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Qantas - Full Thrust or Holding Pattern?
Under new leadership, will Qantas stick with its old jets, or ascend with a new fleet?
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Fasten your seatbelts. We have a Strategy Standoff on our hands.
Qantas faces some critical strategic decisions under new CEO Vanessa Hudson. Having offered free upgrades for its regulators (and their kids), it’s found itself with limited international competition and a squirrel-grip on the domestic market. Not so good for you if you pay for your own travel, but great if you’re a shareholder, at least in the short term.
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However, the Qantas fleet age average is now 15 years because Hudson’s predecessor Alan Joyce cancelled orders for new planes.
With 20/20 hindsight, chairman John Mullen now says the fleet "should have been replaced earlier" and the delay in new aircraft goes some way to explain the airline’s notorious reputation for "crap" service.
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What will new CEO Hudson do next? New jets could give Qantas a smoother ride in the future. But it would mean less profit runway in the short term.
The Strategy Standoff
Strategy A: Sweat the Old Gear.
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With Virgin downscaled and Rex on its knees, a cabin refurbishment might be all they need to keep the old wings in the air a bit longer – Hudson could sweat her old 737s and A330s and avoid the eye-watering cost of new planes.
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With some new seats and fittings, Qantas could engineer a profit windfall for shareholders. However, they would risk customer ire if they become less reliable in service.
Strategy B: Invest in a New Fleet.
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Qantas could buy next-generation jets such as Airbus A321XLRs or Boeing 787s on a faster schedule.
Newer planes cut fuel costs, have quieter cabins, and reduce maintenance delays. Passengers love them.
But the airline would have to accept the trade-off of steeper costs – and the interest bill would snatch shareholders short-term excess profits.
So, Which Did They Choose?
Cast your vote to find out!
Good Job, Strategy A was chosen!
Better luck next time, Strategy A was chosen!
But what did this mean for Qantas...
Outcome: Facilitator Commentary
Matt Braithwaite-Young
Managing Partner
t +61 2 9002 3100
CEO Vanessa Hudson chose to keep the old wings in the air. She announced an end-of-life interior zjoosh-up to draw customers’ attention away from ageing elements of the aircraft.
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Interestingly, Jetstar gets most of the new gear. It’s already received 11 new Airbus 321Neo planes, while Qantas is waiting for its first version (in a long-range format).
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Although Hudson plans new aircraft to replace the really ancient part of the Qantas fleet, most of their investments still go to Jetstar instead of Qantas mainline.
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Shrinking Rivals, Bigger Margins
With Virgin a slimmed-down version of its former self and Rex insolvent in the absence of taxpayer cash, Qantas is making the most of its market power to extract profit while it can from what is a notoriously difficult industry for capital.
In a classic trade-off between short-term profit and long-term strategic positioning, Qantas wants to lock in strong financial results using its ageing fleet even as competitors invest aggressively in fleet renewal. It’s banking on its market position and customer loyalty to sustain it through this period of "sweating the assets."
But jets aren’t fine wine…
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How Long Before These Jets Show Their Age?
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The Qantas fleet has matured from an average of 8 years in 2006 and 11 years pre-pandemic, and now stands at 15 years. Competitors like Cathay Pacific, Emirates, and Qatar Airways deliberately maintain average fleet ages under 10 years.
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How long can Qantas maintain this approach before customers start their own push for newer aircraft?
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Can Qantas keep profits sky-high without facing a surge in operational challenges and customer dissatisfaction? Only time will tell if Hudson’s balancing act between capital management and capital expenditure will prove successful.
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The airline’s strong competitive position may offer breathing room, but pressure will mount if the ageing fleet causes further service issues.
Time will tell – and you will feel the consequences of this strategy standoff you yourself over the next 5 years. Let’s revisit this in 2030!
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Is Your Organisation Facing Trade-Offs?
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Our facilitators guide your leadership team through critical choices to make sure you have alignment, commitment and clarity.
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We can help your team weigh short-term and long-term options, align decision-makers, and help you build confidence in your roadmap for transformation.
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