Qantas bets on non-stop Sydney-London flights with Airbus order

Qantas Airways will fly non-stop from Sydney to London after ordering a dozen special Airbuses, charging higher fares in a multi-billion dollar bet that fliers will pay a premium to save four hours on the popular route.

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Launching in late 2025, the flights will use A350-1000 aircraft, specially configured with additional premium seats and reduced overall capacity, to carry up to 238 passengers in 20 hours – the longest direct commercial flight in the world.

Announcing plans for the service on Monday, the loss-making carrier said a strong domestic market recovery and signs of improving international flights after the worst of the COVID-19 pandemic had given it the confidence to make an investment. major on its future. Qantas expects a return to profit in the financial year beginning in July.

The European aircraft maker’s order also includes 40 A321XLR and A220 narrowbody aircraft to begin replacing Qantas’ aging domestic fleet, with deliveries spread over a decade. The airline did not disclose the value of the deal with Airbus, but analysts at Barrenjoey estimated in a client note that it would cost at least A$6 billion ($4.23 billion).

“Since the start of the calendar year, we have seen huge increases in demand,” Qantas chief executive Alan Joyce told reporters at Sydney Airport, where an Airbus A350 test plane -1000 flew from France emblazoned with the Qantas logo and “Notre esprit vole”. further” was parked in a shed as a backdrop for the announcement.

Qantas shares jumped 5.5% on Monday to the highest level since November after it also said debt levels fell to pre-COVID levels faster than market expectations.

The A350-1000 order was the culmination of a challenge called “Project Sunrise” launched at Airbus and rival Boeing Co in 2017 to create record-breaking planes.

Airbus was selected as the preferred supplier in late 2019, but Qantas delayed placing an order for two years due to financial difficulties during the COVID pandemic.

Airbus chief commercial officer Christian Scherer said the plane which will be used on Sydney-London flights will offer more fuel storage than the A350-1000s currently in service with other airlines.

Qantas’ planes will carry passengers in four classes and have around 100 fewer seats than competitors British Airways and Cathay Pacific Airways Ltd use on their A350-1000s. The Australian carrier will devote more than 40% of the jets’ cabins to premium seats.

CEO Joyce said demand for nonstop flights had increased since the pandemic, when complex travel rules were put in place. Rising fuel costs could be recouped through higher fares, he said, as the airline had done before on its non-stop Perth-London flights.

In a market update, Qantas said that while it expects an underlying operating loss for the year ending June 30, 2022, the second half would benefit from improved domestic and international demand, with free cash flow expected to increase further in the current quarter.

Barrenjoey analysts predict Qantas could realize a 20% revenue premium on ultra-long-haul flights, which Joyce says will also visit New York from late 2025 and possible future destinations like Paris , Chicago and Rio de Janeiro.

Qantas estimated that Project Sunrise would have an internal rate of return of around 15%.

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