Qantas Unhappy With Airbus And Boeing’s Project Sunrise Offers

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.

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Qantas is unhappy with both Airbus and Boeing’s Project Sunrise offers. Photo: Qantas News Room.

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.

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“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.”

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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.

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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?

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Qantas is taking its issues with aircraft prices public. Photo: Qantas News Room.

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.

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Alan Joyce. Not afraid to walk away. Photo: Qantas News Room.

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.

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Peter

As previously said by various commentators here:
Dear Virgin, please rescue us from Alan Joyce’s never-ending BS, and quietly start London-Sydney with an A350-1000…

Phil

I would love to see that actually. Imagine sitting in Virgin Atlantic’s upper class all the way from London to Australia. In Virgin Atlantic’s master plan they also plan to fly to Auckland. With Air NZs withdrawal from London I reckon Virgin Atlantic should do a flight direct from Heathrow to Melbourne/Sydney/Brisbane then continue to Auckland. It would be a amazing option going trans Tasman, Virgin Australia could provide feeder flights and there soon won’t be any 1 stop flights to New Zealand from London without changing planes so this is a good opportunity for Virgin Atlantic.

Karl

@Phil Interestingly, The A350-1000URL should be capable of going non-stop from Heathrow to Auckland Airport and non-stop from Auckland Airport to Heathrow. The great-circle distance between Heathrow and Sydney (Kingsford Smith) is 9188 nm (17016 km)* The great-circle distance between Heathrow and Auckland Airport is 9910 nm (18354 km)* One should keep in mind that routings may avoid the shorter ground distance of a great-circle route to use tailwinds to save time and fuel, shortening the equivalent still-air distance. Typically, the longest flights measured by ground distance traveled are Singapore Airline’s flight 22 from Singapore to Newark. Both of these… Read more »

Karl

Addendum

This means, of course, that Virgin Atlantic — or BA for that matter — could fly to more destinations in Australasia non-stop than what Qantas would be able to do.

William

There is also the issue of ETOPS planning. I think no more than 370 minutes from an viable airport at single engine speed, so the paths may need to bow a little.

Andy

I couldn’t agree more. AJ is like a car buyer who wants a GT with a GTi price tag. The manufacturers can’t just pitch in with standard aircraft.
TBH who would fancy being cooped up in a metal tube with maybe 200 other peeps for 20 hours? It’s nice just to get off and stretch your legs properly on the way to the connections desk….

Peter

As regards your comment on breaking a long flight to stretch your legs at a transit hub: I agree totally!
I like having a long, brisk walk to get my circulation going, and to use a real toilet, and to drink a real cup of good coffee at a real café.
But it seems that, for many people, the concept of having to change planes is an absolute nightmare.
In an article on RunwayGirl recently, business people said that they’d much prefer 2x A380 flights via a hub rather than a direct 20-hour flight in a smaller aircraft. I share that sentiment entirely.

Martin

You have to admire his tenacity. Asking for a special extra long haul specification with small order numbers (Qantas is no Emirates) and then not wanting to pay for it.

Paolo

TBF, I’m guessing Mr. Joyce had a long hard look at the deal Singapore Airlines had for their A350 ULRs (to date the ONLY operator of the type) and is trying to get an even better deal than what SQ agreed to…

Abe

Yeah but the problem is that SIA is the largest customer for the A350-900 and the second largest customer overall of the A350, behind Qatar. Now why would he be so deluded to think he will get the same price for just a handful of orders?

Ueli Praett

From my perspective AJ wants to have a star in the walk of fame.. The further optimization/development of A350-1000 towards ULR has to be spread to all potential customers. As Qantas is the only one with such special requirements, they have to pay for it. The rest is the usual comedy around such a project.

Henning

Both Boeing and Airbus can live happily without making a few very specific aircrafts for Qantas. The A350, 787 and the 777(x) is more than good enough for the rest of the world. Joyce needs to come of his “high horse” and face the real world

Adam Simmons

Perhaps you’d do well to leave your jealousy at Joyce’s salary at the door. When QF has annual net income at the $900m mark (https://quotes.wsj.com/AU/XASX/QAN/financials), paying out less than 3% of that to the CEO seems like a pretty good investment to me!

Peter

This type of comment always assumes that the success of a company is due solely to its CEO.
The unfortunate reality is that, in many (if not most) cases, a company’s success is achieved DESPITE its CEO.
In other words: perhaps Qantas would do even better without the current CEO 😉

Jovian Teo

Not surprising at all, especially when Alan wants aircraft to be modified to his needs, so the project probably needs some time for it to take off. Not unexpected at all actually, especially when you’re requesting aircraft manufacturers to cater to an airline’s needs. But then again, they could have just gone for a modified 787… Then there will be fleet commonality and ease of fleet maintenance as compared to being a new model of aircraft like the 777X or A350. What do you think?

here2go

I’m more interested in the replacement for the B717s. While not big ticket, domestic is bread and butter. E-195 would be a similar aircraft, but A220 could change the dynamic. especially ex CBR and DRW.

High Mile Club

I think Airbus and Boeing are rolling their eyes at this. It’s not like they’re trying, and they know Qantas is practically the only airline trying for 20 hour flights, so they should rightfully foot the bill.

Abe

LOL what a snoozefest from Qantas. Nothing more than a marketing stunt to milk free publicity with hot air stories of the longest flight in the world – which isn’t all that much longer than the SIN-EWR flight, but hey, they needed “research flights” with just 40 people on board. And the media lapped it up!

Peter

Qantas also tried to cut costs when it came to the flight crew of the recent test flights: at least one flight was performed with one captain, one first officer, and two second officers.
In contrast, Singapore uses two captains and two first officers on its Singapore-Newark flights.
It looks as if Mr. Joyce may actually be studying an LCC model…perhaps to compete with Scoot? 😉

TheDude

Then build your own darn plane.

Frank

“But he said publicly he wasn’t happy with the asking price – some eighty or ninety million dollars.” Those are list prices, you are quoting; -100: US$ 81 m (ave. list price 2018) -300: US$ 91.5 m (ave. list price 2018)[6] Airlines never pay list and a 50% discount is probably the norm. If we believe Boeing, they were given away free to Delta. Ironically, when Boeing dropped it’s price on the Max to $22 million and then Bombardier matched it – Boeing filed a dumping suit with the US gov’t. But there is no way Airbus has asked Qantas… Read more »

Nate Dogg

He is going to be looking silly soon when Virgin and BA start their own Project Sunrise…….by operating this flight about 4 years before AJ can even THINK about getting his hands on the plane to do the job. So much for doing research flights for the benefit of your competitors. It is because of him that Airbus have spent money to increase the MTOW to 321T and now he doesn’t wanna pay for it??

Tony

Bear in mind that whichever company is successful in supplying aircraft for this project, they would probably be front runners for further orders when QANTAS looks at future fleet requirements for large twin aisle aircraft

Peter

Well, now that it transpires that Joyce is such a penny pincher, he’ll probably go for Comacs or Irkuts for his narrowbody fleet 😉

Brody Cyr

If he’s being that cheap he wouldn’t go for a Comac. He’d go for a 60 year old TU-124 picked up for the price of a Cessna 172 and STILL try to negotiate the price.

Mike

The objectives of Project Sunrise were only ever to generate a massive amount of free publicity and to try to screw a few more dollars out of the flight deck crew in a new EBA. New aircraft were, in my view, never part of this. During Alan Joyce’s eleven years as CEO of QANTAS, the airline has never bought a new aircraft, none, zero, zip. They have taken delivery of a few bought by his predecessors, and cancelled quite a few too, but AJ has never bought QANTAS a single shiny new bird. And you would expect this trend to… Read more »

Marin

Mike, I fear you have a hole in one here. Alan Joyce has done well as CEO by cutting costs and getting better plane utilization. Mostly stable / low fuel prices and good hedging have been a bonus. The Qantas fleet is old. I chose not to fly with them internationally as their hard product was mostly sub-standard.

James

Why Airbus and Boeing even bothered to respond to AJ’s request in the first place is beyond me. It’s not like they can sell their submitted design for Project Sunrise in significant quantities to make up for the R&D cost to other airlines.

William

I doubt this is going to happen, Joyce is milking this for publicity. The A350-900 and A350-1000 could do it, the B777-8 could do cheaper but its years away. Maybe in 8 years time Rolls Royce will have the Ultrafan ready and Airbus will fit it to an A350 with folding wing tips and the economics will work,

Mark Laycock

Of course QANTAS (read Mr Joyce) is not happy. Project Sunrise is all about moving people for money (and profit) and paying the lowest that they can for the product/crew to be used. I’m sure they (he) would only be truly happy if the equipment was supplied for free. Not gonna happen in the real world, is it? The product (either offering) is eminently suited to the task but is there profit in it? I’d say anything above 1cent is a profit as a helpful service would be provided but in the world of $24million CEO’s it’s all about how… Read more »

tommy tukum

they should fly an ATR on that route

Jason

“The dark art of PR”??

I will have you know it’s the Dark Science 🧬 of PR my friends 😂😂