient planes had contributed to
the accidents involving the 737 MAX, which killed 346 people in Indonesia and Ethiopia.
Sir Michael said it was a tough week for Boeing because it was the anniversary of the crash of the Lion Air Flight 610.
Advertisement‘‘This is a tough month for us. We have as a company for the last year been totally focused on how we can get out from that problem, because safety is paramount, and has been for 100 years.
‘‘We have thrown everything at making sure there are no lapses. We have improved the software. The software was one element in the chain of events in the accidents.’’
Safety, quality first
Sir Michael, who joined Boeing five years ago and is the only non-American on the executive committee, says the culture of the company has been shaped by a program called One Boeing.
He says this program puts safety and quality at the forefront of what the company does.
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Sir Michael says Boeing is in daily contact with aviation regulators in the US, but the company is hopeful to have 737 MAX aircraft approved for flight before the end of the year.
‘‘We are confident when they are back in flight, this is the safest plane we have ever made,’’ he says. ‘‘We believe that. It’s not just a word of propaganda. Safety is the core of aviation and that’s what we live to do.’’
Stockmarket investors have not lost confidence in Boeing’s financial prospects because of the 737 MAX safety failures. The stock trades on a forward price earnings multiple of about 75, which is what you would pay for a fast-growing software company.
Only four of the 28 analysts that cover the stock have a ‘‘sell’’ recommendation, while 10 have a ‘‘hold’’ or ‘‘neutral’’ rating and the remainder label the stock a ‘‘buy’’.