Shortsighted?

Some in the industry privately suggest the cancellation is a perfect example of why an airline shouldn’t be privatised for the share market has little – read no – appetite for airlines.

What’s more Qantas simply doesn’t have a strategy for the deployment of the 787 – other than to Jetstar – because of uncertainty in the industrial landscape which will likely flare up again in two or so years and exactly how the new Emirate alliance announced on September 6 will play out.

And the watershed deal with Emirates was clearly pivotal in the 787 decision with Qantas essentially marrying itself to the world’s largest and most successful international airline, immediately reducing the need for additional capacity.

The Emirates alliance has enabled Qantas to tap into the economics and popularity of the 777-300ER, an aircraft it has passed over too many times, a massive European and Middle East route network and a significantly lower cost base.

However, while the dilemma over equipment and network into Europe is solved, Asia, the Americas and Australian domestic operations beg equipment solutions.

Game Changer

The 787-9 and potentially the -10 are compelling for Qantas – if for no other reason that its competitors will have them.

Make no mistake the 787 is a game changer in every respect whether for economics or passenger appeal.

Boeing chairman and chief executive Jim McNerney likes to call it the biggest step change since the Boeing 707, while a recent All Nippon Airways passenger survey makes sobering reading for any airline that does not have commitments for the 787 – or A350.

The survey of 800 passengers on ANA’s Frankfurt service found that nine in ten passengers found their overall experience met or exceeded expectations, which is remarkable considering the enormous hype surrounding the 787.

A similar number expressed a preference or strong preference for flying in the 787 over other aircraft and a quarter of passengers said they would go out of their way to book a flight on the 787 again.

Four in five passengers said the higher humidity levels in the 787 – made possible by the composite fuselage structure – met or exceeded expectations while 92 per cent responded that cabin ambience was as good as or better than they had expected.

Passengers also lauded the air quality, cabin pressure, cabin lighting, personal space and smoothness of the flight.

Importantly and not unexpectedly the survey found that appreciation of the unique characteristics of the 787 was

greater amongst frequent flyers.

Some 98 per cent of passengers said they would fly on the 787 again or go out of their way to do so.

Those are the sort of numbers that British European Airways boasted of with its turboprop Vickers Viscounts in the 1950s, which incredibly catapulted it to the world’s fifth biggest airline.

The Viscount entered service in April 1953 on the London-Rome-AthensCyprus route for BEA and was an immediate success. Passengers loved the Viscount, which featured enormous oval picture windows affording a magnificent view. The Viscount’s turbine engines produced excellent speed and were virtually vibration free.

Its impact for BEA was extraordinary.

The profits the airline made from operating the Viscount offset the losses by its other aircraft, putting BEA into profit.

At home in Australia the Viscount was a major factor in the demise of Australian National Airlines (ANA).

The government-owned Trans Australia Airlines (TAA) ordered the almost vibration free Viscounts while ANA opted for the larger, slower and noisier DC-6Bs.

Passengers flocked to the Viscount and, as with the DC-3 20 years earlier, the aircraft was a game-changer.

When ANA collapsed in 1957 and was taken over by Ansett the government introduced the Two Airline Policy to ensure the survival of two airlines. TAA was forced to swap three of its Viscounts for two of Ansett-ANA’s DC-6Bs.

For decades TAA was forced to buy whatever aircraft Ansett-ANA could afford or wanted.

The introduction of jets and the jumbo era also demanded airlines re-equip or face oblivion.

Qantas faces massive 787 competition with Air New Zealand getting its first 787s from 2014 and almost certainly Virgin Australia in 2016. And those airlines’ alliance partners Singapore Airlines and Etihad are also large adopters of the 787.

Qantas could face a 787 blitz from 2014.

In fact there are many at Virgin Australia who suggest and fear some of the initial 787-8s earmarked for Jetstar could arrive in Qantas colours next year (our title image shows a 787-8 in the old Qantas colours).

And the reborn United/Continental tag team has a large fleet of 787s about to start services across the North Pacific and it could easily deploy these to replace its ageing 747-400s on South Pacific routes. Air Canada is also a 787 customer.

And there are the giant Chinese airlines with China Southern flagging that it will operate the 787 to Sydney.

Qantas has already found that its 767s are no competition for the 777 and the 787 is a quantum leap again.

Economics

While financial analysts – who have no interest in history – may argue that an airline’s overall network is more important than an aircraft type the 787’s economics also make it compelling.

The importance of the 787’s fuel saving and the high profile cancellation of the order promoted New York-based analysts Bernstein Research, which covers aircraft manufacturers, to issue a special research note on the issue.

It said the cancellation was a Qantas problem and warned Airbus that the airline group may cancel A320s as well.

It warned that Qantas faces a downward spiral if it does not take delivery of the

787s, saying that the airline faced increased competition and even higher fuel prices.

“We believe that these planes [787s] will be a necessity and Qantas could find itself in a downward spiral if it does not have planes that provide competitive fuel efficiency in 2016-18,” said Bernstein.

Bernstein warns that Qantas “is in a particularly difficult position as it faces intense competition on its long-haul routes”.

It added that “long term, Qantas also faces increasing pressure on its short-haul network due to low-cost carriers operating in Australia and to Asia.

However, Bernstein added – and in defence of Qantas CEO Alan Joyce’s cuts – that at Qantas, “there is huge uncertainty as to what its long-term network will look like in size and scope, so locking down deliveries could be seen as a risk. ” The 35 cancelled 787s were scheduled to be delivered between 2014 and 2017 but Joyce told Australian Aviation at the time that the airline “remains committed” to the 787.

Originally the airline placed a firm order for 65 of the revolutionary planes with 50 options but this has been slashed to just 15 firm orders – the 787-8s for its low-cost subsidiary Jetstar – with the latest cancellation.

The Jetstar 787s will be delivered from 2013 and the 50 options have been brought forward two years to start from 2016.

At the Emirates/Qantas alliance announcement Joyce again stressed to Australian Aviation that the 787 was coming to Qantas.

And Boeing staff in Seattle confirmed off record that the airline has earmarked delivery slots for its options.

The Emirates tie-up in fact gives the delivery to Qantas of the 787 more credibility.

One fascinating option is that Qantas could base and register a substantial number in Dubai and operate them into Europe with Emirates codesharing.

OCTOBER 2012 AUSTRALIAN AVIATION An example is Paris where Emirates would operate a double daily A380 and Qantas a 787.

It could be an awesome and fascinating tag-team.

Joyce reiterate to Australian Aviation that the “787 is an amazing aircraft” and the Dubai hub offered a host of opportunities for 787 destinations in Europe.

Emirates president and CEO Tim Clark also confirmed that the deal was also about Qantas returning in its on right to destinations in Europe that it had abandoned years ago.

The Emirates alliance and the 787-9 also provide fresh opportunities for Qantas to fly to more destination in the US.

It could re-enter the San Francisco market and fly to Seattle for the first time to link up with EK’s services.

Clark told Australian Aviation that while the airline had no immediate plans to codeshare across the Pacific that option would be explored in due course.

“The initial focus is European and Middle East and then we will look further,” he said.

Once regulators tick off the Emirates alliance, Qantas and its pilots need to quickly resolve a long-term pay structure for the 787 – not a two-year breathing space.

For the Qantas/Emirates deal to work to its full potential the Australian carrier must have industrial harmony.

The stark reality is that Qantas can codeshare on more and more Emirates flights.

However, Qantas needs the 787 for Asian, Pacific and Australian domestic operations and the 50 options it still has would appear to be the bare minimum number required.

There is no question the 787 will wipe the floor of its opposition and by 2016 Qantas will face armadas of Dreamliners.

And while the Emirates deal is inspirational the 787 will be a massive rallying point for Qantas staff as the aircraft is a quantum leap forward.

It would give Qantas unprecedented flexibility.