Delivery Delays Pose Fleet Capacity Challenges for Qantas

 - February 23, 2023, 11:16 AM
Qantas is adding the Airbus A350 to its fleet from late 2025. (Image: Airbus)

Qantas Group has become the latest airline to confirm it is facing supply-chain and aircraft delivery delays. During its first-half results presentation on Thursday, the carrier acknowledged that the later-than-scheduled arrival of new narrowbody jets from Airbus has forced it to turn to the second-hand and wet-lease market to help restore fleet capacity back to pre-Covid levels and meet surging demand. CEO Alan Joyce told reporters the company has been able to effectively limit the manufacturing delays to “less than six months” with Airbus.

The Australian flag carrier has a large order for 299 next-generation A220 and A320neo family aircraft—half of which are firm orders and half are purchase right options—after combining an existing order of 109 A320s (plus purchase rights) for its budget carrier Jetstar with a new firm order, placed in May 2022, for 20 A321XLRs and 20 A220-300s, to start the renewal of Qantas’s narrowbody fleet. Last year’s order also included an additional 94 purchase right options spread across A320 and A220 families, with flexibility on delivery timing (over 10-plus years) and aircraft type.

To offset the delivery delays, the group is sourcing five mid-life A319/320 aircraft for Network Aviation—one of the brands of QantasLink, its regional subsidiary—to meet continued demand growth in Western Australia, for delivery in financial year 2024. It is also sourcing two second-hand A320s for Jetstar Asia, to be based in Singapore, for delivery in mid-calendar year 2023. This will bring its total fleet size back up to nine aircraft as demand across Asia rebounds.

On the freighter side, the Qantas Freight fleet will see the arrival of three additional mid-life converted A321P2F aircraft in the 2025 and 2026 financial years. It also secured options for up to 12 additional Embraer E190s to be wet-leased to QantasLink from Brisbane-based Alliance Airlines.

Managing Supply-chain Disruptions and Aircraft Delivery Delays

“Aircraft manufacturers are seeing the same supply chain delays as a lot of other industries and we’ve been told that some of our deliveries will be pushed back by up to six months,” Joyce commented. “When you combine the delays with the sustained growth in travel demand that we’re seeing, we need to find other ways to lift capacity in the short and medium term.” Once the delayed aircraft are delivered, the group has the option to retire or retain the aircraft they were originally designed to replace depending on market conditions, Qantas noted.

Challenges with global supply chains are also impacting replacement parts, Joyce said, citing the auxiliary power units of Jetstar’s A320s, while adding that MRO slot availability is slowing down the planned return-to-service of Qantas’s remaining A380s to early 2025. “Every maintenance facility around the world is very full because every airline is trying to get their aircraft back up and running,” he commented.

Other fleet changes, announced on February 23, include the intention to exercise nine purchase right options for A220-300 aircraft for the domestic fleet. This will take the total number of A220s on firm order to 29. These additional aircraft will arrive during the 2026 and 2027 financial years.

Qantas Group stands to receive 169 new aircraft, including three additional Boeing 787-9s this year, 29 A220s and 20 A321-XLRs from 2024, and 12 A350s from late 2025 as part of Project Sunrise ultra-long-range flights, flying non-stop from Australia’s east coast to New York and London. Overall, the group will be adding on average one new aircraft every three weeks over the next three years. Jetstar Australia and New Zealand took delivery of four A321LRs during the company’s first fiscal half through December 2022, and the group is expected to add three new 787s, seven A321LRs for Jetstar, and two A220s for Qantas Domestic by December 2023.

“We’re at the start of a major update of the Qantas Group fleet that will unlock a lot of benefits. The aircraft we have on order will help us lower emissions, expand our network, create new jobs and ultimately serve our customers better,” Joyce said.

Reducing the Airline's Carbon Footprint

Meanwhile, Qantas Group has set a target to reduce carbon dioxide CO2 emissions by 25 percent by 2030 on 2019 levels and has committed to using 10 percent sustainable aviation fuel (SAF) in its overall fuel mix by 2030 and approximately 60 percent by 2050. “Every new aircraft that we bring in helps towards our emission reduction target because they burn up to 25 percent less fuel,” Joyce remarked. “Electric and hydrogen are a long way off–especially for the distances we fly. That’s why we’re investing in sustainable aviation fuel, which cuts lifecycle emissions by up to 80 percent compared with fossil fuels.”

Qantas is buying SAF for its flights from London Heathrow in the UK and Joyce called on the Australian government to invest in local SAF production. “When you consider the importance of air travel in this country, Australia is a prime candidate to develop its own sustainable fuel industry. That’s the conversation we’re having with governments around the country with some urgency, and we welcome the federal government’s commitment to a SAF industry council that meets next week,” he said.

After having incurred A$7 billion ($4.8 billion) in losses across three years of the pandemic, Qantas Group reported a profit before tax of A$1.4 billion for the six months to the end of December. “This is a huge turnaround considering the massive losses we were facing just 12 months ago,” Joyce commented. Revenue tripled year-on-year to almost A$10 billion as Australia eased its stringent Covid travel restrictions. Group capacity recovered to 72 percent of pre-Covid levels, group domestic capacity stood at 94 percent, and international at 60 percent of pre-Covid capacity.