Qantas Cancels 787-9 order

[harvyk]

I think this is a good sign to state that QFi (and by that I mean JetConnect and "The QFi Company" aka Not Qantas) will ultimately become a two bird race... JetConnect operating B737's TT, and QFi operating A380's to a handful of destinations eg a couple of SE Asian Cities (thinking HKG and SIN), LHR (one flight daily from SIN) and LAX. All other flights will most likely be OW connections or code shares with JQ taking up the other destinations. I also see QFi becoming very SYD and MEL focused with virtually no international flights from any other AU port (BNE and PER will prob be served by JQi).

I don't see this as the end of QFi, but I strongly suspect QFi as we know it is on limited days.

 

[AaronBradford]

As a matter of interest how far away are we from seeing a 789 built?

I believe I read something quite recently that said Boeing weren't too worried about the -9 at the moment, and we may not see it until the late teens.

 

[mannej]

I believe I read something quite recently that said Boeing weren't too worried about the -9 at the moment, and we may not see it until the late teens.

?
Why is no one looking at this side, considering the delays the -8 had, perhaps there may be a case of cutting some losses and running while they can?

 

[The Rok]

1 news story this morning suggests QF will draw a $450 million payment from Boeing as a result of cancelling the delayed Dreamliner deliveries.

It is entirely possible that QF are being very very smart here and have something up their sleeve.

How about some new 777's and 747's to feed into DXB??????

 

[markis10]

Correct me if I'm wrong, but I think that the fuel burn for the 767 and the A330 would be similar for routes within the golden triangle? Given the nature of these sectors, there's not enough cruise time to make a large difference to fuel use.

Think about cost per seat/ per mile rather then just fuel cost.
Newer A330 cost less to maintain and run then the 767's ,

A 767 burns less fuel than either flavour of A330, by quite a significant margin, and while opex on an A330 is lower, it relies on loads that need to be 15% higher than the break even point on a 763 thanks to even the 332 having a 20% higher pax load. If your not growing a 763 route to meet the higher passenger count of an A330, then there is not much point putting one on.

I wonder what compensation QF have just lost right to by dropping the 35 dream liners, could of got some good deals on other aircraft I suspect, just when you have a nice strong local dollar!

 

[casanovawa]

I think there are some very frustrated wannabe Airline CEOs and Fleet managers on this thread who would just love to have a crack at getting their hands on QF and managing it for a day or a year...

And I'm sure there are many valid points on here, why doesn't AJ read this and benefit from the savviness of AFF's many contributors, better still, why doesn't Red Roo organise another lunch so that some of the collective wisdom can be put forth to AJ over a couple of courses (is it just me or has Red Roo been absent from AFF for a long time or am i just reading the wrong threads???)

I had thought about the costs of paid up 767s vs newer fuel efficent planes that are having to be paid off but didn't know about the impacts of lease arrangements and depreciation and all... I think as a number of people have indicated you would really need more background information to be able to drill down and get the actual costs and relative costs involved of different aircraft and their loadings on different routes to really be able to make some hard and fast decisions... And wouldn't we all love to have access to such commercially confidential info and insights...

But on the face of it it does seem a disappointing announcement, that may acutally have a brilliant rationale in the world of juggling balance sheets or provide scope to change direction on aircraft types... Its just a pity we can't hear some of it, and these days QF management seem to change tack every 6 to 12 months anyway as plans are scrapped or new ideas come up, so hard to work out what they are doing or sticking too and to quote old statements as though gospel that they are still intended to be carried out... Keeping your powder dry in difficult, uncertain times is, however, a good concept in general...

But I definitely think another lunch is needed sooner rather than later!!!

 

[docjames]

It's also possible that by cancelling the firm orders (which in turn means they can be sold to other airlines) and retaining the options, they've been able to trigger liquidated damages provisions under those orders for the delays, thereby getting cash payments from Boeing.

I think this may be an under-recognised point.

If QF growth is insufficient to utilise the 789s immediately, and they can more economically keep the 763s going, AND get a payout from Boeing due to the delay, then it's undoubtably the right move for QF.

Note that the options remains so they can still take the 789s when they want them further into the future. And with hopefully the kinks of production sorted out so that when they go to boeing and ask for them to be built, they get a fairly acurate delivery date. Unlike the current situation.

The need to still take the 788s as JQi cannot grow with them.


No mention today of the (??) 120 or therebaouts A320's on order?

 

[lovestotravel]

No mention today of the (??) 120 or therebaouts A320's on order?

This, again, confirms 787-9's are NOT happening... For now....

But also confirms 1 x A320 delivery per month for the "QF Group"

 

[medhead]

No mention today of the (??) 120 or therebaouts A320's on order?

I assume that 81 of them are listed for delivery from 2014 onwards.


Sent from the Throne

 

[JohnPhelan]

The 787-9's are dependent on QFi becoming profitable....

Simply not going to happen

So are you suggesting that QFi, if it remains unprofitable, should still buy those additional aircraft and cascade further into a black hole?? A bit of economic knowledge/reality would be nice.

 

[simongr]

This, again, confirms 787-9's are NOT happening... For now....

No it doesn't - it confirms that they don't have commitments. You do understand one of the reasons for the distinction is the readers of the financial reports. Commitments are different to options. A question for an investor is what the long term liabilities, contingent liabilities and commitments of the business in which you are investing.

 

[JohnPhelan]

I think there are some very frustrated wannabe Airline CEOs and Fleet managers on this thread who would just love to have a crack at getting their hands on QF and managing it for a day or a year...

And thank God they will never be in such a position, because they clearly understand nothing about running a business!

Those who are spreading relentless negativity are best advised to fly on a different airline (but then, they probably already work for them anyway!)

 

[lovestotravel]

So are you suggesting that QFi, if it remains unprofitable, should still buy those additional aircraft and cascade further into a black hole?? A bit of economic knowledge/reality would be nice.

Reality is that QFi is gone, and announcement after announcement confirm this

The order is CANCELLED, the remaining part will likely never come

 

[mannej]

Reality is that QFi is gone, and announcement after announcement confirm this

The order is CANCELLED, the remaining part will likely never come

We are in reality talking about a plane that hasn't been produced yet. People have been critical on how QF were slow to react over the 380 and the 787-8 delays. They are probably in a better position to make judgement regarding the timeframe in which the 787-9's will be available from.

An analogy yes, but it reminds me of how supporters are during a team's regrowth stage. All doom and gloom, yet give it time and the right conditions, they jump right back on the bandwagon proclaiming I told you so!

 

[ajw373]

Reality is that QFi is gone, and announcement after announcement confirm this

The order is CANCELLED, the remaining part will likely never come

I repeat the 787-9's were NEVER going to QFi. So why this deferal means the death of QFi is beyond me. Can you explain?

 

[harvyk]

I repeat the 787-9's were NEVER going to QFi. So why this deferal means the death of QFi is beyond me. Can you explain?

Probably because AJ keeps talking up the death of QFi, and because they have posted their first loss since 1995.

I personally don't see this as the death of QFi, despite how hard AJ appears to be trying. I simply see it as part of a consolidation strategy designed to make QFi limited to a handful of profitable routes which have high loads and handing everything else to JQi...

From a business point of view, it probably makes sense, from a keeping your loyal frequent flyers happy because they all want to try a B787, it makes little sense. Of course AJ has to look at things from a purely business point of view.

 

[JohnPhelan]

Reality is that QFi is gone, and announcement after announcement confirm this

The order is CANCELLED, the remaining part will likely never come

Reality is you are drawing a conclusion from only partial data, which you are entitled to do. Many of us think your conclusion is wrong, because it is based on a fallacious assumption and does not take into account commercially confidential information which QF will not release at this time.

QF management is far from perfect, but there is no doubt that they understand the economics of running an airline better than do you, or I, or most of us here.

 

[The Rok]

Reality is you are drawing a conclusion from only partial data, which you are entitled to do. Many of us think your conclusion is wrong, because it is based on a fallacious assumption and does not take into account commercially confidential information which QF will not release at this time.

QF management is far from perfect, but there is no doubt that they understand the economics of running an airline better than do you, or I, or most of us here.

I agree 100%. I'm fully supportive of hope, speculation and observation, but what really cough's me is the amount of people here who think they can do a better job of running the airline than the people who are currently at the helm!

Let's be real, QF have access to far more information than we do. QF have stated publicly that they have a 5 year turn around strategy for QF. They have made no statement that QFi is being disposed of or abandoned. Sometimes a little faith and understanding goes a long way!

 

[SteveJohnson]

Agree with those who are 'over' the armchair airline CEOs and have given in to a knee-jerk reaction to all this without reading through.

Yes, Qantas has cancelled orders for 35 Dreamliners, which immediately wipes almost $8bn (list price, in reality maybe more like $4bn?) off their forward balance sheet.

And yes, they were due to arrive in 2016 by last estimates (a QF exec had previously said 2015-2016, meaning financial year, and that 2016 was more likely).

But on top of the original 15+35, of which the 15 JQs remain on the books and the 35 to be shared between JQ and QF have been cancelled, Qantas had an option to buy 50 more 787s.

They have not only retained that option, they have bought it forward to begin in 2016, which is same timeframe as the beginning of delivery of the original 35, with fixed slots in the delivery queue and at a fixed price, but without having to actually spend a dollar until QF says they definitely want the 787s.

How is this not a smart move by Qantas?

 

[oz_mark]

So are you suggesting that QFi, if it remains unprofitable, should still buy those additional aircraft and cascade further into a black hole?? A bit of economic knowledge/reality would be nice.

Based on tadays announcements, the 787-9's are dependant on the QFi turnaround plan being successful, as they make statements that the timing of these two things are related. So, it comes down to whether or not you think the turnaround plan will be successful.

In 2016 we will know the answer!