The most extreme interpretation of Qantas’s decision to cancel 35 firm orders for Boeing 787 Dreamliners is that the move represents a step toward the inevitable end of the Flying Kangaroo’s iconic overseas services.
Saddled with a high legacy cost base and obvious geographic disadvantages – the thinking here goes – Qantas simply cannot compete with Middle Eastern and Asian airlines, and is choosing to wind up its haemorrhaging international operations while there’s still time to save its profitable domestic business. International flights would be turned over to the much cheaper-to-operate Jetstar and, perhaps, a revived version of the Asia-based premium carrier Qantas has sought to get off the ground in recent years.
Needless to say, this rather dire picture is not the one Qantas CEO Alan Joyce sought to paint today as he unveiled the carrier’s $244 million loss for the last financial year. Rather, Mr Joyce was quick to point out that Qantas retains options to purchase 50 of the carbon composite 787-9s – meaning in theory that the Dreamliner could join Qantas’s fleet by 2016, only two years later than the first of the 35 firm orders was scheduled to arrive. Qantas will also go ahead with 15 firm orders for 787-8s scheduled for delivery starting next year, though the fact that these will join the Jetstar fleet tends to highlight the less rosy prognostications for Qantas International’s future.
To be sure, Qantas’s original order for 65 787s, placed way back in the halcyon days of 2005, seems wildly optimistic today. As its $244 million loss last financial year makes clear, Qantas International has problems that can’t be solved simply with more fuel efficient planes. But as the Flying Kangaroo’s moves today also make clear, the airline did well to retain significant flexibility in that deal. Even with the cancellations, in the medium term Qantas remains in line to receive as many of the fuel-saving 787s as it is likely to want. The real question is not only how many of the aircraft Qantas will want, but whether those aircraft will be headed to a revived Qantas International or to Jetstar, Qantas Domestic or somewhere else.
That’s anyone’s guess, and with Qantas’s apparently-serious talks with Emirates over a codesharing alliance still hanging in the balance, there’s another shoe yet to drop. If Qantas’s decision today is a clear indication of anything, however, it’s that the airline no longer views more efficient aircraft as a viable short-term fix for an international operation that needs to be fixed pretty quickly. And that points to the likelihood that – even if Qantas International survives – it’s likely to keep on shrinking.