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Qantas will cancel firm orders for 35 Boeing 787-9 Dreamliners after posting a worse than expected $244 million statutory loss last financial year.
The loss, a nearly half-billion dollar swing from the previous year’s $250 million profit, was blamed on high fuel prices, the cost of Qantas’ industrial dispute and intense competition.
Qantas posted pre-tax profits of $95 million on revenues of $15.7 billion for the financial year that ended in June, CEO Alan Joyce told a Sydney news conference this morning.
As expected, Qantas’ international business lost $450 million as it struggles to compete with lower-cost carriers based in the Middle East and Asia. Qantas’ domestic business remained profitable but faces an increasingly intense challenge from Virgin Australia. Virgin is expected to announce its financial results next week.
Mr. Joyce said Qantas had made “significant progress” in its overall strategy, with investment in new aircraft giving the airline its youngest fleet since Qantas went public in 1995.
Qantas still plans to take delivery of 15 787-8s in the second half of next year. Those aircraft will be transferred to Jetstar, with Jetstar A330s in turn transferred to the mainline brand, allowing Qantas to begin phasing out its ageing Boeing 767s.
The 35 cancelled 787-9s had been scheduled for delivery beginning in 2014. The cancellation will reduce capital expenditure by US$8.5 billion based on list prices, though the actual savings will be less than that since airline’s typically negotiate significant discounts on aircraft orders.
Qantas retains options and purchase rights on a further 50 787-9s, and Mr. Joyce said the airline would bring those options forward to 2016, resulting in at least a two year delay of the Dreamliner’s introduction into Qantas service. The moves leave Qantas International with no firm aircraft orders.
This story is being updated throughout the morning.
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Tom
says:Alan Joyce has now lost my support. Unbelievable.
random
says:The Qantas conundrum….. can’t perform effectively as an ultra-premium airline, too expensive as a low cost carrier, and burnt its spiritual advantage of unimpeachable maintenance standards trying to survive.
Unfortunately what this is really saying is that there are very few if any routes that Qantas International can effectively compete on – which is a big statement to make – It’s a sad day when that’s the conclusion. It seems however a little bit unclear what role Qantas management has had to play in this over the past decade (including Joyce). One would have to suggest that over the past 10 years they have bungled aircraft selection (general concensus says they should have 777s), and have bungled route selection (it’s hard to believe that the only routes that really suit Qantas International are London, LA, Dallas, Jo’Burg, Singapore, and Buenos, give or take a couple). Surely there are other city pairs that could turn a profit?
Admittedly Australia is being “punished” for being a geographical extremity (ie the end point of very long routes from any direction), which makes it nigh on impossible to generate through traffic – which seems to be one notable reason why Asia and The Middle East are now growing so rapidly. It doesn’t really matter where the traffic originates and where it’s going, providing it can be routed via their home base, and being geographically in the middle gives them a cruel advantage. This does beg the question, how different might Qantas’ plight be if and when technology and manufacturers support an economic aircraft range of 18,000km direct, thus removing the requirement to one-stop the longest legs. Places like Bahrain suffered immeasurably from the first range extension of aircraft like the 747 – might the same occur again if the longest legs could become no stop.
To return to a previous point, it’s hard to believe that no-one inside Qantas can dream up new routes that might make Qantas Intl a profitable concern – its a sad indictment on management when that’s the case. Add to that the cancellation of 787 orders which might just have given Qantas Intl the capacity to profitably consider new city pairs, and it’s a very uncertain path that lies ahead.
iflyvirginnow
says:Alan Joyce, you’ve lost the plot. Resign.
stuart
says:if anyone doubts joyce is here to wreck qantas ,heres your answer.
Brian Richard Allen
says:Tom says that Mr Joyce has lost his support but the reality is that the Gillard Gang and its mobbed-up “work choice” and aeroplane plumber and other union sub-crime-families are the ones who are systemically destroying QANTAS and who deserve our derision.
Tim
says:The mistake of the last decade was not buying the B777. To cancel the 787 order indicates that they still have no confidence in climbing out of this hole. Sadly all that will be left is Jetsar. An airline that still does not understand what the word schedule actually means. As others have said Australia deserves an airline that is not the preserve of greedy Qantas staff and their union mates.
Nigel
says:The way I read it is Qantas will get paid $430 million by Boeing to delay purchases of 787’s by 2 years and make further savings in the way of interest from the delay of the capital expenditure program. It doesn’t say Qantas are not buying 787’s all together. Another way to look at it would getting 787’s 2 years earlier make more than $430 million + interest to the balance sheets just to break even? Seems like it could be a smart move if they have done the sums.
schmilsa
says:AJ is not the one to blame, Dixon and the other snakes are using him to deplete the airline to the bottom line and get rid of everyone and start it all over again, despite what it costs to the goodwill of the country and the once proud airline we knew. The snake dixon didn’t have the balls to sort the problems out himself years ago with making decisions, so he hides behind the leprecorn who will be cut loose. JB would never have done this to a once good airline, no wonder he left I would