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No time machine to change Qantas fleet order – Joyce

written by australianaviation.com.au | March 6, 2014
Qantas has 12 Airbus A380s and six Boeing 747-400ERs in service from a 2000 order. (Rob Finlayson)
Qantas has 12 Airbus A380s and six Boeing 747-400ERs in service from a 2000 order. (Rob Finlayson)

Qantas Group CEO Alan Joyce has suggested his airline’s order for the Airbus A380, A330 and Boeing 747-400ER placed in 2000 was, in hindsight, a mistake.

“It is great to be able to say I wish I could get in a time machine and go back to 2000 and [change] the fleet order [made by] not the last CEO, the CEO before that,” Joyce told an Australia Israel Chamber of Commerce lunch event in Sydney on Wednesday.

“But the reality is we have the aircraft we have. We just have to get on with life,” he said in comments reported by the Australian Financial Review.

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In 2000, under then CEO James Strong, Qantas placed an order for 12 A380s, 13 A330s (both -200s and -300s) and six 747-400ERs in what was then its largest fleet order decision to date. The evaluation that led to that decision explicitly rejected the Boeing 777, which was deemed too big for domestic services (for which the A330 was originally ordered for), and instead elected for the 747-400ER and A380 for international services.

A common criticism of the airline in recent years has been its decision not to order the 777, particularly in its 777-300ER form, for long-haul international services. Instead the 12 A380s and six 747-400ERs from that 2000 order form the core of the airline’s long-haul international fleet.

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34 Comments

  • Ben

    says:

    Is this as close as we are going to get to management admitting not getting the 777 was a mistake?

  • Reverend

    says:

    just get the rest of your A380s and fly them From Brisbane to LAX Sydney Johannesburg and buy boeing 787-9s around 30 of them

  • William

    says:

    Qantas should cut its losses and sell the A380 for the 777-300ER. If they’re so uneconomical, why would you keep them? Use the A330-200 to replace the 767s on the J curve, and use the 787-8 fleet to fly east coast to Perth, and the 787-9 fleet to fly international to the destinations currently served by the A330-300.

  • Peter

    says:

    The Qantas shareholders wish they had access to the time machine also, they’d go back a few years and flood the Board with votes to ensure Joyce didn’t get the top job.

  • marc

    says:

    The similarities with Ansett… history repeating.

  • john

    says:

    Whilst it may be true that Qantas should have orderded 777s back in 2000, by the time they ordered the 787 in 2005, the 787 was deemed to be the twin jet aircraft for Qantas as unlike the 777 it could do two roles:

    A It could fly domestically, and replace the 767s and A330s, a role for which the 777 was and is too big,
    B It could with the 787/9 model, undertake all regional international flying, and long thin international routes,
    it is worth noting that if it wasnt for the 787 delays, the 787 would now be flying for Qantas!

    I agree with the reverend, if they could find the money, buy the remaining 380s for Johannesburg and Santiago, two routes which no twin can operate effectively,and then they just need to confirm their current orders for the 787/9 and these aircraft can do everything else, currently operated by 747s/767s/A330s.

    They could then end up with a fleet of just 3 types, A380s/787s and 737s, very efficient for an Airline of their size.

  • Stuart Lawrence

    says:

    How come Qantas did not follow British Airways fleet of having 747 400 and 777 and that has been very successful up to now. Indeed some airlians like TAP portugal and Iberia have all airbus or Japan airlines all Boeing planes.

  • Reverend

    says:

    I hope they buy boeing 787-9 and boeing 777-9x

  • Randall Stevens

    says:

    Get rid of the A380, have you gone to totally bonkers William ?

  • Glen

    says:

    The biggest mistake Qantas made was employing Joyce and the rest of his yes men .I do find it amsusing that he blaming a former CEO . Yes I do belive the 747-400ER I do think was a mistake they should have bought more A380s instead and 777s . But no other airline seems to think the A380 is uneconomical look at Emriates how many they are operating.

  • Michael B

    says:

    Get rid of Joyce, send the 787’s to qantas, lease 777’s off Emirates (They have a mutual interest in international flights to Aus now) or whoever else with 777 available. Don’t know how but also have the government buy (even if only 10-20%) into the international arm of qantas so they actually take an active interest in aviation and protecting our flag carrier.

    Seek greater efficiencies throughout the business, domestic is performing so nothing too major required.

    Lease out the A320’s waiting for approvals to operate under Jetstar until the approvals come through.

    Above should make massive improvements to the profitability of qantas. Joyce we want our flag carrier back, performing at 100%, profitable and being a great representative of Australia!!

  • kaz747

    says:

    The demise of qantas started from the moment they introduced airbus into their fleet, there were no issues when it was a wholly boeing fleet , was there???

    • australianaviation.com.au

      says:

      Lets not turn this into a Boeing vs Airbus debate. There are airlines that are successful using Airbus products, and Boeing operators sometimes don’t go well.
      Cheers
      Andrew

  • Dane

    says:

    The A380 is only economical if can fill the seats

  • craig

    says:

    QF should sack the AJ and start again, simple !!!!!

  • Amazing really, to think that there are a couple third world countries now operating the 787, Ethiopian Airlines and Air India as well as Kenya Airways about to start services. Qantas however is lagging behind in many ways, not to mention the amount of 777s globally that are hitting the big roo for the six in terms of fuel burn per seat compared to the 747.

  • random

    says:

    Just because the A380 works for Emirates doesn’t mean it’s necessarily the best option for Qantas. Emirates very handily finds itself geographically advantaged by through traffic as it can be half-way or so between a vast number of cities. Many Asian & Mid-East carriers are now prospering from this geography. Apart from a few heavy traffic routes like LA & London, much Australian international traffic volume is really in the next tier or two down where B777 down to A330 make far more sense. It is amazing that QF has made so little running in trying to exploit these routes. They used to be the preserve of the B747-238 fleet but even an A330 can one-stop a lot of these routes. Instead operations have been pared back to trunk routes and a mere handful of niche locations.

  • Ben R

    says:

    Dane,
    Every aircraft is ‘only economical if can fill the seats’

  • Russ

    says:

    In 2000, lots of Qantas people believed that order to be short-sighted. The responsible person who “couldn’t make the numbers work on 777s” – as I was told by CEO James Strong – was David Forsyth (now at UNSW – beware students).

    After he was instated as CEO, Geoff Dixon told employees that Airbus’ John Leahy told him that if he didn’t buy the A380 bundled with A330s that Airbus would not compete for another Qantas order again. Whether Geoff believed this or not, he shouldn’t have, but that is what he said at the time. Dixon was the last chance Qantas had to escape. Even he came to realise as well that not having 777s was an Achilles Heel but even he turned it down twice more, too.

    If Qantas had to have Airbus jets, clearly what was needed in 2000 was 777s, A320s and possibly more 767s.

    Since that time, the 2000 order has cost Qantas at least approx. $4B – that’s $4,000,000,000.00 – in accumulated missed opportunity earnings – and more in cashflow. (Calculated by what a 777 fleet could have done in lieu of those airplanes chosen.) It has also cost it new route opportunities and growth. It has also cost Qantas its soul, because instead of being able to deploy the right-sized airplane on numerous routes, management has focused on it being a ‘cost issue’ and handed available capital to the Jetstars which are ‘cost efficient’. A lot of high value skilled people left Qantas as a result; and revenue stuttered. Joyce himself would have left if he’d not been given a gig running Jetstar.

    The thing is, Joyce doesn’t need a time machine, he just needs to think. An airline with a bad fleet can’t be cost-cut into a positive capital return; at least not for long. What Qantas needs is Group investment. For example, painting new 787s – the airplane that lures in and sticks business customers to your airline – in Jetstar colours and flying backpackers to Bali probably isn’t generating the best capital return that the Group so desperately needs.

    What is amazing is that in 2000 it was readily apparent that Qantas’ competitors were ready to descend upon Australia with hoards of 777s. It happened. Qantas got stuck. Today, Qantas’ competitors are lining up to descend upon Australia with 787s and A350s, but Qantas is deferring 787s. Exactly how does the current plan get Qantas out of their death spiral?

    My bet is that it won’t.

  • Trent

    says:

    Russ extremely well put!!!!! Couldn’t have expressed myself any better totally agree

  • Glen

    says:

    Well put Russ, I totally agree Qantas missed the boat but not buying 777 and sticking with 747s and now Joyce is sticking to the same old script. Buy new aircraft or die its as simple as that .I do belive jetstar should be a seprate airline.

  • Patrick Kilby

    says:

    On most figures the A380 is cheaper per seat Km than a 777. It is only the 773s that are economical (the 772s are not). Perhaps the 777s instead of the 74-ERs but they did not know that the 773s could do Melb LA which is what the ER was about; and the A380 is a no brainer on slot restricted long routes over water, which QF deals with. The A333s are stll in production and the 772s are not. The ony ‘mistake’ was not to take some 773s instead of 74ERs. But if the A380 was not two years late and the 789s 5 year late then QF would look qiute different, but who would know that

  • Russ

    says:

    It is true that the 2000 version of the 777-300ER wasn’t expected to economically perform LAX-MEL, but it also didn’t need to: the -200LR could. The -200LR approximated the per seat cost of the 747-400ER and could have been converted to -300ERs in time to take advantage of eventual increased performance. (As an example, EVA did this.)

    The A380 cost per seat is similar to the 777-300ER if you can stomach the lower yields. Much depends on the price of fuel. Yet, the last time that Dixon’s Qantas rejected the 777 in 2008, fuel had become a huge cost. Instead of fixing their cost problem, Qantas ordered more A380s to collect cash and credit penalties from Airbus owing to delivery delays. It was an irony that, by 2011-12, to get out of those extra A380s that Qantas had to buy A320neos uncontested even though one of the goals in 2000 was to split Boeing with Airbus and always have a purchase competition. Oops!

    Slice it here or there, the simple truth is that 777s had compelling economics that the A380, 747-400ER and A330 didn’t offer Qantas. A Qantas operating 777s today not only would look better in 2014, it also looked better as a forecast in 2000 – Qantas just used faulty maths. Today, Qantas would be in 6-10 more international markets and operate more frequencies on key routes. Shareholders would have had higher returns – even dividends – and the Group would be in a better position to invest in the region. A380 and 787 delays are just other measures of remorse.

    There is still an aircraft that can make for a better Qantas. It is called the 777. Call it 777X if that makes it more palatable.

  • GD

    says:

    Being a Fleet Manager in the Mining Industry and previously running a large fleet of vehicles for a council the secret to succes is Fleet Standardisation. On my many flights with Jetstart/ Virgin/ Qantas I have always wondered why Jetstar run the A320 and Qantas the 737, would it not make sense and be cheaper to run the same plane for both groups?? That’s what I have always done when selecting the most cost effective vehicle

  • Gary

    says:

    My thoughts, a number of times I have heard Qantas was flying the 380 with less than capacity. A flight diverted to Adelaide a few years back due a fuel issue only had 280 people aboard. That size aircraft is pure lunacy and its original order was possibly more about Qantas “keeping up with the Jones” than simple or smart economic pragmatism. All I know is that in the last 6 years I have travelled to the USA 5 times on the Virgin 777 and every single seat was taken in economy. The 777 is a masterful jet and it would have been the sensible thing between Aust and the USA, not the 380.

  • Ned

    says:

    Well said Russ!
    The flying kangaroo I used to be so proud of is no more. Hasn’t been since Jimmy Bowtie came in with his domestic mentality and all his yes men. (And they took the wing off the kangaroo logo!)
    The 777 was a no-brainer really. Terrific long range aeroplane, which is just what QF international needed and only two donks. Almosr 747 size at that time.
    It can actually perform quite well domestically (does so in Japan, for instance) but you’d need to fill it.
    The A380 is a fine machine, but again you have to fill it.
    One can only hope that future orders will include the 777X.
    And what idiot gave the 787 to Jestar? Qantas needs it, for image and passenger appeal.
    Flying backpackers around in a 787 just doesn’t make sense!

  • B G Price

    says:

    As Ive said in the past, lease in B773s retire the 744s and go and find Rob Fyfe somewhere in NZ and install him as the new CEO

    Look at the expansion NZ have announced elsewhere in this article and all QF does is retreat into its shell

    As U may know PER has lost PER TYO some time ago and now SIN PER so there’s not one Intl QF service out of the west coast
    My wife and I travel PER JNB each year to see our son on SA /QF codeshare and now they’ve pulled that they expect us to travel PER DUB JNB on EK codeshare, I don’t think so SA will get all our revenue

  • Mark

    says:

    Has anyone got any suggestions on whom would be a suitable replacement for Alan Joyce at this time? I would love to know whom could be a better choice and why.

    Whilst Alan Joyce may not be the marketeers dream to say the least, he and his board have had the balls to tackle many many legacy issues that have been conveniently ignored by the last three CEO’s in the interest of their reputations and relationships with the unions.

    He has closed or sold off unprofitable legacy facilities through out the Qantas Group relieving the balance sheet of even more red ink.

    He has had the guts to ground a brand new state of the art fleet of aircraft in the interests of serious safety concerns when no other airline had the guts to do it.

    He inherited a sick, one eyed lumbering dysfunctional airline that was and is being attacked by international government run airlines, whom have vast resources, brand new fleets of aircraft, unlimited funds and a deregulated local environment that allows the competitive threat to fly in at will, night and day hammering more nails into the Qantas coffin with each passing hour.

    So tell me anyone, who could do better……..Jesus?

  • Andrew J

    says:

    Mark, are you related to Alan Joyce, or married to him?
    At he very least, to say the board has “balls” is the joke of the month.
    If they had the “balls”, they would have acted sooner(about 4 years ago)
    when the rot had already commenced taking over.

  • random

    says:

    The elephant in the room remains that Joyce wants to slash staffing costs. Unfortunately the glory days where airline work was a lifestyle for employees (that airlines could sustainably afford) have long been ceded to corporatism, and the monies that funded that lifestyle now sit with the fuel companies (which interestingly seems to avoid scornful judgement). Unfortunately it is almost guaranteed that in trying to make the pendulum swing with staff costs they will most likely fail to achieve a balanced & genuine compromise. Such in the nature of adversarial issues in Australia.

    The institutional investors no doubt support Joyce because they fervently stand to gain long term from reduced staff burden if it can be pushed through. Unfortunately they seem willing to trash the brand short term in order to bring things to a head with staff. Why economists constantly fail to see the enormous value in brand & image maintenance with the customer is beyond understanding.

    Whilst staff economics is in many respects needed, it will nonetheless be window dressing if the poor fleet choices are not reviewed. The B787 to Jetstar shows that the management are willing to let QF INTL struggle to force other issues. Given QF tie up with Emirates it is hard to believe that QF couldn’t get B777 into action relatively quickly, which would allow sustainable contraction and redeployment rather than slash & burn management of routes & fleet. If the economists are really in control, why are issues of fleet renewal (which are intrinsic to economic reform) not being addressed. Wholesale retirement of classic types makes perfect sense only if the remaining fleet is the most economical for the job at hand.

  • bob

    says:

    The only way to fix what is broken is order what you should have
    Be the ceo alan and order the correct fleet! !!!!!!!!!!!

  • John Harrison

    says:

    As much as I would like to say something, reading all of the above, most seems to have been said. There is a strong theme running through most of the comments. Didn’t get the B777s, hasn’t put the B787 into Qantas service instead of Jetstar (I still can’t get my head around that decision) And yes maybe the AB380 is too big
    for most routes, except the key routes which Qantas as hinted it wants to drop or reduce !! Yes there should be
    changes at the top also, but don’t change till you can find someone like the old CEO of AIr Newzealand.
    Fresh thinking is need all around I would suggest.

  • Murray Heldon

    says:

    Qantas needs to get out of the “railways” mindset – cutting services until the main trunk routes are uneconomic. It is all about a program of developing new ways to attract clientele. Then be more price sensitive to fill planes (I ceased to fly QF because the prices are too high compared to equivalent competition)

    Yes the 2000 decision was wrong, but it can be partly reversed. Use the 787/9 where they should be used to develop business – in Qantas. Keep a few 747 for Santiago, and Jo’burg, lease some 777-300ER for 747 replacement elsewhere. Use the A330s domestically – that is what they were bought for / designed for.

  • Sean

    says:

    It seems Russ understands and appreciates what exactly is required for Qantas to recover.
    How it can justify operating 767’s that are 30plus years old, and cede the new 787’s to Jetstar (who, I add, were profitable anyway using the A330’s so why give them these aircraft??) is, quite frankly lunacy.
    With these new aircraft, Melbourne could also see a resumption of premium services to Asia with more than just a paltry smattering of services with better competitors and much better product. (MEL – SIN x 3 per day on SQ / MEL – HKG x 3 per day on CX / MEL – BKK x 2 per day on TG / MEL – KUL x 3 per day on MH) – all offering a fantastic and CONSISTENT product.
    With Qantas we have a fleet of aircraft that dont even offer a full Qantas service – First and Premium Economy are on 2 flights – the A380 to LHR and LAX – Asia doesnt get anything except for Economy and Business – WHY? Are Victorians poor? The stats show huge growth in premium traffic from MEL – yet Qantas leaves us with poor services, (unless you route through Sydney) – and a loss of revenue due to its short sightedness surrounding what Victorians will pay for their travel.
    And note here, MH / TG / SQ / CX / VA / QR / EY all consistently fill their premium cabins, with EY and QR both stating that their new A380’s will be down to the Victorian capital within 12 months. This on top of SQ and EK already operating them here, and Royal Brunei the ONLY operator of 787 services to London.
    I dont buy the argument that the A380 is wrong for Qantas – it is perfect for LHR / LAX / JNB / SCL / DFW and probably to NYC. Remember also that CX are now the only carrier from SE Asia direct to NYC, so surely operate the A380 SIN – SYD – LAX – NYC with a premium service
    QANTAS – wake up. Census statistics show that within the next 5 years, the population of Melbourne will overtake Sydney, yet you continue to view Victorians as second rate!!

    The “crippled wallaby” will only continue to “limp” on until Mr Joyce is removed – and I agree – Mr Rob Fyfe, former CEO of Air New Zealand, would be MY choice as a shareholder!

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