It may not be day five thousand four hundred and eighty-six in the Project Sunrise saga, but it sure feels like it. Reports in Australian media today have Qantas knocking back both offers from Boeing and Airbus, asking for a better price and more comprehensive guarantees and conditions.
A report in The Sydney Morning Herald has Qantas saying no to the best and final Project Sunrise offers submitted by both Airbus and Boeing in June 2019. Qantas International Chief Executive Tino La Spina says there is a “gap” between what the airline wants to pay and what the airline manufacturers expect the airline to pay.
Is the sun setting on Project Sunrise?
Frankly, the news isn’t a surprise. Qantas CEO, Alan Joyce, has been prepping the punters for some time about the potential for Project Sunrise to fall over at the last hurdle. Just last month, we reported in Simple Flying that Mr Joyce was saying Project Sunrise wasn’t too big to fail.
“It’s a very exciting project but it is not too big to fail and if we don’t have a business case we won’t do it because that’s what our shareholders expect.”
At the time discussions between Qantas and the pilots union, the Australian and International Pilots Association (AIPA) were breaking down. Qantas needs to recalibrate its long haul pilot’s work conditions in a new enterprise bargaining agreement (EBA) to help make the economics behind Project Sunrise stack up. The union hadn’t then, and still hasn’t agreed on a new EBA.
Rather than saying, “we’ll work it out,” Mr Joyce kinda metaphorically shrugged his shoulders and said he’ll call off the whole thing if he can’t get what he wants from the pilots. Not that you should feel too sorry for the pilots. A long haul Qantas captain can pick up a cool half a million a year. Granted, that is only one forty-eighth of what Alan Joyce earns but let’s not be picky about these things.
Flinching at aircraft asking prices
In addition to a take it or leave it IR strategy, Qantas has also suddenly come over all miserly when it comes to asking prices for aircraft. Recently, Airbus toured the A220 through Australia on a promotional campaign. It’s a great plane and ideally suited for a lot of short-haul flying in Australia. Alan Joyce went for a spin in one and seemed to like it. But he said publicly he wasn’t happy with the asking price – some eighty or ninety million dollars.
Do two publicly contested price issues in a month make it a trend?
According to The Sydney Morning Herald, Qantas’ Tino La Spina told an investor’s meeting this week;
“We’ve asked them (Airbus and Boeing) to go back and re-look at that, to sharpen their pencils, because there still was a gap there.
So we’re eagerly awaiting to see what we get back from that.”
At the same time, Mr Joyce said he didn’t have a problem with walking from Project Sunrise, saying he needed all the stars to align;
“We have to get the premium from our customers … we have to get in the position where the manufacturers contribute their contribution, we have to get the regulator on side and we have to get the pilots on side.
I have no problem… in saying ‘we gave it a good try but it didn’t work’.”
All tip and no iceberg syndrome at Qantas?
If I was being cynical, this might sound like Alan Joyce was building on earlier statements, preparing the public for a walk away from Project Sunrise. As in a deliberate calculated strategy – Qantas wouldn’t do that, would they?
But despite the CEO having no problems walking away, there would be some egg residue to be wiped off faces at Qantas. Especially since they’ve promised faithfully to announce which manufacturer would be supplying Project Sunrise aircraft by year’s end – just seven weeks to go.
And then, of course, they’ve doubled down with their Project Sunrise marketing research flights. The most recent was just this week. I think even the Inuit in Newfoundland heard about it. For a mid-size end of the line airline, Qantas has mastered the dark arts of PR and sure knows how to beat the drums.
Which works if you can back up the noise with results. Project Sunrise was never a fait accompli. That’s fine. The flaw in the Qantas strategy was making so much noise about it that everyone is now waiting for it to fail.
Nonetheless, Project Sunrise isn’t written off yet. No doubt Alan Joyce would like to see it get up. It would be a great legacy for him. But when it comes to business, he left his sentimentality back in Dublin – probably handed it into Aer Lingus HR when he left that airline. I don’t doubt he’d walk away from the idea, head up to Palmie for the January break and kick back, working out to spend his twenty-four mil.
The next month or two promises more installments in the Project Sunrise saga. So while Simple Flying would like to promise that there will be no more Project Sunrise for at least a week – giving everyone a well-deserved break… we cannot guarantee that. Sorry.