Airbus and Boeing have submitted revised proposals for Qantas’ ambitious Project Sunrise flights, however the airline is still not ready to pull the trigger on a multi-billion dollar order for either the Airbus A350-1000 or the Boeing 777-8.
The aircraft manufacturers handed Qantas their “best and final offers” on their planes in August, but Qantas believed the price was too high and, in the words of Qantas International CEO (and former Qantas Group CFO) Tino La Spina, “we asked them to go back and sharpen their pencils, because there still was a gap there.”
Reworked proposals have since made their way from Toulouse and Chicago to Mascot, La Spina tells Executive Traveller, but neither of those sealed the deal.
“We've received something back (but) we've still got a couple of questions or clarifications on what’s in there."
While La Spina wouldn’t be drawn on specifics of the shortfall, he says that Qantas has been “very clear” to Airbus and Boeing on its expectations.
“Having been CFO in the past, I want to make sure that we set it up for success. We’ll get these aircraft and they’ll be there for 20 years-plus in the fleet. So you don't want to base this on a bad business case, because then you've got to live with that.”
But the clock is ticking for Airbus and Boeing, with Qantas Group CEO Alan Joyce eager to make a decision on the Sunrise fleet by the end of this year.
“We're still hopeful to close this off one by the end of the year,” Joyce tells Executive Traveller. “The dilemma that we have is this is a big task, Sunrise is taking up a lot of resources, and there's a big task with the domestic fleet replacements that we need to make next year, and that’s going to take most of the year, if not more, to get it done. So we don't want to keep on pushing (Sunrise dates) around.”
Even if Airbus or Boeing finds a tentative order wrapped under their Christmas tree, other pieces of the Project Sunrise puzzle still need to fall in place in the opening months of 2020.
“The manufacturers need to contribute their part, the pilots and the regulators have to contribute their part,” Joyce says.
He also expects the non-stop flights could command a 30% price premium over conventional stop-over routes, adding “it has to work commercially because we will want the premium and we expect a big seat factor, and the combination of these all have to come together.”
Joyce: “We don’t have to do Project Sunrise”
"One part letting down the team, as it were, means that you won't cross the threshold and the returns that we're setting ourselves for the business case, and then we won't do it. We'll walk away from it. We don’t have to do Sunrise.”
“One of the good things about where Qantas is today, it's been very disciplined on its allocation of capital. It can't get something like this wrong and it has to make sure it does it right.”
“But when we've made the big bets, on Jetstar and the loyalty business, they've always paid dividends for us in the long run, and those big bets are the reason I think we're strong today. So we're keen on Sunrise, but we won't do it at all costs.”