Qantas plans non-stop flights to London and New York

Ross Greenwood speaks to Qantas chief executive Alan Joyce as the airline has announced the testing of non-stop flights from Sydney to London and New York amid a $1.3 billion drop in profits.

Ross Greenwood: Alan, just explain project sunrise. If this all stacks up? Are you convinced really that people will want to fly directly from London to the east coast of Australia or from New York to Australia?

Interview with: Alan Joyce, CEO, Qantas

Alan Joyce: We are Ross, and because of the success of our London to Perth service, 95% full, which is unheard of at an airline, made money from day one and has the highest customer satisfaction ratings of any route on our network, and it is the longest route. People are loving it. They want to fly direct. They want to have a good product. We are designing the product for these long haul flights. More space in economy, better seats in business class and premium economy, and we’ll have a new first class product on this sunrise aircraft and people are loving that product that were putting in place. We’re also working with the University of Sydney to make it more healthy for people and giving them some healthier options in food and drink to make the journey really that much more pleasant.

Ross Greenwood: It really would be quite a landmark if Qantas were to be able to do this in its 100th anniversary.

Alan Joyce: Yes, the aircraft still won’t be there till 2022, but we’re hopeful we will be announcing it in our 100th anniversary year, which would be amazing. We’re the oldest continuous operating airline in the world. No other airline has operated for 100 years. And we were, through our entire history, doing these type of things, challenging aviation, pushing the frontiers out. One of our founders talked about overcoming the tyranny of distance. This is the last tyranny of distance, and if we can do that it’ll be something really special in the 100th year.

Ross Greenwood: Okay, but you did say that it’s not a foregone conclusion. That in actual fact, this still has to stack up for the shareholders.

Alan Joyce: It does. I think this will be great for our customers. It will be great for our employees. There’ll be huge amount of promotional opportunities as you grow the fleet. But really, the money’s coming from the shareholders, so we have to make the business case work. We have to make sure that we meet those hurdles. One of the complexities is as the Aussie dollar’s getting weaker, we buy aircraft, these aircraft in US dollars. It makes the business case a little bit harder each time. We’re having to get every part of this business case for home and get there. We think we will, but as dialogue with our pilots, dialogue with the regulator, still dialogue with Boeing and Airbus, we’re hopeful that we’ll get all of them to conclude by the end of the year.

Ross Greenwood: Because, say for example, 20 hours in an aircraft for a pilot, that’s clearly something that you’ve got to assess in terms of the safety of the pilot but also the passengers.

Alan Joyce: It is, and part of these research flights is to do that. It’s to work with our pilots to monitor sleep patterns, to monitor lateness, and to show that we can do this. We’ve done this every time we start these very long haul flights. We have what’s called a fatigue risk management system that manages this. We think we’ll be able to get there and show it and we’re working with the regulator closely to manage that.

Ross Greenwood: These results also do show variation in the consumer demand. In terms of their consumer demand, what do you think really is most influencing it?

Alan Joyce: I think like everything it is going to be around confidence and we need to make sure that we’re continually talking about the positives out there. There’s a lot positives in the Australian economy, 29 years of continuous growth, the resource sector, for us, is going really well. A lot of other corporate markets have shown signs of weakness. Premium leisure has gone really strongly. We are seeing weakness in the price sensitive leisure market. We need to talk about the positives. We need to make sure confidence remains there and we need to focus on, and we are focusing on matching supply with demand and that’s how I think we’ll manage it as a business.

Ross Greenwood: Do you think that Qantas today is compared with say, 10 years ago, is in better shape to adjust to changes in the economy because of the cost savings, because of the changes in the fleet? Are these things the keys to actually keeping Qantas as a more flexible and perhaps sustainable airline?

Alan Joyce: It is, Ross. You think even with the year we just passed, our fuel bill went off by $600 million and we’ve produced an underlying profit of $1.3 billion. We were able to manage those type of headwinds. We think we’re a lot more adaptable, a lot more flexible, we’re agile at how we plan, at how we move capacity around, and we think we can cope with those demand environments by matching that supply with that amount.

Ross Greenwood: Alan Joyce, many thanks.

Alan Joyce: Thanks, Ross, fantastic.

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