Cancellation of a Boeing Dreamliner command due to negative financial results must be taken as a sign of serious troubles at Australian carrier Qantas. The Boeing 787 was part of the airline’s core strategy of becoming more competitive.
SYDNEY- The title of the Herald Sun newspaper last June sounded very pessimistic and even provocative: “Is Qantas the dying kangaroo?” was asking the newspaper to an expert…
Looking at the current situation of the Australian carrier, the newspaper’s question sounds less blunt. Although it is doubtful that Australia would let its national carrier going down, the airline will have to find new ways to survive. More than ever, Qantas has to redefine its strategy and its operational format.
It is true that Qantas is at disadvantage compared to other carriers in Asia-Pacific. The airline is at the world’s edge. With rockeing jet fuel prices, this location is increasingly turning into a weakness. Add high costs in Australia due to an extremely strong currency, weak premium markets from the USA and Europe, falling prices due to rising competition, both on domestic and international routes. Add over it a series of hard social movements which paralyzed Qantas during a couple of weeks. The US$ 258 million annual loss was a combination of all those factors and Qantas had then to react.
The big chock came at the end of last week, when the Australian carrier, following the announce of its first loss in at least 17 years, decided to cancel an order estimated at US$ 8.5 billion for 35 aircraft Boeing B787 Dreamliner. The contract was cancelled also due to the delay expected in the aircraft. It is one of the largest order’s cancellations in the airline industry so far. Qantas will get in return US$ 433 million from Boeing, including more than $300 million compensation due to delays in aircraft delivery plus a refund of deposits. In a statement, Qantas CEO Alan Joyce acknowledged that, “circumstances have changed significantly since our order several years ago. In the context of returning Qantas International to profit, this is a prudent decision.”
Boeing is not the only one to bear the burden. Deliveries of two Airbus A380 have been delayed from 2013 to 2016/17 and six more aircraft pushed back to 2018/19 while overseas routes are getting axed or frequencies. For the last quarter of the year, seats capacity is down by 8% on average. It also includes the termination of flights to Mumbai, Buenos Aires as well as from Bangkok and Hong Kong to London. Among other measures taken is the redundancy of 500 persons and a cut in capital spending equivalent to US$ 515 million over the next two years.
Internationally, Qantas is still mulling out options to transfer part of its activities further westwards in Southeast Asia. Singapore is still Qantas best option to base some aircraft in a more “central” location while Kuala Lumpur could be an alternative thanks to the integration of Malaysia Airlines into oneworld global alliance. Qantas affiliate Jetstar would play a pivotal role in the development of a large base in Asia. Rumours also recently circulated about a possible agreement with Emirates Airlines with part of the traffic to Europe being redirected via Dubai. If Qantas will certainly survive, it might lose its prestigious status of an airline with the longest routes in the world…
Qantas reduction of capacity on international destinations from Sydney for the fourth quarter of 2012 versus the fourth quarter of 2011.
| Q4 of 2012 | Q4 of 2011 | Percent Difference | |||||
| via | Destination | Flights | Seats | Flights | Seats | Flights | Seats |
| AKL | 907 | 152 376 | 914 | 162 008 | -1% | -6% | |
| BKK | 89 | 26 655 | 86 | 33 884 | 3% | -21% | |
| SIN | BOM | 0 | 0 | 40 | 12 850 | -100% | -100% |
| CGK | 52 | 15 534 | 47 | 13 971 | 11% | 11% | |
| CHC | 92 | 15 456 | 93 | 15 624 | -1% | -1% | |
| DFW | 86 | 33 884 | 53 | 20 882 | 62% | 62% | |
| EZE | 0 | 0 | 40 | 15 760 | -100% | -100% | |
| SIN | FRA | 88 | 34 672 | 92 | 36 248 | -4% | -4% |
| HKG | 321 | 106 965 | 322 | 113 421 | 0% | -6% | |
| HNL | 43 | 9 847 | 42 | 9 618 | 2% | 2% | |
| LAX | JFK | 92 | 36 416 | 92 | 36 304 | 0% | 0% |
| JNB | 91 | 35 854 | 91 | 35 854 | 0% | 0% | |
| LAX | 349 | 146 410 | 354 | 147 652 | -1% | -1% | |
| AKL | LAX | 0 | 0 | 92 | 15 456 | -100% | -100% |
| BKK | LHR | 0 | 0 | 86 | 33 884 | -100% | -100% |
| HKG | LHR | 0 | 0 | 87 | 34 278 | -100% | -100% |
| SIN | LHR | 184 | 82 800 | 183 | 81 230 | 1% | 2% |
| MNL | 55 | 16 407 | 52 | 15 450 | 6% | 6% | |
| BNE | MNL | 13 | 3 903 | 13 | 3 861 | 0% | 1% |
| NOU | 53 | 9 697 | 54 | 9 865 | -2% | -2% | |
| NRT | 92 | 36 248 | 92 | 34 659 | 0% | 5% | |
| POM | 158 | 11 692 | 157 | 11 618 | 1% | 1% | |
| PVG | 86 | 25 758 | 88 | 26 148 | -2% | -1% | |
| SCL | 42 | 16 548 | 0 | 0 | |||
| SIN | 579 | 218 061 | 588 | 212 767 | -2% | 2% | |
| ADL | SIN | 38 | 11 304 | 13 | 3 861 | 192% | 193% |
| WLG | 272 | 45 696 | 273 | 45 925 | 0% | 0% | |
| ZQN | 41 | 6 888 | 40 | 6 720 | 3% | 3% | |
| 3 823 | 1 099 071 | 4 084 | 1 189 798 | -6% | -8% | ||
(SRS Analyzer 08-2012)
Luc Citrinot a French national is a freelance journalist and consultant in tourism and air transport with over 20 years experience. Based in Paris and Bangkok, he works for various travel and air transport trade publications in Europe and Asia.
