Dreamliners to trim Jetstar costs
Qantas is banking on the arrival of the first batch of new Boeing 787-8 Dreamliners for its budget offshoot Jetstar to help narrow the gap in costs with Virgin Australia.
But despite the reduction in fuel and maintenance costs offered by the new aircraft, Qantas will not decide whether to commit to buying up to 50 of the stretched version of the Dreamliners - known as the 787-9 - for at least another two years. Even then, any purchase will be considered on a case-by-case basis.
The airline has purchase rights and options for the 787-9 aircraft from 2016 but Qantas boss Alan Joyce emphasised he would not make a decision on whether to buy them until some time after the company's international operations reached their target of breaking even by the 2014-15 financial year.
"Once we have seen the business on the path to that [better financial health] ... we think we have a case then to invest more money," he said in Seattle.
Mr Joyce made clear the airline wanted to maintain flexibility in buying new aircraft because of volatile conditions.
Qantas also emphasised that the overhaul of its fleet, brought about by the arrival of the 787s for Jetstar, would help close the gap in costs between its premium domestic operations and Virgin from 10 to 15 per cent to just 5 per cent.
Ending a five-year wait, the first of 14 Dreamliners that Jetstar will receive over coming years will arrive in Melbourne on Wednesday. A further two planes will be added to Jetstar's fleet by the end of the year.
The first 787 will be flown from Melbourne to the Gold Coast and Cairns until November, when it will fly on Jetstar's routes to Asia.
The delivery of the 787s will allow Jetstar's 11 Airbus A330 aircraft to be transferred to Qantas' domestic fleet. In turn, this will finally allow Qantas to retire its gas-guzzling 767 planes by early 2015.
Mr Joyce said a significant reason for Qantas' higher cost base was the fact that its fleet had too many types of aircraft. The 767s were also "very expensive" aircraft to maintain and operate.
The arrival of the first batch of 787s will allow Qantas' domestic operations to reduce its fleet from five aircraft types to just two in the Boeing 737 and Airbus A330.
Mr Joyce also sought to reassure passengers about the safety of the Dreamliners in the wake of several high-profile incidents early this year. The worldwide fleet of 787s was grounded for more than two months.
"The 787, like any new aircraft, has had a number of teething problems with its introduction," he said. "But it's actually had a smoother introduction than the 777."
Macquarie Equities analysts say the new Dreamliners will result in reduced maintenance costs, fuel savings and "improved employee productivity from fewer pilots and cabin crew pools" for Qantas.
The reporter travelled to Seattle courtesy of Jetstar.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free