Qantas not convinced on Airbus, Boeing revised Project Sunrise bids

"We don't have to do Project Sunrise" says Qantas CEO Alan Joyce, as Airbus and Boeing hand in a second version of their offers.

By David Flynn, December 10 2019

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.

Qantas has big plans for its Project Sunrise jets, but the numbers still don't quite add up...
Qantas has big plans for its Project Sunrise jets, but the numbers still don't quite add up...

“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.”

David

David Flynn is the Editor-in-Chief of Executive Traveller and a bit of a travel tragic with a weakness for good coffee, shopping and lychee martinis.

Delta Air Lines - SkyMiles

16 Oct 2017

Total posts 93

An alternative for New York would be SYD-AKL-JFK. Existing aircraft can do that, just push a 789 onwards with the fuel top up. Not much time added and perhaps a more reliable option at this stage? Similar thought for South Africa: SYD-PER-JNB (especially as SAA will probably ditch PER-JNB when inevitably they retire the fuel-burn nightmare a340's.

06 Feb 2014

Total posts 97

SAA rotates both A330s and a340s on the PERTH route which as I understand it is one of their most profitable. The bigger issue is SAA as a going concern as they are corporately in trouble.

Qantas

19 Apr 2012

Total posts 445

Tommygun a stop is a stop admittedly Auckland is a much better proposition than LA but while Perth is a great non hassle stop to LHR it is still a stop. In addition QF would also like some 5th freedom traffic rights out of NZ and I am not sure the existing agreements allow for them

19 Aug 2011

Total posts 23

I suspect the issue is the stop rather than rights. Qf used to fly akl-lax

21 Aug 2019

Total posts 30

To be honest the Sydney to Perth and LHR is getting to be my preferred option over SIN. Lounges in SIN notwithstanding the transit at Perth is painless. Would be keen on SYD to LHR but at the moment the Perth option is the least hassle

31 Mar 2014

Total posts 293

I get the feeling that Qantas have realised that this isn't commercially viable with current planes.

13 Mar 2014

Total posts 6

The sunrise team are looking only at dollar figures on paper, what about a thought for the poor pilots and cabin crew stuck in that metal tube for 22hours and actually working for 24hrs plus. Don't understand how they could do it to themselves.

The Boom plane is a business case if you ask me. East coast of Australia to where ever the boom plane can reach “east coast USA hopefully” in half the time, sign me up. I'd pay a 50% premium. Less time in a plane tho with a superior product... aka super first class.

The technology isn't here yet for the type of travel qantas is wanting to pioneer towards. Fantastic they are trying, tho just a little to early.

Qantas - Qantas Frequent Flyer

11 Dec 2017

Total posts 44

You'd be paying a lot more than a 50% premium if we ever get supersonic airline travel going in this day and age.

Qantas

19 Apr 2012

Total posts 445

Boom will be anther 10 years before flying paying passengers; but doubt it will be to the East Coast US. Carying too much fuel to keep the speed up.

AJW
AJW

16 Nov 2011

Total posts 521

Without a doubt they are looking at EVERYTHING including what you mentioned.

Whilst some may disagree Qantas management are not stupid.

24 Aug 2011

Total posts 586

The business case is definitely way too marginal at the moment and it is just as likely that the Board will walk away until technology improves though you get the impression that neither manufacturer see ULH travel as a particularly attractive niche. Even a discount from the manufacturers is not significant enough to overcome the risks that remain in the model.

The big unknown is whether enough passengers are prepared to pay a significant premium to save 2 or 3 hours. If they are not, the whole business case crumbles.

14 Oct 2016

Total posts 53

The quote about the price being to high for the planes probably signifies that Qantas was asking too much from Airbus and Boeing for such a small order (maybe 10 planes).

Boeing and Airbus probably want the a380 successor order too as well as the initial sunrise order due to the extra work needed for the sunrise planes.

Qantas

19 Apr 2012

Total posts 445

It may also be that Boeing is a bit vague about the 777-8. If it is offering the 777LR or the 779 (modified) as a stop gap what assurances can they get that the 777-8 will actually eventuate. And I agree Airbus would love some A220s/A320s thrown in as well as A380 replacements, but as they are a decade away, it is a long time to wait while Boeing would love some 737MAXs/EMBs thrown in as well.

dcb
dcb

10 Dec 2019

Total posts 1

Call me a skeptic, but I suspect they knew all along that it was super unlikely to stack up and that it would be a great PR campaign. Just look at all the free TV, Online and Newspaper space they got with the ‘experiment' flights. Lots of positive stories about the 787, the seats, the food etc. Probably worth the potential blow back.

That said, they do need to plan for capacity replacement on the old 747 routes. Yes the A380 covers most and the 787 will do the rest, but that is assuming they do not grow or change in demand for certain destinations. I would love them to buy some A350 for the old 747 routes.

04 Aug 2014

Total posts 39

Plane price is never the biggest problem when trying to commence a new route.

New route will only success if marginal revenue > marginal cost which constantly returns positive cash flow.

AJ is probably just trying to find an excuse to abandon the entire plan.

Qantas - Qantas Frequent Flyer

01 May 2019

Total posts 9

I believe Qantas has a serious problem with his staffing costs. Theyhave had a rough relationship with the Pilots union dating back to the GFC when they asked the pilots to take a pay cut to secure the airlines future. Qantas then gave the entire savings to Geoff Dixon as a golden handshake. Ask Qantas cabin staff and Pilots and they want their pound of flesh after Joyce was paid $24m last year. If it is not the cost of the plane, its the costs of carrying the fuel and pay demands for a new longer route.

15 Sep 2012

Total posts 89

Project Sunrise is pure and simply about the prestige of being first to fly nonstop from Sydney and Melbourne to London and New York. Nothing else!!!

Can just imagine Alan Joyce: Oh look Airbus and Boeing can't provide a plane capable of doing it at a price we can afford. Guess we would have to spend more than budgeted for. I know how to get out of this and still look good. I will tell the public we don't have to do Project Sunrise. I then look like a great CEO saving Qantas big money

23 Aug 2011

Total posts 59

This was never going to happen all spin. There is a market for ultra long haul flights to cities such as New York and London.

Qantas - Qantas Frequent Flyer

25 May 2017

Total posts 68

As predicted project sunrise has been a very clever marketing campaign! Well done QF. No one would really want to spend 20+ hours even in F. Airbus and Boeing would not be able to provide an aircraft that made business sense to deliver such a project.

Qantas

19 Apr 2012

Total posts 445

BLAMEX people said the Perth London planes would never fill and they have; same with Dallas. I for one would use it provided the markup on price wasn't too great. Hanging around in airports, even in Perth which is the least hassle is still a hassle.

01 Mar 2011

Total posts 3

QF should turn HNL into a mini hub for second tier US flights. Aus cities to HNL then connect to daily 787s to JFK MIA ORD DFW (after A380s) YYZ etc. Immigration and customs there pretty easy compared to LAX. Then arrive as a domestic passenger on the US east coast. 2 hour break in the tropical air nicer than Tom Bradley. Very old school compared to non stops but being half way ish, will allow full passenger/cargo with out risk of diversions due to head winds of ultra long haul.

Qantas

19 Apr 2012

Total posts 445

Pailkaz there is no partner hub (AA or anybody else) there with direct flights to any of those places, so who will have the 787s to fill; QF doesn't have 5th freedom rights in the US so not sure where the passengers are coming from. JFK would be the only viable one but needs connections from at least three other OZ cities. Not sure there is enough traffic to HNL from each to warrant it.

Qantas - Qantas Frequent Flyer

29 Mar 2015

Total posts 84

Agree, it would also allow for flights to Canadian ports such as YVR, YYC, YYZ, preclearing Canadian customs in Hawaii.

06 Nov 2019

Total posts 5

HNL is such a crap airport n theBF TSA queues are as bad as LAX

Delta Air Lines - SkyMiles

16 Oct 2017

Total posts 93

paulkaz have you been to HNL lately? It can be immigration hell. As for QF competing with numerous major U.S. carriers on major U.S. domestic routes from to/ HNL...

Joe
Joe

03 May 2013

Total posts 402

I have heard on the grapevine that Boeing is taking Sunrise vmuch more seriously than Airbus who feel it's not really doable at this stage. Then again Boeing has proven it will anything to sell a plane.

Qantas

19 Apr 2012

Total posts 445

If Boeing are serious then they need to make a contractual clear promises on the 778, as QF wont take an 'interim' 777LR for the next 20 years (or maybe the 779 will be interim with extra -temporary- tanks and fewer seats), and Boeing will need a promise on the 779 as well to follow (10 of one and 20 of the other maybe). Some blogs are saying the Feb QF board meeting will be crunch time.

Qantas - Qantas Frequent Flyer

09 Feb 2015

Total posts 272

After reading Geoffrey Thomas's article, it seems as he puts it. the sun is setting on Project Sunrise.

Qantas - Qantas Frequent Flyer

05 Oct 2016

Total posts 50

Surprise surprise.... Just stop this circus and spare yourself the embarrassment of another overblown PR spin...

23 Aug 2011

Total posts 59

Agree it is going to back fire on QF if they keep it up.

Qantas - Qantas Frequent Flyer

29 Sep 2013

Total posts 1

Not sure enough people would pay that premium to save a relatively small percentage of time. It's not like supersonic London to New York time saving territory.

The other option is mid air refuelling which mean the planes can travel with a lighter fuel load rather than fuelling up for the whole flight which would be more efficiency all round

04 Dec 2019

Total posts 1

I've seen the 'mid air refuelling' option discussed elsewhere, and apparently its way too expensive. Not to mention the potential safety issues should something go awry - two planes at 20,000 feet 10 metres apart with hundreds of souls on board, what could possibly go wrong :-) ?

Qantas - Qantas Frequent Flyer

29 Jan 2016

Total posts 8

This is negotiation 101. Always appear genuinely ready to walk away to secure the best possible deal.

Of course, sometimes you have to make good on that - but Qantas won't want to walk unless it really does look uneconomic.

11 Dec 2019

Total posts 1

Typical CFO. Play two companies off against each other and screw the price down to an unsustainably low figure. Then the manufacturers start cutting corners and all sorts of problems arise in 10 years time when Joyce and La Spina have ridden off into the sunset with their bonuses. Boeing, Airbus. Tell Qantas to pi-s off. You don't need their business. Let them continue to fly their aging fleet.

16 Dec 2016

Total posts 29

Htn1460 I think you are ignorant if you think that either Airbus or Boeing don't need Qantas' business. Domestic fleet replacement is a bloody big deal and a cash positive, full service, ultra long haul carrier with 100 years history is one of their oldest and best customers. When there are two suppliers I would hope that Qantas play them off reach other to get the best price for customers and shareholders. Cutting corners to save cost because of good negotiations doesn't happen in aviation mate and maintenance and warranties are part of the contract negotiations. Your arm chair assessment is just wrong.

Jetstar Airways - Qantas Frequent Flyer

24 Aug 2018

Total posts 51

The Melbourne to LHR via Perth is a demonstrable money spinner, apparent to all, especially the high take up of J seating. If the Project Sunrise, with current aircraft costs is a no goer, why not explore destinations with similar flying times? Example Paris, Frankfort and Amsterdam. A business case for these would parallel Melb to LHR and the one hour break in Perth is sheer pleasure compared with all middle eastern or Asian stopovers

Qantas

19 Apr 2012

Total posts 445

OttoV I fully agree the only issue is Perth Aiport and its reluctance to let QF operate out of its own terminal, and its own delays in promising QF of a terminal in the central precinct. When all of that is sorted then will happen.

30 May 2018

Total posts 15

This “initiative “ was never more than a brazen attention-seeking stunt for Qantas. The aircraft required for a profitable operation simply don't exist. We all knew that. This is a a great big ‘nothing burger' And look how successfully it generates endless discussion and buzz. Imagine their c-suite giggling over this thread...

Airbus A350-1000 is the Winx and Boeing is the...well, damaged goods. Why would Qantas touch anything with an 8 in it from Boeing. The 777-9 is having major engine problems and we've seen this movie before hello 737 Max 8. The 777-8 is no where near ready and just ask Air New Zealand/Ethiopian/Norwegian what happens when you choose to be a launch customer. Joyce knows he's on a winner with a massive order for A350-900 and A350-1000 plus the current 99 A321s for Jetstar plus another 80 for the 737-800 replacement at Qantas. Also Don't forget the favourable trade-in deals on the 12 A380s. Poor old Boeing is a disaster and the last thing Joyce needs as his legacy is TV footage of a crashed Qantas 777-8 or 737 Max 8 when better aircraft ie A350 and A321 were available and loved by the travelling public.

With turbulence getting worse I'd prefer to see aircraft manufacturers design aircraft that can fly as high as Concord to avoid such turbulence then I'd consider sitting on an aircraft for long hours at a time. Currently I much prefer to stop and breakup the journey as bouncing across the Pacific for 15 hours, you need a break from it.

11 Dec 2015

Total posts 87

What's the chance Qantas will drop London and do New York only?

SYD/BNE-JFK route just about matches the quoted range of the A350-1000 (MEL is a problem as it's quite a bit further), meaning by the time QF goes with a lower density cabin (as they do for their 787s) it should be doable with the standard version. Then they get to sit back and still claim sunrise is a success.

15 Sep 2012

Total posts 89

One thing occurred to me. Qantas says Project Sunrise is about reducing the travel time between Eastern Australia and London and New York.

Why then are they not asking the manufacturers for faster aircraft?

Why are they not looking at super or hyper sonic aircraft?

We had supersonic 50 years ago with Concorde. Surely we have the technology now for improved range and quieter supersonic flight?

No Qantas just wants prestige of first non stop flights!

Qantas

19 Apr 2012

Total posts 445

I think the point is they do not have the technology yet for improved range and quieter supersonic flight. They are working on it with Boom and at least one other, but I doubt it will be on the market for another 10 years ( the first scale model or engines have not been tested yet) , and it will certainly require one if not two stops.


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