Qantas is preparing to reshape its domestic fleet, with the current Boeing 737-800 workhorse jets being replaced by either new fleet of Airbus A320neo-family or Boeing 737 MAX aircraft.
At stake in the familiar Airbus vs Boeing contest is a multi-billion-dollar contract as the airline looks beyond the expected 2023-2024 timeframe for recovery from the COVID-19 pandemic and through to the 2040s.
It’s a project the airline had expected to embark upon last year, after putting Project Sunrise to bed – but both were sidelined by the sudden impact and immediate priority of COVID-19.
While this gave the Roo a little more time in its pouch to make that call, Qantas Group CEO Alan Joyce admits “we have to replace the domestic fleet over the next decade.”
“Now is the time to order aircraft because the prices are very good,” Joyce told The Australian Financial Review's Business Summit earlier this month.
“We know that aircraft prices are very attractive out there, so it’s a big opportunity for us to get really low prices for some period of time.”
Joyce said the domestic fleet was one of “two big projects that we'll have on,” the other being to revisit plans for non-stop Project Sunrise flights, which have the potential to take off in mid-2024 with strong appeal to passengers who'd rather fly direct and avoid stopovers.
“We will be … looking to undertake a renewal of our domestic narrow-body fleet, and will be planning to launch that sometime this year,” Qantas Group CFO Vanessa Hudson recently confirmed.
Many would see the upcoming battle as Boeing's to lose. Nearly every travelling Australian will have stepped aboard a Qantas Boeing 737, with the single-aisle jets flying in kangaroo colours since 1993.
Today, the oldest Boeing 737 in the Qantas stable arrived in 2002, putting it at 19 years of age, and close to the milestone ’20 years’ at which Qantas most often aims to retire aircraft.
Airbus A320neo vies for victory
In the Airbus corner sits the A320neo family of planes, for which the European manufacturer already has its foot in the door at Qantas.
Jetstar has long used the standard Airbus A320 as the base of its domestic fleet in Australia – as well as at Jetstar Asia and Jetstar Japan – with QantasLink also flying A320s on selected routes in Western Australia.
Beyond this, the Qantas Group has a staggering order in place for 109 Airbus neo jets, spread across 45 A320neos and 64 A321neos.
The latter includes both the A321LR and A321XLR variants, designed for long and thin routes, including international flights.
Many planes among the 109-strong order are expected for Jetstar, but Joyce has left the door open to some joining the Qantas ranks instead.
“We’ll take a decision closer to the time (of delivery) about which parts of the Group will use these aircraft, but there is plenty of potential across Qantas and Jetstar,” Joyce has previously said.
“We’ll also take a view on whether they are used to replace older aircraft or whether they are used for growth, which will depend on what’s happening in the market.”
Boeing 737 MAX returns to the skies
On the other hand, Qantas basing its future domestic fleet around the Boeing 737 MAX would be to continue a legacy dating back to 1993, when Qantas added the first Boeing 737 to its roster.
Back then, it was the Boeing 737-300, shortly followed by the 737-400: both of which have since departed, and been replaced by the Boeing 737-800s currently flying in Qantas colours.
Those are the very planes that Qantas is now looking to supersede.
Even so, selling the MAX will be a challenge for Boeing, and one that follows the plane being grounded globally for nearly two years, after two fatal crashes took the lives of 346 people.
Aviation authorities – including those in Australia – now consider the plane safe to return to the skies, but for airlines flying the MAX, convincing passengers of as much becomes the next struggle.
Airbus A320neo vs Boeing 737 MAX
The battle between Boeing and Airbus will surely be a tough call for Qantas, with both companies competing for the billion-dollar order.
Airbus would see the victory as a momentous win over Boeing, defeating the Boeing 737’s run of 28 years (and counting) as the Qantas domestic stalwart.
Particularly considering the Qantas Group’s existing A320neo order, and the Roo’s plan to buy Airbus’ A350-1000 for Project Sunrise flights, the company could well be prepared to offer a significant discount on the purchase to bolster its delivery backlog.
As well, knowing that some travellers remain nervous about the Boeing 737 MAX – which Qantas’ rival Virgin Australia has already chosen for its own future fleet – starting fresh with the A320neo could assuage any anxious travellers across from Virgin in the years to come.
Boeing, on the other hand, would be very keen to ink a new order for the Boeing 737 MAX: particularly from an airline with the safety reputation of Qantas.
To secure a MAX deal – and the positive publicity and safety endorsement that a Qantas order would generate – Boeing would also be highly motivated to give Qantas its best possible price.
Qantas choosing the MAX would also make it no less attractive to nervous flyers than its rival, which plans to operate the same plane: and Qantas already has some indirect experience with the MAX, courtesy of Fiji Airways.
Fiji’s national carrier – in which Qantas owns a 46% stake – took delivery of its first Boeing 737 MAX 8 in December 2018, although the number of MAX flights Fiji Airways has operated have been limited, both due to the grounding, and as a result of subsequent international border restrictions.
In recent years, Boeing has also been teasing a twin-aisle ‘NMA’ (New Midsize Aircraft), which Qantas had shown interest in.
But with the headaches around Boeing’s 737 MAX grounding and re-entry into service – compounded with delays to the company’s separate Boeing 777X debut – it’s uncertain whether the NMA would be finished, built, certified, and flying on a timeline suitable for Qantas.
When would Qantas need new domestic aircraft?
Normally, Qantas keeps planes until they reach roughly 20 years of age.
Had it not been for COVID-19, that would see its need for a Boeing 737 replacement rising in January 2022, when the airline’s oldest 737-800 hits that 20-year mark.
However, with the Roo’s Boeing 737s flying less than normal over the past year, the airline expects to get an extra “0.8 years” (9.6 months) of life from each of these jets at a bare minimum, pushing that deadline to around October 2022.
As well, Qantas can perform additional maintenance that would allow it to safely keep those planes in the air for a further 4-6 years, if it chooses to.
In a recent presentation to investors, Qantas confirmed it had the “opportunity to extend retirement age from ~20 years to ~24-26 years” by performing what’s known as a ‘D check’ at the 24-year point, combined with other maintenance techniques.
Qantas says these aircraft are designed to fly safely for up to 40 years with the right maintenance, but as planes get older, maintenance costs increase. Those expenses can make purchasing a new plane more economically viable than continuing to maintain an older jet.
By performing enough maintenance to push its planes from 20 to even 24-26 years of flying before retirement, this would defer the need for new planes until late 2026, if not late 2028, assuming new deliveries were only to replace retired jets.
Qantas’ regional fleet also moving towards an upgrade
Beyond the Boeing 737s of Qantas’ mainline fleet, its regional arm QantasLink operates smaller Fokker 100s and Boeing 717-200 jets.
In an all-economy layout, these planes carry 100 and 125 passengers respectively, with QantasLink’s two-class Boeing 717s accommodating 110 travellers across 12 business class seats and 98 economy seats.
At the right time, these planes will also come up for replacement, and Airbus is making sure its A220 is front-of-mind at Qantas.
In late 2019, Airbus flew an A220 down to Sydney – kitted out from tip to tail with Qantas branding on every headrest, to welcome Alan Joyce and fellow executives on board for an experiential flight – and the company seems to have made an impression.
“It looks like a very good aircraft, it’s very quiet, and I think passengers will love it,” Joyce said after the flight.
“It’s a great replacement to the Boeing 717: not too dissimilar in configuration, but with a lot more overhead bin space, a lot more space in the cabin, even the toilets are big.”
Airbus A220 nudges in front, but pricing an issue
The challenge for Airbus will be getting the price right – with the sticker sitting in the region of US$81 million to US$91.5 million – which Joyce flagged as being too high.
“For us to buy it, it has to be a lot cheaper than the prices we’ve been seeing,” he says.
As well, QantasLink’s “Boeing 717s are very reliable and the F100s are very low utilisation, so there’s no rush, we have a bit of time,” nodding to Airbus that the airline won’t be rushed on buying.
More recently, Qantas has forged a partnership with Australia’s Alliance Airlines, which will operate Embraer E190 jets under a ‘wet lease’ agreement with QantasLink for at least a three-year period.
This buys Qantas more time to place what could be the Group’s largest single order, spanning its needs across regional, domestic, and international flying, and taking the airline through until at least the mid-2040s, before it's time to do it all again.