Qantas is expected to push back on new aircraft orders, potentially including Airbus A380 superjumbos and Boeing 787 Dreamliners, as part of its drive to cut $2 billion from the books over the next three years.
The airline will make the case that with fleet age at an all-time low since Qantas was privatised almost 20 years ago, the expected retirement of other ageing and fuel-thirsty aircraft will keep the Flying Kangaroo's fleet in good trim for some years to come.
It's suggested that Qantas will put its Boeing 767s and some older Boeing 747 jumbo jets out to pasture in a sweeping redraw of the airline's domestic and international network.
Keeping a relatively young fleet reduces operating costs in fuel and maintenance, which has a knock-on effect further down the spreadsheet as Qantas works not only to slash costs but prove to the Federal Government that the airline is doing all it can to get its own house in order before continuing to lobby for a debt guarantee.
A Government guarantee of Qantas debt would be similar to the backing extended to Australia's banking sector during the GFC, lowering lower Qantas' risk factor and potentially helping it bounce back up from ‘junk’ status. It could also reduce the cost of future borrowings and potentially the refinancing of existing debt.
Qantas keeping its options open
Qantas CEO Alan Joyce has always kept his fleet options open, and following the company's 2012/2013 financial results in August 2013 told Australian Business Traveller "we will maintain complete flexibility over the fleet."
"In this business there is always potential for great headwinds and tailwinds... there is no intention that every aircraft is guaranteed to come or that it's not going to come."
Those headwinds are now buffeting Qantas, which this week will declare a record loss as high as $300 million in the six months from July to December 2013 as it battles with competitors on both the domestic and international fronts.
Joyce has always maintained that the decision for Qantas International to receive any new aircraft will be largely dependent on its return to profitability, which was previously on the calendar for the middle of 2015.
"As always with fleet, flexibility is the keyword" a Qantas spokesman told Australian Business Traveller earlier this year.
"We have a very good relationship with various manufactures and that has enabled us to adjust our orders as required. In Boeing’s case, our relationship stretches back more than 250 aircraft across 60 years."
Qantas holds orders for eight Airbus A380s on top of the 12 already in service, but in 2012 pushed its next two A380 deliveries back from 2013 to 2016-2017 with the final six slated for delivery from 2018-19.
In a Fleet , Efficiency & Engineering presentation to media and analysts in October 2013 Qantas pegged all eight of the remaining superjumbos for delivery in the 2017-2025 period.
With the A380's list price currently sitting at US$414 million (A$461), each undelivered superjumbo places a sizeable marker on Qantas' forward balance sheet.
Qantas can also call dibs on up to 50 of Boeing's 787 Dreamliner, which Alan Joyce has previously indicated would likely be split between the original Boeing 787-8 for Jetstar and the larger longer-range 787-9 for Qantas.
Jetstar's order of 14 Boeing 787s will see six delivered by the middle of this year with five more by mid-2016 an the last three in a nebulous timeframe stretching from 2017 to 2025.
The fate of those and other orders, and their impact on Qantas routes, will be revealed this Thursday morning from 10.30am when Qantas presents its FY14 half-year financial results and reveals cost-cutting plans to tackle what it is framing as the "consequence of an unprecedented set of market conditions now facing Qantas."
Follow Australian Business Traveller on Twitter: we're @AusBT