Group CEO Alan Joyce said Qantas is planning to exercise options to grow the Qantas 787 fleet beyond eight aircraft. But the spotlight should in due course return to Jetstar, the original 787 operator in the group.
Jetstar operates 11 787-8s and would benefit from a larger fleet, including -9s, to allow it finally to seize opportunities it has had to wait on while competitors - notably Scoot and AirAsia X - have grown their widebody fleets. Jetstar received its last 787 in 2015 and the Qantas Group is trying to convey to investors (some still sceptical) a message of disciplined capital allocation and debt reduction.
Jetstar could benefit from the larger -9 variant
All of Jetstar's 11 787s are the original and smaller -8 variant. Many 787 operators have found the -8 too small, and they need the larger -9 to spread fixed costs. This augurs well for Boeing and their preferred focus on the -9, which is more profitable and incorporates manufacturing improvements. The -9 and newer -10 have a relatively high commonality with each other, whereas the -8 does not.
Boeing's orders and deliveries website has received 12 787-8 orders since 2015, while the -9 has received 136 orders.
Jetstar's network opportunities
Jetstar's 787 network is anchored around Southeast Asia and Japan (there is also a flight to Honolulu). Jetstar could significantly grow in Southeast Asia while diversifying in Northeast Asia.
China presents significant opportunity in the long term. Australia has experienced significant Chinese growth due to a generous air service agreement that is now liberalised. With other long haul markets constrained, Chinese airlines have diverted capacity to Australia.
Eventual market cooling and rationalisation will improve Jetstar's opportunities, although there are many other charter opportunities to capture, as it did with its Wuhan-Gold Coast service and will do with its Zhengzhou-Melbourne flight.
Jetstar expects LCC penetration of 20-40% in the China-Australia market.
The nonstop market today has effectively no direct LCC presence, since Jetstar is not flying and some Chinese airlines identifying as LCC are still essentially full service airlines (although there is considerable intermediate LCC operation, notably by AirAsia and Scoot).
The continued consumer shift from group travel to FIT will enable LCC platforms to be more prominent, while some full service airlines become more premium. Until then, a low cost airline - even if on board it is effectively full service since it sells all-in bundles to agencies - has the key advantage of lower cost seat production.
There could also be ad hoc opportunities for Jetstar and Qantas to interchange routes and fly wingtip-to-wingtip for strategic purposes, or for Jetstar to access slots that Qantas cannot.
Qantas Group is moderating capital expenditure, unlike Scoot and AirAsia X
Although there is a strong business case for Jetstar to receive more 787s, the unit essentially will have to wait its turn in the priority queue at Qantas Group. (This makes for some interesting discussion internally as Gareth Evans, until now CEO of Qantas international, moves to his new position as CEO of Jetstar in the recent reshuffle.)
Like many leading airlines - IAG, American Airlines - Qantas is seeking to convey to investors that it has restructured, can deliver consistent returns, and is investor worthy. A key objective is trying to smooth the historically cyclical nature of aviation performance. For Qantas Group this equates to limiting capital expenditure, maintaining low debt, and delivering dividends.
To read more visit, Qantas receives first 787 and plans to exercise options: more 787s should go to low cost Jetstar