Qantas will need a few more months before it will select the aircraft for its short- and medium-haul fleet renewal. It will then place orders for 100+ aircraft by mid-2022, likely at next July’s Farnborough Airshow. So far, all the three big airframers Airbus, Boeing, and Embraer still seem to be in the race for one of the airlines’ biggest orders by size. Qantas closes in on fleet renewal order.

The Australian carrier offered a tiny glimpse into its thinking with a press release issued on October 5. It went out at the same time that CEO Alan Joyce discussed the fleet renewal with the lead management of all three OEM’s in Boston on the sidelines of IATA’s Annual General Meeting. Joyce told media that the upcoming order is a key milestone for Qantas as it is about replacing a large part of the fleet during a ten-year spell between 2023 and 2034.

At stake is the renewal of twenty Boeing 717s with QantasLink and 75 737-800s with Qantas. The 717s joined QantasLink between 2005 and 2016 but they are actually much older. The oldest is from 1999 and the average age is 19.5 years. The 737-800s are on average 13.5 years old, with the youngest only six years old but some fifteen aircraft 19.8 years.

Replacing these aircraft and also accounting for future growth has been part of Qantas’ strategy for a couple of years now. During its November 2019 Investor’s Day, the carrier shared a slide that outlined which direction it was thinking. It had the Airbus A220 and Embraer E2-family in one group and the Airbus A321LR and Boeing MAX in another. The A321XLR and Boeing’s New Midmarket Aircraft were also under evaluation but in June 2019, Qantas placed an order for 36 XLRs for use by both Qantas and Jetstar.

This is a slide from November 2019, when Qantas shared its fleet plans during an Investor’s Day. (Qantas)

A proper evaluation was delayed as the Boeing MAX was grounded following the earlier fatal accidents and the debate about its safety, which since then has resulted in an aircraft with modified systems. Then Covid intervened, putting every decision on hold as Qantas struggled to keep going as a domestic-only airline.
“Covid has had a devastating impact on the aviation industry and there aren’t many airlines around the world in a position to place orders for new aircraft. We still have our own repair work to do, but we know travel demand will rebound quickly and right now we’re in a strong position to secure the best possible deal at very good prices”, Joyce says in a statement.

Four types under evaluation for mixed fleet

Since then, Qantas has picked up what it calls ‘Project Winton’, named after the birthplace of the airline in Queensland. Qantas says it evaluating the four types mentioned in its 2019 presentation: the A220, the A320neo/A321neo without referring to the LR, the Boeing MAX 7, 8, 9, and 10, plus the Embraer E190-E2 and E195-E2. They will be selected based on safety, reliability and performance, sustainability and emission reduction, and commercial terms.

“All of the next-generation aircraft we’re considering have the potential to drive big improvements in trip cost and overall efficiency, and they’re great platforms for delivering a better premium service to our customers, says Joyce. “Not only will these aircraft deliver a step-change in reducing fuel burn and carbon emissions by up to around fifteen percent, but we’re also talking to each of the manufacturers about how we can accelerate the development and use of sustainable aviation fuels for our domestic flying.”

With its diverse network that includes services between bigger cities and between big cities and small cities, the airline needs both smaller and bigger aircraft for the right mix. “Our approach is always to have the right aircraft on the right route, which really means balancing the size of the aircraft with the demand in each market. The mix of aircraft we’re considering means we’ll have more operational flexibility, which for customers translates into more direct routes to smaller regional centers and more choice of flights throughout the day.”

Qantas’s existing order for the A321XLR could give Airbus an advantage. (Airbus)

Who will be the winner(s)?

So what will Qantas buy? The 737-800s have 174 seats and the 717s come with 111 to 125 seats. Airbus could be at an advantage as its subsidiary Jetstar will introduce the A320neo and A321neo in its fleet from mid-2022 onwards and has 109 aircraft on order. And it has 36 A321XLR on order itself.
Buying the neo would give Qantas and QantasLink maximum fleet commonality and efficiency at the same time reducing MRO and pilot training costs. But if you look at the number of seats, with 150 to 220 seats, the A320neo-family sits at the high-end of the segment that Qantas is looking at. It would still need a smaller aircraft to replace the 717. The press statement doesn’t mention the A319neo, so this seems no part of the evaluation.

Going for the A220 would give Qantas a wide spectrum of a 100 to 150-seater that could almost do both jobs, but will be too small for services that are now served by the 737-800. Selecting the A220 and A320neo-family offers maximum flexibility from a capacity point of view and will undoubtedly tempt Airbus in making a very good commercial offer. The problem is that Airbus has almost no production slots for the A320neo-family before 2024 and Qantas wishes to introduce the first new aircraft by late 2023. Unless it opts to lease them and finds itself available aircraft with lessors.

Embraer can only offer products that are to replace the 717s as even its largest E195-E2 at 146 seats is no match for the 737-800. It also has a smaller active fleet that Qantas can evaluate, although operators like Azul, Helvetic, and KLM are very pleased with the efficiency of their E2s. They deliver even a 20+ percent fuel burn improvement over the E1, more than the 17 percent that Embraer usually communicates, CEO Arjan Meijer told AirInsight. This could make the E2 an interesting candidate. From its partnership with E1-operator Alliance, Qantas knows Embraer well.

Be sure that Boeing is trying to keep Qantas on board as one of its long-term customers. But the MAX 7 is too big as a 717 replacement. The -8 would seem to hit Qantas’ sweet spot and maybe the -9, but the -10 seems too big as well for what the airline needs.  

Of course, we don’t know which criterium will be the most important for Qantas and how commercial terms fit in. But the way we look at it, Airbus could have an advantage with its mixed products of A220 and A320neo-family and the fact that Jetstar already has selected the neo and Qantas the XLR. A split Airbus/Boeing order seems unlikely for the reasons mentioned. If Qantas prefers the MAX for the high-end then the Embraer E2 stands a good chance to win the 717-replacement order.

Order for Project Sunrise seems imminent

As Qantas closes in on its fleet renewal order, Alan Joyce also indicated that it will decide soon on placing a firm order for Project Sunrise. In December 2019, the carrier selected the Airbus A350-1000 as the preferred aircraft and was ready to announce a firm order for twelve in early 2020 until Covid intervened. In the media statement, Joyce says: “At the other end of the spectrum, we’ll be picking up where we left off with our direct flights to London and New York as part of Project Sunrise, which we hope will start operating in 2024/25.”

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