Qantas chief eyes lower costs

Airline boss says renewal of fleet with new Dreamliners will lower cost base.

Qantas (QAN) chief executive Alan Joyce says he's comfortable that new Boeing 787 Dreamliners being delivered to budget carrier Jetstar are extremely safe, and has flagged a lowering of costs as a result of the renewal of the airline's fleet.

Jetstar's first high-tech jet for international routes are due to be delivered to Melbourne this week, quickly after after budget airline Norwegian Air Shuttle demanded Boeing take back a plane and fix a faulty hydraulic pump after only 30 days in service.

Qantas has ordered 14 Boeing 787s for Jetstar, which are being delivered until late 2015.

The Dreamliner deliveries will enable Qantas to take 11 Airbus A330s from Jetstar as part of a plan to retire older, fuel-burning Boeing 767s.

Mr Joyce said the lighter Dreamliners would reduce fuel costs in the Qantas group, and help enable the airline to have an even younger fleet than Singapore Airlines "in the next couple of years which we haven't seen in a long time".

The Australian Financial Review reports Mr Joyce forecast Qantas' domestic operations will have a cost base 5% lower than rival Virgin Australia Holdings (VAH) by 2015 as a result of the new aircraft.

“That gives us a huge cost reduction,” Mr Joyce said, according to the newspaper.

“We think our cost base will get down to 5% where Virgin is, and that is a big movement.”

Visiting Boeing's factory in Seattle, Mr Joyce said the aerospace giant had worked closely with Boeing engineers to pinpoint possible problems.

"It's important to distinguish reliability from safety. Sometimes in people's minds they can be really concerned," he told Australian journalists.

"Reliability in new aircraft takes a while to get up there. It's not a safety issue.

"We're very comfortable this is an extremely safe aircraft."

Boeing 787 vice president and general manager Larry Loftis said the ambition to build the most technologically advanced aircraft in five decades had been a logistical challenge since production began in 2007.

"From a reliability standpoint ... we're working to make sure the airplane continually improves and becomes more and more reliable," he told reporters.

"We put a lot of new technology in this aircraft and over-estimated the ability to bring this new technology to market in the time frame to which we committed."

The Dreamliner is 20% more fuel efficient than comparable wide-bodied aircraft with about 300 seats. It uses carbon fibre composite graphite instead of traditional aluminum.

But 50 Dreamliner jets were grounded globally in January when lithium-ion batteries caught fire on two Japanese airlines.

They returned to the skies in April but an emergency transmitter on a Boeing 787 caught fire at London's Heathrow airport in July on an Ethiopian Airlines plane.

Jetstar expects to begin commercial flights abroad the Dreamliner in November, with limited domestic flights for test purposes, following testing by the Civil Aviation Safety Authority in Australia.

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