Australia Post and Qantas are ready for a parcels boom

Alan Joyce and Paul ­Graham at Sydney airport – two Irishmen running the national flag carriers for Team Australia.

For Qantas chief Alan Joyce and new Australia Post chief Paul ­Graham, it’s beginning to look a lot like Christmas proper.

On Tuesday, the captains of Australia’s biggest national carriers are to announce new aircraft deals to handle a very different world of passengers and parcels post-Covid.

The first is to help handle the biggest Christmas operation in Australia Post history, expected to eclipse the record 52 million parcels and 7.4 million kilograms of airfreight uplifted last year. This week Qantas Freight will add another Airbus A321P2F freighter to its fleet that will operate for Australia Post.

The second deal is a response to a permanent step-up in e-commerce and freight demand, with the airline converting two of its A330s from passenger planes to freighters to be flying by mid and late-2023.

In an exclusive interview with both chiefs, Joyce tells The Australian that Omicron has failed to dent people’s international travel plans, with flights for December close to full.

“People are still holding onto their international bookings” Joyce says. “We haven’t seen the cancellations that we saw when Covid first came along.

“We are one of the highest vaccinated countries in the world, and that has given people a lot of confidence. And for two years, people have not seen family and relatives.

“There is a huge pent-up demand of people who want to do that through Christmas and over the New Year, so our flights are very full.”

Also on Tuesday, Qantas is to operate its first flight to India in almost a decade.

“It is the fastest-selling flight ever in the launch of our international service. So the demand is there and people are determined to travel. And the same with domestic,” Joyce says.

When passengers stopped flying during Covid, the hit to the airline was inevitable. But at Australia Post, Graham also lost capacity from the belly of those passenger planes. It would be yet another pressure point for supply chains.

A third factor forced Australia Post and Qantas to rethink logistics: the parcels business simply exploded.

“It’s been in the wings for some time – no pun intended,” Graham says. “Both teams were looking at the post-pandemic situation. We have seen a 76 per cent increase in e-commerce growth compared to two years ago.”

This week a third A321 passenger freight aircraft will be added to Australia Post’s existing fleet of 12 freighters. It means the service can carry more than 70 per cent more parcels.

“The speed customers are looking for in that next-flight-out scenario is certainly increasing, and we will be very good place for this Christmas,” Graham says.

Qantas’s relationship with its largest freight customer goes back to 1922. Its first flight at Cloncurry in Queensland was carrying mail for Australia Post.

Almost a century later, Graham and Joyce were of one mind that the shift to online shopping means a structural change in logistics. They were going to need a bigger plane.

“We have done a lot of research, as has Qantas,” Graham says. “The logic pointed to that sustained increase and the need for us to continue lift our ­capacity.”

Their answer is the wide-bodied A330. Joyce says the team at Qantas knew it had passenger A330s it could convert. The airline had conversions ongoing in other parts of the world. “We said that would be an even bigger step change to go from 20 tonnes in an A321 to go to up to 50 tonnes in an A330, and that would meet what we regard as a significant demand going forward and give us capability,” Joyce says.

Two A330s are being converted, one for the domestic market and one for international freight. Both are for use by Australia Post and international flights will also carry perishable agricultural products to Asia – abalone into Shanghai, or avocadoes into Singapore.

One plane will be converted in Germany, the other in the US, with seats removed and larger doors and cargo handling systems installed, ready for use in 2023.

Joyce says the 26 remaining A330s passenger aircraft will be flown more frequently. “We don’t lose any domestic flying, but we get these two aircraft essentially free of charge, except for the conversion.”

During Covid, Qantas Freight has been the best performer for the entire Qantas group. “Its record profits over the last couple of years have helped offset the massive losses in the international airline,” Joyce says.

“We know that will come back a bit as the passenger aircraft belly hold comes back up, but we do think there is a step change. Having these aircraft to meet that ­demand from 2023 onwards is really key to us.”

For Australia Post, Graham says the wide-bodied A330s will help reduce carbon emissions. “As e-commerce grows, the carbon footprint grows, so the more ­efficient aircraft we can bring in, it’s a double win,” he says. “We get far more capacity up to 50 tonnes and at the same time these are far more efficient and it helps our sustainability footprint.”

In Sydney, the shift to online and a new obsession with last-mile logistics has driven huge interest in the airport itself.

“We have sold the land around here which is surplus for over $800m, a lot more than our expectations on it,” Joyce says. “And we just saw Sydney Airport being sold for a record level, a lot more than it was in terms of the market cap pre-Covid. People know that the air transportation postcode is going to have growth. From the research we are doing even on the passenger side, the intent to travel is higher than it has ever been and on the freight side there has been a step change.”

It is less than three months since Graham took on the top postie job and on the airside at Sydney Airport to announce the aircraft deals are two Irishmen running the national flag carriers for Team Australia.

“We reminisce about Ireland all the time,” Joyce says. “He’s from the North, I’m from the South and we are doing the photo, in the rain. It felt like we were back in Dublin or Belfast on a good summer’s day.” Graham adds: “Everyone was telling us it’s raining and we’ll give you some cover and we said no, no this is fine, it’s actually quite tropical for us.”

Down at parcel level where staff have been at Christmas pressure for months now, Graham admits there is fatigue. He is focused on safety and wellbeing. “We’ve seen that across all businesses,” he says. “The team has shown incredible resilience but there is a limit to that. We will punch through the next three week through Christmas, Boxing Day is a big day and the week after also a big day in e-commerce now.”

In contrast, after months of standing down, Qantas staff are back in business. On Monday, Queensland Premier Annastacia Palaszczuk confirmed the state’s borders would be open on December 13, leaving only Western Australia off-limits. Joyce says that for travel, vaccinations have been the catalyst to change a vicious circle into a virtuous one.

“We saw over the weekend the premiers of NSW and Victoria reconfirm they are going to keep the borders open, the South Australian Premier the same,” Joyce says. “We are seeing the confidence that vaccination has given the governments to keep borders open, allow people to travel and for people to get on with our lives is very strong. That gives people the confidence to keep the bookings there and to travel and visit those friends and relatives domestically and across the world.”