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Airbus' domination of Qantas strikes blow at Boeing
Planes

Airbus' domination of Qantas strikes blow at Boeing

3 min. 16.12.2021 From our online archive
The decision is a coup for Airbus, based in Toulouse, France
The Australian carrier on Thursday said it will buy 40 Airbus jets
The Australian carrier on Thursday said it will buy 40 Airbus jets
Photo credit: Paul Miller/EPA/AAP/dpa

Airbus SE’s total domination of a multi-billion dollar aircraft order by Qantas Airways Ltd. has struck a blow to a resurgent Boeing Co. and its 737 Max just as the aviation industry charts an exit from its worst-ever crisis.

The Australian carrier on Thursday said it will buy 40 Airbus jets with a list price of at least $4.6 billion before discounts, with options to buy an additional 94 aircraft over more than a decade. The jets replace Qantas’s aging fleet of almost 100 Boeing 737s and 717s - some of them about 20 years old - that still serve as the airline’s domestic workhorses.

The decision is a coup for Airbus, based in Toulouse, France, as it races to match Boeing’s Max order bonanza by year-end. The European planemaker also landed a commitment from Singapore Airlines Ltd. for its A350 freighter Wednesday and has an opportunity to make headway with Air France-KLM, which is set to announce replacements for its aging Boeing 737s.

The commitment means Qantas and its low-cost Jetstar division are likely to be flying mostly Airbus planes on their domestic and international networks for decades to come. 

Boeing’s Dreamliner, still favored by Qantas on some popular long-haul routes, now appears set to be the US company’s only significant presence in the Australian airline’s fleet.

Boeing has been pushing its Max after the plane was cleared to fly again in the wake of two crashes. Those disasters in Indonesia and Ethiopia in late 2018 and early 2019 killed 346 people and led to the jet’s worldwide grounding. Securing Qantas - famed for its safety record in the jet era - as a Max buyer would have been a further step in the aircraft’s rehabilitation.

Instead, Qantas is throwing itself behind Airbus. The airline’s latest order is in addition to Jetstar’s existing agreement with Airbus for more than 100 aircraft in the A320neo lineup. All told, the Qantas group will be able to tap about 300 new A320 and A220 planes over the next decade as part of the biggest order in Australian aviation history.

With so much hanging on the deal, competition between the manufacturers was especially fraught, and Qantas pored over the different aircraft for six months. Airbus’s campaign for the order “pushed the boundaries” of “operational and financial evaluation,” according to Chief Commercial Officer Christian Scherer. In a statement, Boeing said it was “disappointed” at the result, but respected Qantas’s decision.

The Chicago-based manufacturer has been using discounted sales to help compensate customers for revenue they lost after regulators grounded the Max. But with the model selling strongly and delivery slots filling, Boeing executives signalled in October they were focusing on “pricing discipline.”

Shares of Chicago-based Boeing fell in New York before erasing declines following a Federal Reserve announcement that it expects to raise interest rates in 2022 faster than expected. 

Qantas shares climbed as much as 2.3% in early trading, before closing down 0.6% in Sydney, giving the airline a market value of about A$9.1 billion ($6.5 billion).

Qantas is the latest carrier to bet that travel will eventually rebound even with the threat of the new Covid-19 variant omicron hanging over the world. Virgin Australia, a domestic rival emerging from a restructuring, has already unveiled an order for 25 of Boeing’s largest 737 Max model.

According to Alan Joyce, Qantas’s chief executive officer, it’s a great time to buy aircraft because manufacturers are eager to nail down sales and are offering advantageous pricing. The new aircraft will also reduce fuel and maintenance costs, while cutting carbon emissions.

“This is a clear sign of our confidence in the future,” Joyce said. “We’ve locked in pricing just ahead of what’s likely to be a big uptick in demand for next-generation narrow-body aircraft.”

And the Australian flag carrier is eyeing even more planes as it pushes ahead with plans to start long-haul flights halfway around the globe. Non-stop services connecting Sydney with New York and London, a project thrown into doubt by Covid, are due to start as soon as 2024.

Qantas has already picked Airbus’s A350-1000 as its preferred aircraft for the flights and is due to decide on a firm jet order in early 2022.

Separately, Qantas forecast it will post a fiscal first-half loss of A$250 million to A$300 million. With most of Australia’s internal borders now open, domestic capacity is expected to exceed pre-Covid levels in the first six months of next year.

©2021 Bloomberg L.P.


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