QANTAS: Big mistake, HUGE! When Joyce cancelled Boeing 787 orders.
Qantas late last month announced the delivery of the final aircraft in its order of 14 of Boeing’s 787 Dreamliner jets. But if we cast out minds back, you might remember that soon-to-retire CEO, Alan Joyce originally had options for over 90 aircraft.
According to the AFR, Joyce cancelled options for 35 Dreamliners in 2012 and a further 50 later, leaving Qantas with the 14 they now have in service. Cancelling or severely modifying an aircraft order is not unusual in the aviation industry. Needs change over time, as do airline strategies, so aircraft orders need to reflect that.
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Ageing planes, and a tight market
The problem for Qantas now is twofold. It has an ageing fleet, particularly with its 24 Airbus A330s largely servicing international routes. At the same time, new aircraft are in high demand worldwide as passenger pandemic caution reduces.
In fact, demand is unprecedented, which applies to passenger seats and the planes that house them. Every airline is after new aircraft, so manufacturers are running out of delivery slots, and the pressure is off to provide the usual discounts and deals on orders. Not only is the demand for the delivery of new aircraft unprecedented, the call on maintenance facilities to return aircraft to the skies, and to refurbish their interiors has never been greater.
Qantas Fleet renewal
What does all this mean for Qantas with its ageing domestic fleet of Boeing 737s and international fleet of A330s, 787s A380s and yet-to-be-delivered Project Sunrise A350s? It means that getting replacement planes already ordered on time will be a challenge, and ordering new aircraft for delivery before the end of the decade, is nigh impossible.
Expect to get an update on the next phase of fleet renewal plans when Qantas updates the market this month. The AFR is reporting that Qantas may
‘… be compelled to order the same Dreamliners it once held purchase options over and subsequently tore up.’Ayesha de Kretser, Australian Financial Review. August 6, 2023
Joyce may have to eat his cancelled options, or more likely, he will let incoming CEO Vanessa Hudson announce since she said last month that the process of replacing those A330s would be flagged in the 2nd half of the year – which we are definitely in.
Juggle, jiggle, juggle
According to analysts reported in the AFR, Qantas is faced with a bit of a juggling act. It will need to look at its requirements and then measure them against available delivery slots for various aircraft. Its options include the Airbus A350s and A330 neos, as well as potentially the Boeing 787 Dreamliners. Add to the equation the arrival of those Project Sunrise A350s, now expected in late 2025, which is likely to actually be 2026.
Qantas has previously announced that it will start receiving 20 Airbus A321XLRs and 20 A220-300s as part of ‘Project Winton’, its renewal plan for narrow-body jets to replace Boeing 737s and 717s. Qantas has purchase right options for another 94 aircraft for delivery over the next decade.
That’s all well and good and will give them a developing fleet of aircraft with lower emissions, longer range, quieter performance and better operation economics. But, it doesn’t tell us what will replace those aging A330s.
Whatever Qantas decides to order as a replacement for the A330s, ordering now will prove a lot more expensive. Delivery dates will be even further in the future than they were three years ago pre-pandemic.
And what does that mean for consumers? Presuming demand continues at an unprecedented pace, as analysts predict, airfares will remain high for much longer than predicted. However, with inflation at the highest rates for a decade internationally, demand might ease. Then the pressure might be off Qantas to increase capacity. But it still needs to replace those ageing A330s, and a long queue for aircraft delivery remains.
I look forward to the next Qantas market update. It could be next week that we get the final piece of their fleet renewal jigsaw puzzle