Qantas explains A320 neo buy

At a joint briefing in Sydney yesterday, Qantas’s Alan Joyce, Jetstar’s Bruce Buchanan and Airbus’ John Leahy elaborated on why the Group had elected to buy the upcoming A320 neo, the re-engined version of the popular single-aisle family.  

“The key reasons why we chose the neo are the economic advantage and the eight per cent impact on cost which is driven by fuel and maintenance savings,” Buchanan told the specialist media.

“And with aircraft being delivered this decade that helps us achieve management of growth, but also gives us the flexibility of managing our older generation aircraft and keeping the fleet new.

“And having the simplicity of transformation into what is a largely common aircraft with our existing fleet, that makes the decision relatively easy for us on the neo.

“In terms of routing the good thing about the neo is that it can do everything the A320 can do today and then extends that range with both the sharklets and the engines when they come in in 2016. And that will allow routes like Melbourne, Sydney to Bali to be operated by narrow bodies; and routes like Singapore-Shanghai and Singapore-Beijing to be operated by narrow bodies. And also extends the range to make KL to the east coast (of Australia) a reality in a premium configuration.

“It allows Qantas to serve an Asian market that largely doesn’t have the network to service today, with one stop into places like Beijing.

“In trying to get from places like Melbourne to Beijing today on the Qantas network versus with this option, we’ll really throw up a competitive proposition for the corporate customers. And the business model is predicated on 80 per cent of the business coming out of Australia, so I think it’s a strong proposition to give to existing customers… and that has a benefit, not just in terms of growing the business with those customers, but (it) also strengthens the relationship back for all the rest of the Qantas Group operations that we are currently doing with those particular customers.”

The Qantas Group has ordered 110 neos, plus a series of purchase rights. Of the 110 aircraft, 99 will go to Jetstar and the other 11 will go to the new premium Qantas airline which will be based in either Singapore or Kuala Lumpur.

Of the 99 Jetstar aircraft, a considerable number will be devoted to enhanced operations in Japan, while others will be allocated to support growth in the existing business and to roll over older aircraft.

“But we do have the flexibility of being able to use those for either growth or roll over,” Buchanan said. “So we’ve got extreme flexibility to either put them into existing businesses and replace the existing aircraft or put them into existing businesses and grow, or put them into new businesses.”

Alan Joyce believes the strategy has been viewed favourably by the rating agencies:

“What was important when we made this announcement and showed the flexibility we have and how much was actually going to appear on our balance sheet – and that in conjunction with delaying the A380 – the rating agencies were very positive that this showed good capital discipline in the Qantas Group; that we are fulfilling our growth strategy with Jetstar and the premium airline… It’s a very sensible measured approach towards growth in the Asian markets in a way that’s complementary to our investment grade rating.”

 

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