Qantas fleet Choices:A Perspective
Summary
Cutting out premium seating undermines an already precarious business case for the A380 – did Qantas prematurely write off the 777-300ER as well as 747-8 Intercontinental?
Analysis
Former CEO Geoff Dixon was one of the first to lambaste the 747-8 Intercontinental. As part of the original “Working Together” advisory group, Qantas is the only member not to have purchased a single 777.
Dixon confessed that not buying the 777-300ER had hampered Qantas’ ability to effectively compete with new entrants - and not just on the lucrative Australia-US segment.
With Airbus dilly-dallying on A380 production rates it cannot hope to achieve within even a decade, Qantas faces a mounting prospect of behind left behind its rivals.
The carrier deferred its A380’s, it has delayed, swapped and chopped its 787 orders and yet works towards phasing out its ageing 747-400 fleet with nothing to step in to replace that capacity.
That the airline is considering cutting business class seating from its A380 fleet is a startling indictment at the sheer gravity of the mistake of overbuying a big bird whose “flexibility” in a downturn is as commensurate to using gasoline to extinguish a forest fire.
That’s before we consider that Qantas has a hefty batch of 767-300s that need divesting hurriedly too.
Alan Joyce hasn’t had the dream start to his role he may have wished for. Domestic traffic erosion, Tiger Airways, Virgin Blue and new competition on US routes means Qantas has a rockier future ahead of it – perhaps that’s why Joyce alluded to a decade or more to elapse before Qantas could consider merger overtures.
The common theme in this entire quandary is the over-ambitious pep talks on how the A380 would be all things to all long haul airlines.
Reality has shown it to be everything its not.
Shrinking market, half of the 16 customers have deferred orders, a terminated freighter variant and a volatile production regime that shows no sign of stability.
Qantas has already made moves to drop First Class from a slew of key routes – to consider business class immune is at best a hollow fantasy.
If, as expected, Qantas takes the cull to its business class sections, the very ethos of John Leahy’s “you can break-even at 65% load factor on the A380” mantra evaporates as quickly as the Airbus E-Squared concept response to Boeing’s former Sonic Cruiser.
With Qantas increasing freight operations to the USA and having nothing efficient to fly it on when a rebound occurs means their planning will become unstuck.
Dixon was way too quick to condemn the 747-8 Intercontinental – such incremental growth could slot right into its fleet and global network with no problems. Equally, the 777-300ER could play a fundamental role on European routes that Jetstar hoped to ply 787s with.
For the interim, 777s could play a productive role – even the newest 777-300ER customer in Turkish Airlines is poised to deploy the airplane on routes to Australia.
It takes a big man to make big decisions.
Dixon is no longer at the helm of Qantas, although he was indeed man enough to admit the 777 should have been in the fleet.
The question is whether the Alan Joyce is man enough to bite the bullet and order the 777 and/or 747-8 Intercontinental to make up for the failings of the A380.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
Contributed by a Member of the GLG Energy & Industrials Councils
So, guys how interesting is that?
A Special Industry Insider Report by John Alwyn-Jones – e-TravelBlackbaord’s Special Correspondent.