Qantas May Defer 787’s For Jetstar
The biggest airline customer for the Boeing 787 Dreamliner to date, Qantas, has revealed that it may defer initial deliveries of the type destined for its low cost off-shoot, Jetstar International.
Jetstar is due to become the first Australian airline to take delivery of the 787-8, of which upto seven had been earmarked to replace it’s Airbus A330-200’s - those airplanes would in turn be transferred back into Qantas’ mainline operations while the 787’s form the backbone of Jetstars intercontinental network.
Qantas has orders, options and purchase rights for upto 115 Boeing 787’s.
While the 787 has itself been delayed by almost two years, it is thought that the plummeting rate of premium traffic across the world has forced Qantas to re-evaluate the need for 787 so soon, particularly when the first examples of the type may not meet specifications. In a recent bulletin to clients, Macquarie Research notes that “the delays [to the 787] could be ideal given ongoing demand deterioration for international travel out of Australia.“
Image courtesy of Boeing
Boeing has been talking to every 787 customer about the delays thus far in terms of deliveries - with the possibility that the economic downturn and fuel price decreases seen over the last two quarters could mean that some 787 slots are vacated. Carriers such as First Choice Airways have made no secret that their summer plans for 2009 and 2010 had been hurt as a result of the delays and have sought to get earlier slots should they become available - in summary, there will be no shortage of candidates willing to take early 787’s should there be any opening for them to do so.
Vacated positions also means those carriers affected by the delays can possibly seek rearranged deliveries earlier than envisaged - the reality is that Boeing is probably loathe to “block” these open positions and rather offer customers 787’s much sooner than if they had to wait based on the last round of delays announced in late 2008. Of course the other added bonus for Boeing is if these vacated slots are not taken up by customers, it has a greater element of manufacturing breathing space to better allow suppliers to incrementally gear up for production increases ahead of planned service entry next year.
Jetstar had planned to deploy its 787’s on routes to southern and central Europe, allowing its bigger parent Qantas to focus its predominantly 747/A380 services to key hubs such as London Heathrow. Macquarie Research also highlights that Jetstar “is likely to continue outperforming Qantas mainline over the next 12 months, with premium traffic downgrading to lower cabin classes and leisure traffic downgrading to low cost carriers.”
Any decision to defer 787 deliveries could stifle Jetstar’s ability to expand into Europe and supplant routes that Qantas wishes to “offload” to its low cost subsidiary. Furthermore, with yields declining across many blue chip carriers, Qantas’ reliance on Jetstar providing upto 5% better profit margin* means that it can ill afford to hold back its growth while it combats yield erosion of its own operations.
With Airbus potentially poised to cut deliveries of A380’s this year, Qantas may elect to defer deliveries of 787’s destined for its own mainline operations to control systemwide capacity while the fall in yields show no sign of abating.
* Macquarie Research
20 comments April 13th, 2009
