QANTAS boss Alan Joyce believes the arrival of its new Boeing 787 Dreamliners can help the airline slash domestic mainline costs by 10 percentage points and narrow the competitive gap with rival Virgin Australia.
The cost base of the mainline Qantas operations is 10-15 per cent higher than Virgin's, and Mr Joyce hopes he can reduce the differential to about 5 per cent.
The first 787 is due to land in Melbourne tomorrow and the decision to send the fleet of 14 aircraft to Jetstar will see Qantas receive the low-cost carrier's 11 Airbus A330-200s between now and late 2015. This will allow Qantas Domestic to retire ageing, fuel-guzzling Boeing 767s and simplify its domestic fleet to two types: the A330-200s and Boeing 737-800s. "And that means it has a clean fleet," Mr Joyce said. "Qantas mainline will only be operating A330-200s and 737-800s by 2015 when this is all done, and that gives us a huge cost reduction. We think our cost base will get down to below 5 per cent compared to where Virgin is and that's a big movement."
Mr Joyce said the arrival of the 787s would put the lowest cost aircraft into Jetstar, allowing it to offer lower airfares and giving it a competitive advantage over other low-cost carriers.
Jetstar group chief executive Jayne Hrdlicka said the new aircraft, which burn less fuel and are cheaper to maintain, would deliver savings across the board of about 20 per cent.
"For Jetstar it's fantastic,"she said. "Three things matter to us. One is meeting our low costs, the other is ensuring that customers enjoy their experience and they want to come back for more; and the third is we've got really happy engaged people who are committed to our model. Now the 787 does all three things."
Mr Joyce said the Qantas fleet this year would be the youngest it had ever been and the average age of its aircraft fleet would drop below that of Singapore Airlines as it retired the 767s.
Fleet renewal was proceeding at its quickest pace, he said.
A presentation to analysts by chief financial officer Gareth Evans showed Qantas plans to take delivery of 96 narrow-body and 13 widebody aircraft in the next five years. It also has 37 options and 268 purchase rights through to December 2025. It expects to retire up to 37 aircraft in the next five years to bring the average fleet age to 7.9 years.
"Since I've been CEO we've taken delivery now of 160 new aircraft -- this will be 161, I think, of the total," Mr Joyce said. "So of a fleet of 300 aircraft in the group, we've replaced half of them in the last four years."
A decision on whether Qantas would take the bigger 787-9 from 2016 would be made once it was clear the international arm was returning to profitability, he said. The options would be considered on an individual basis to give the airline maximum flexibility.
The analysts' presentation showed 787 options would fall due from fiscal year 2017 and fiscal 2020 but purchase rights would go to fiscal 2025. Five would fall due in FY2017, six the following year, seven in FY2019 and two in fiscal 2020. "Those aircraft have amazing range," Mr Joyce said.
"They can fly just about anywhere in Asia, so they'll give us a lot more opportunities to set up and operate new routes. But we will not have to make a decision until 2016 and it is part of our plan to turn around Qantas International and get it back to break even in 2015. When that has been achieved we make a decision on when we take the 787-9s."
Steve Creedy travelled to Seattle courtesy of Boeing and Qantas.
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