Qantas throws off the tyranny of distance

Ability to fly non-stop to destinations like London, or NY, is what makes Qantas’ new planes so intriguing.

Boeing 787-9 Dreamliner joins the Qantas International fleet from 2017.

When Qantas begins flying its Boeing 787-9 Dreamliners on 17,000km non-stop services from Perth to London next year, it will gain insights into a re-imagined future for its international network.

The tyranny of distance has been a limiting and disruptive influence over the shape of the Qantas network ever since the emergence of the Asian and Middle Eastern hub carriers.

As an end-of-the-line, point-to-point carrier, it wasn’t possible for Qantas to be able to compete effectively with carriers who could leverage their strategic locations to attract and aggregate passenger volumes from multiple jurisdictions and then on-fly them to multiple destinations.

The development of the Gulf hubs in particular and their dominance of the international volumes on the routes from the Asia Pacific region into Europe ultimately forced Qantas into an alliance with Emirates.

The direct flights from Perth to London and the imminent availability of new longer-range aircraft will, however, create new possibilities for Qantas.

While in Los Angeles for the opening of Qantas’ new A380 maintenance facility last week, Alan Joyce made it clear that Qantas is looking closely at its options for replacing its remaining, ageing, fleet of extended range 747s, the newest of which entered service in 2003.

Both Airbus and Boeing will be pitching product at Joyce. Airbus plans to have its A350-900 ultra-long range in service in 2018 while Boeing has its 777-8X on the drawing boards, which probably means it won’t be available until the early-to-mid 2020s, which is about the time Qantas will need new long-range capacity.

The appeal of both the planes is that they can fly distances that were previously almost unimaginable — up to 19 hours. The planes are smaller than the current long-haul aircraft. The 777-8X would, in a multi-class configuration, carry perhaps 350 or so passengers compared with the 480-plus capacity of an A380.

The ability to fly non-stop to destinations previously unreachable by direct flights — direct flights from the east coast of Australia to London or New York, for instance — and, counterintuitively, that smaller capacity, is what makes the new planes so intriguing for Qantas.

While Qantas is severely disadvantaged relative to the hub carriers on the routes between Australia and Europe, it has some extraordinarily valuable assets — its “bi-laterals,” the rights to the international routes that are negotiated at governmental level, and its slots at Heathrow in the UK.

Boeing factory in Seattle where Qantas's new 787-9s will be built. Picture: Robyn Ironside.

Those bilateral agreements mean that only the Australian and New Zealand and US carriers have the rights to fly the trans-Pacific route, while slots at a congested Heathrow are heavily restricted and immensely valuable.

The new planes would give Qantas the ability to fly from Sydney or Melbourne direct to the east coast of the US and direct from those cities to London, bypassing the Middle Eastern and Asian hubs on the London route. That would create a new point of entry to the US in the most desired destination in the US. Qantas currently flies into Los Angeles and the Fort Worth hub of its ally, American Airlines, in Dallas.

At this point no-one knows whether passengers will want to spend 17 hours or more in a plane to avoid a stopover in transit to their eventual destination.

The smaller configuration of the new products also means that, if those direct flights are to be economic, they will have to be priced at a premium to multi-leg flights. Thus there are two questions to be answered: the demand and the yield.

The Dreamliner flights from Perth to London won’t, for east coast passengers, be direct flights. While passengers originating in Melbourne will clear customs and immigration at Melbourne airport, in effect they will be swapping a transit point in the Middle East or Asia for a lounge in Perth.

Nevertheless, the data from the Dreamliner experience will help inform Qantas about the prospect of direct flights from the Australian east coast to the UK or eastern seaboard of the US.

Will enough passengers, particularly business customers, be prepared to pay a sufficient premium to make economic sense of a direct flight strategy and the expensive aircraft required to execute it? The new planes will cost something approaching $US400 million each.

If the tentative answer is “yes”, it would open up a complex set of options for Qantas, not just in the possibilities of the direct flights on the obvious routes but potentially elsewhere — a 19,000km range brings a lot of destinations within reach.

It would also release existing capacity, which could be deployed elsewhere.

Given the lead times in the decision-making for fleet renewals, where carriers have to try to plan up to a decade ahead, some of the questions within the range of options opening up for Qantas will need to be answered in the relatively near future.

The potential of the next generation of aircraft to transform Qantas’ international network is obvious, if the demand at the required pricepoints is there. It could also have implications for the nature of the joint venture Qantas has with Emirates and the alliance, momentarily scaled back as the carriers seek US approval for a joint venture, with American.

Given the unsettled state of the world, particularly the US, long-range planning is an even more challenging task than it has been in the past, in an industry where violent volatility is the norm.

If Qantas can make economic sense of the ultra-long-haul flights, however, there is the tantalising prospect of it finally overcoming the handicap of that tyranny of distance that has distorted and limited its international network and advantaged its competitors. Those new planes and their successors are potential game-changers for Qantas and the industry.

The potential of the next generation of aircraft to transform Qantas’ international network is obvious. Picture: Bob Barker.