Australian carrier Qantas has made a raft of announcements this morning. In addition to canceling the majority of its international flights until the end of July, the airline has announced that its highly anticipatated project, Sunrise will be put onhold and is initiating a review of its international fleet.
In a media statement this morning, Qantas said it was extending its current domestic and Trans-Tasman cancellations through to the end of June. Other international flight cancelations will be extended until 31 July.
“We don’t know how long domestic and international travel restrictions will last or what demand will look like as they’re gradually lifted.
“With the possible exception of New Zealand, international travel demand could take years to return to what it was,” said Qantas CEO Alan Joyce today.
Qantas is currently operating a slimmed-down domestic flight schedule and an international skeleton service to critical overseas hubs. The Australian Government is underwriting these services.
The project in question has to do with the dedicated fleet of 12 Airbus A350-1000 Ultra Long Range (ULR)) aircraft, valued at around US$4.4b in list prices.
These aircraft would enable the carrier to continue with its strategy of global-haul operations for flights between 18 to 20 hours respectively.
Qantas already has this in place with some of its Boeing 787-9 Dreamliners that operated between London Heathrow and Perth before the virus took over the industry.
The flights with the A350-1000ULR would have enabled direct non-stop flights between both Sydney-London Heathrow and Sydney-New York’s JFK, thus removing the need for a stop-over elsewhere.
Qantas CEO Alan Joyce spoke to Executive Traveller on how COVID-19 was to blame for putting the project on hold.
“We do think there is a huge potential for Project Sunrise but the time is not right now, given the impact that COVID-19 has had on world travel.”
“But we do think there’s still a good business case for it, and a good opportunity.”
QANTAS’ PRUDENCE MAKES SURVIVAL EASIER
This also follows the news of the airline securing around US$353m in funding from banks, with three of its Boeing 787-9 Dreamliners being used as collateral in the event of a negative outlook.
It is understood according to Reuters that Qantas could raise another A$2.7b in funding as well as wanting to reduce its cash burn to A$40m a week by the end of June.
As a result of this, shares in the carrier rose 5.6% due to the news across the board, highlighting the financial prudence that Joyce believes is the case of the airline being able to survive the pandemic period.
“This means we are very well placed to ride this out and to take part in the recovery when it arrives,” he told Reuters.
“Because Australia has flattened the curve, there is some hope travel demand will come back faster than expected.”
WHERE IS QANTAS AT THE MOMENT?
At the time of this writing, Qantas has furloughed around 25,000 of its staff until the end of June due to it flying 5% of its domestic passenger network and 1% of its international network.
The airline has canceled most of its domestic flights until the end of June and its international flights until the month after.
Joyce also suggested that due to Qantas’ current position and the options it has, the carrier could return to pre-crisis operations quickly; it all depends on whether or not the demand will be strong and bounce back.
However, he did concede that it would take years for a full recovery in international travel, which has encouraged him to look at his fleet review.
Such strong financials have meant that Qantas could, in fact, keep all 12 of its Airbus A380, subject to operational requirements if the pandemic does go on for much longer.
Even then, the fact that this financial prudence is taking place now means that the airline wants to get one step ahead of any negative cash flow that could take place, especially with the demise of Virgin Australia earlier last month.
Virgin Australia had to file for insolvency after the Australian Federal Government chose not to bail the airline out, following losses of £2.55b.
A BLOW TO NON-STOP GLOBAL TRAVEL?
If all went well, Project Sunrise would have been successfully launched in 2023, with the direct services to New York and London from Sydney being the first two ultra long-haul routes with the new aircraft.
With the Coronavirus pandemic due to damage the industry for many years to come, it does beg the question on how long the delay will be on these deliveries.
Whilst Qantas has not given any specifics about such delays to the program, it is a good estimation that we will not see Project Sunrise until the second half of the decade perhaps.
In Europe, with carriers such as Norwegian suggesting full operations will not be resumed until 2022 at the earliest, it means that airlines will be stripping back any leakage to their bottom line and be financially prudent and savvy where appropriate.
In-all, Qantas project halt, let alone the pandemic, most certainly is a blow to the non-stop global travel market, but however volatile the industry is, it does bounce back, and maybe some day in the future, the public will have more of these ultra-long-haul phenomenons.