Qantas defers, cancels 787 orders

“Qantas announced its original B787 order in December 2005, and the operating environment for the world’s airlines has clearly changed dramatically since then,” said Qantas CEO Alan Joyce in announcing the decision. “The agreement we have reached with Boeing will provide greater certainty going forward in terms of our fleet renewal and growth strategies as well as broader resource planning and matching capacity with demand. ” Under the new plan, the Qantas Group’s total order for 787s falls from 65 to 50.

The first 787s to enter Qantas Group service will now be 15 787-9s delivered to Jetstar from 2013. They will be followed by delivery of the 15 787-8s from the fourth quarter of 2014 for Qantas’s domestic operations to allow retirement of the airline’s last 767-300s, while the remaining 20 787-9s will be delivered from the fourth quarter of 2015 to 2017 for both Qantas and Jetstar’s international operations. The company will also retain options/purchase rights on 50 additional 787s.

“The latest delay is disappointing, but we do not expect it to impact the Qantas Group given these changes to our delivery program,” Joyce said.

“We remain committed to the aircraft as the right choice – for Jetstar’s future international expansion, Qantas’s growth and as a replacement for Qantas’s B767-300 fleet. ” The terms of the deal remain confidential, but the company says that the cancellation has saved it approximately US$3bn (A$3. 7bn) in capital expenditure, at list prices. This is likely the key factor in the decision – the airline’s aim to conserve its cash reserves in the current economic environment.

But there are other likely considerations too. Early 787s will be overweight, with some speculation that the operating economics of early build 787-8s won’t be significantly improved over the A330-200 (already in Qantas and Jetstar service), and that payload range performance won’t meet early promises. So defering their delivery means the Qantas Group can wait for a more mature, efficient production standard aircraft.

And the decision also removes some organisational complexity. Under the original delivery plan the first aircraft to be delivered were to be the 15 787-8s, which were to be delivered to Jetstar from next May (at least before the 787’s latest delays), but those aircraft were then to be transferred to Qantas mainline as Jetstar took delivery of the first 787-9s. Instead, with the 787-8s going direct to Qantas, this means the Group will no longer have to reconfigure 787-8s from Jetstar to Qantas seating configurations.

Just days before the 787 order cancellation and deferrals was announced, Jetstar CEO Bruce Buchanan spoke to Australian Aviation about his airline’s growth plans in light of the latest 787 delay, saying the Qantas subsidiary would seek other opportunities to continue to grow, such as its recent commitment to take on a seventh A330. “We’ll continue to pursue alternative opportunities to fill the interim growth opportunities. So like we did last time with A320s, we’ll look to see with the Darwin and Perth hubs to fill that void. ” Nevertheless, he also noted that the Qantas Group believes that the 787 is “the right aircraft in the long run”.

With the 787 now being more than two years late even before first flight – see over – that likely meant Qantas could cancel and defer its 787 orders without penalty.

The original order as announced on December 13 2005 comprised firm orders for 15 787-8s and 30 787-9s, with 20 options and 50 purchase rights.