The airline industry is a
difficult assumption made on future outcomes. It's difficult to see what will
happen in the works ten years down the road. One thing is certain, Qantas has
traveled the journey in a wide swinging effort with little to show for its
effort. Back in the early day of the 787 program, Qantas was Boeing's bragging
point when it ordered so many 787's with its duo fleet expansions and
replacements. JetStar being its economy fleet and Qantas its premium fleet
excited the Boeing community across the board. They ordered massively beyond
its ability to induct new airplanes into its fleet. The great recession hit
firmly into the core of Qantas plans during 2008. Qantas knew more than
everybody else they were in trouble with its expansion plans using the 787.
What
Happened via ATW:
"787-9. Courtesy, Boeing Citing lower international
growth requirements in an “uncertain global context,” Qantas (QF) has canceled
firm commitments for 35 Boeing 787-9s and posted its first full-year loss since
1995. QF will retain 50 787-9 options and purchase rights, available for
delivery from 2016. The Australian carrier said there were no changes to its
order for 15 787-8s, the first of which is scheduled for delivery in the second
half of 2013. The 787-9 ..."
Stage one
brought forward a downsize decision ordering 14 JetStar 787-8 greatly
reducing its optimistic vision for a vast economy fleet of 787. They even
inserted 334 seats on it's firmed up remaining -8's, it held on to as
confirmed. Thirty five 787-9 gone from
2012 elimination and a book mark held for a future fifty.
Stage two
required another phone call to Boeing from Qantas saying you know those 50
787-9 we confirmed at the outset, well Qantas now needs 20 of the fifty
optioned and 30 more with ordering rights. Whatever that means. It asked for a
reservation for thirty in the future with some price guarantees, but no
production slot guarantee. Only the first 20 options will have production slot
guarantees, only if they confirm orders in the option group by set dates.
Qantas
had its work cut out for them by turning its airline processes into a
profitable and efficient business. They needed to trim routes, and turn
maintenance operations into an efficient arm of Qantas. Arrange for wages to
align with the goal of becoming profitable through lower operational costs.
Basically it was an "All hands on Deck" call out for its whole operation,
because it was in trouble with its competition, and it was slowly losing
regional market. The 787 a perceived savior for Qantas was then out of its
financial reach for any hope of rescue. The airline had to turn itself around
without the presences of the 787 doing the trick.
Qantas
had one card up its sleeve, it was JetStar. They could buy 787's within its
operational scope. They had A-330's which could move to Qantas as soon as the
787 would arrive. While Qantas was shaking up its operations towards
profitability, JetStar had Qantas blind spot protected with an immediate fleet
renewal plan and flexibility to insert 787-8's into its fleet. A profitable
operation was awaiting execution of a plan.
The pivot
comes when Alan Joyce reports the long endured plan had come together for
Qantas. It was making a $Billion from efficiency changes in its organization.
It was maximizing the service ages of its 747 fleet, where some would be ready
for replacement starting in 2017. Alan Joyce knew he didn't need a commitment
of 50 787-9 back in 2008, but with a new five year plan for Qantas it would
need the 787-9 in staged groups. He had a staged group of twenty in the option
bucket with production slots guaranteed for Qantas. The pivot came during the
last financial reporting. Jetstar was stable with its 787-8 fleet at ten units.
Qantas could steal three 787-8's of the four remaining undelivered from
Jetstar's backlog. They did that little thing while calling up Boeing, and
said,
"let's
do a 787-9 deal using three 787-8 slots from Jetstar, and turning those old
orders into new 787-9's for Qantas."
Boeing
said politely "we are listening"!
Qantas
said, "by the way you know those 20 we have on option? Qantas would like a
commitment for five out of that pot including its respective production slots.
In total we need 8 787-9's during 2017-2018 production season.
Qantas
Pivot Demonstrated on chalk Board
Qantas then goes deep with Boeing and suggest to them, you made us
happy standing by our former bumbling, and we're going to say a lot of nice
things about the 787-9 in our fleet. Furthermore, the eight we have just
committed to through this phone call is more than an eight only order. By next
year we will have a clear financial picture etched in Ayers Rock, and Qantas
will clean up all its loose ends for the future. It is a hint, the remaining 15
787-9's that are in the options languishing will turn into confirmed orders,
and the 30 on open reservation will fill some production slots assigned as soon
they become actual intents or options. We may even restore the 35 787-9's we
dropped in 2012. By now my math mind is troubled. Cogent thinking is lost and a
formerly lucid Qantas hits low visibility. Good thing Boeing has a super
computer to sort this out.
Boeing responds, "Okay".
Summary: Qantas "had" 35 confirmed and 50 in the
optionish mode. My question to Alan Joyce of Qantas, "You had planned for
about 85, 787-9's in the beginning, do you still see that number if Qantas has
another year like 2015 during 2016?
So far Alan (Joyce) has not returned my phone calls, messages and
texting. Who am I, chopped Liver? I've got no answer on that question either!
Remember, I just may fly to Australia, keeping that in mind, considering my
awesome leverage I have over the industry.
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