Qantas chief executive Alan Joyce says the desire to return the airline group to an investment grade credit rating is unrelated to its consideration of a potential order for Boeing 787-9 Dreamliners.
The company has established three criteria that needed to be met before it would consider taking up any of its 50-odd options and purchase rights for the 787-9, namely Qantas International’s return to sustainable profitability, repaying $1 billion of debt and establishing appropriate staff conditions to ensure the business case for the new aircraft type stacks up.
Joyce said suggestions Qantas would have to choose between returning to an investment grade credit rating and purchasing the 787-9 were flawed.
“If we get the debt down and we get the performance where it needs to be with those returns, then we are going to be at the investment grade rating matrix,” Joyce told reporters on the sidelines of the International Air Transport Association (IATA) annual general meeting in Miami on June 7.
“That can be achieved with buying the aircraft in the future. We believe you have to chew gum, walk and sing at the same time.
“You have to be in a position where you are investing continually for the future, you are paying down debt and strengthening your balance sheet and getting yourself back to investment grade and you are giving returns back to shareholders.
“That’s the position we want to get the airline in.”
Qantas International chief executive Gareth Evans said the first 787-9 option was for delivery in late calendar 2017, with the remaining delivery slots spread out over the rest of the decade.
A decision on whether to exercise that first option would be made in the “back half of this year”.
“We’ve got specific pricing, specific delivery slots and the ability to essentially drop and pick up those slots as we desire to do,” Evans said.
“If we went with a new aircraft type, I think there would be an element of replacement and growth added in as well.”
A key plank of the business case for the 787-9 was the recent in-principle agreement between Qantas and the union representing its long-haul pilots for the next enterprise agreement, which included an 18-month pay freeze and provisions for any potential Boeing 787-9 order.
Joyce said the deal, which is due to be voted on by the full membership of the Australian International Pilots Association (AIPA), was “significant” given it was the first time there has been a different arrangement for a new aircraft type.
“That makes that a very productive arrangement going forward and we shouldn’t underestimate the size and the importance of this agreement with the pilots,” Joyce said.
In addition to the options for the Dreamliner, Qantas also has orders for eight Airbus A380s, which have been deferred to a yet-to-be-confirmed date.
Qantas has 12 of the double-decker superjumbos currently, which serve Melbourne, Sydney, Dallas/Fort Worth, Dubai, London Heathrow, Los Angeles and Hong Kong (during peak times) and Evans said that was sufficient for now.
“I think a fleet of 12 works well for us and we will hold onto those planes through their economic life,” Evans said.
Meanwhile, Evans said the alliance with Emirates, now in its third year, has been of mutual benefit to both carriers.
Evans said the two airlines combined had put $1.7 billion worth of revenue on each other’s services through their codesharing arrangement.
Moreover, the number of passengers travelling on QF-coded tickets to Europe was four times higher than before the partnership with Emirates, Evans said, adding that a “significant proportion” of those extra travellers were those that previously flew with the likes of Etihad, Qatar, Singapore Airlines or Cathay Pacific.
“People at the start thought Qantas are just going to be handing their customers over to Emirates. What it has been is much more a partnership of equals,” Evans said.
“We bring the customers, they bring the network and there is mutual benefit that is shared between us.”
Emirates president Tim Clark said recently he hoped to extend the partnership with Qantas beyond 2018.