Airbus unseats Boeing to replace ageing fleet of Qantas 737s

[SYDNEY] Airbus clean swept a multi-billion aircraft deal with Qantas Airways in a blow to Boeing and its 737 MAX narrow-body jet.

The Australian carrier said Thursday (Dec 16) it plans to buy Airbus's A320neo line of aircraft to replace the 75 aging Boeing 737s that serve as Qantas's domestic workhorses. It will also purchase Airbus A220 planes to replace 20 Boeing 717s that ply regional routes inside Australia.

The decision is a coup for Airbus as it races to match Boeing's MAX order bonanza by year-end. The European planemaker also landed a commitment from Singapore Airlines for its A350 freighter Wednesday (Dec 15) and has an opportunity to make headway with Air France-KLM, which is set to announce replacements for its aging Boeing 737s.

Qantas committed to buy 40 planes with a list price of at least US$4.6 billion before discounts. The carrier also has purchase-right options on 94 additional aircraft spanning more than a decade.

In total, the order is set to be the largest in Australian aviation history, the airline said.

The fleet decision means Qantas and its low-cost Jetstar division are likely to be flying mostly Airbus planes on their domestic and international networks for decades to come.

Boeing's Dreamliner, still favoured by Qantas on some popular long-haul routes, is now set to be the US company's main model at the Australian airline.

Qantas shares climbed as much as 2.3 per cent in early trading, before reversing gains to be down 1.2 per cent at A$4.81 as at 11.03 am in Sydney, giving the airline a market value of about A$9.1 billion (S$8.9 billion).

In a statement, Christian Scherer, Airbus chief commercial officer and head of international, said competition for the deal with Qantas had "pushed the boundaries" of "operational and financial evaluation".

Shares of Chicago-based Boeing fell in New York trading before erasing declines in the wake of a Federal Reserve announcement that it expects to raise interest rates in 2022 at a faster pace than expected.

"Although we are disappointed, we respect Qantas' decision and look forward to continuing our long-standing partnership," Boeing said in a statement.

Qantas is the latest carrier to bet that travel will eventually rebound even with the threat of the new Covid-19 variant omicron hanging over the world. Virgin Australia, a domestic rival emerging from a restructuring, has already unveiled an order for 25 of Boeing's largest 737 MAX model.

According to Alan Joyce, Qantas's chief executive officer, it's a great time to buy aircraft because manufacturers are eager to nail down sales and are offering advantageous pricing. The new aircraft will also reduce fuel and maintenance costs, while cutting carbon emissions.

"This is a clear sign of our confidence in the future," Joyce said in the statement. "We've locked in pricing just ahead of what's likely to be a big uptick in demand for next-generation narrow-body aircraft."

Qantas's order in detail:

• 20 A321XLR (extra long-range) and 20 A220 aircraft
• 94 options with flexibility on timing and plane type
• Order to be finalised by June next year
• Deliveries starting from the year ending June 2024

And the Australian flag carrier is eyeing even more planes as it pushes ahead with plans to start long-haul flights halfway around the globe. Non-stop services connecting Sydney with New York and London, a project thrown into doubt by Covid, are due to start as soon as 2024.

Qantas has already picked Airbus's A350-1000 as its preferred aircraft for the flights and is due to decide on a firm jet order in early 2022.

Separately, Qantas forecast it will post a fiscal first-half loss of A$250 million to A$300 million. With most of Australia's internal borders now open, domestic capacity is expected to exceed pre-Covid levels in the first 6 months of next year. BLOOMBERG