Qantas Airways CEO Vanessa Hudson Talks Revamping Fleet & New Routes
Qantas Airways will retire its Airbus A380s from 2028 and phase out its A330 fleet, replacing them with more fuel-efficient aircraft. Vanessa Hudson, Qantas Group CEO, speaks to host Guy Johnson about the challenges and opportunities facing the business and more.
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Speaker 1: Bloomberg Audio Studios. Podcasts. Radio. News.
Speaker 2: Would you pay an extra 20% to fly direct from
Speaker 2: Sydney to London? Sydney, Australia to London. No stops. It
Speaker 2: could be 19 hours. It could be up to 22 hours.
Speaker 2: It's a long way. It's nine time zones, but it's
Speaker 2: direct and it significantly shortens the distance effectively between London
Speaker 2: and Sydney. Qantas is betting that demand for direct flights
Speaker 2: will be there. And from next year. It will be
Speaker 2: using custom Airbus A350s. They've got a big extra fuel
Speaker 2: tank to make this possible. Other routes will then follow.
Speaker 2: I think we're going to get 12 aircraft. They're all
Speaker 2: on order. And at some point, they're going to be delivered.
Speaker 2: And at some point, we're going to see other destinations
Speaker 2: being added to the London and Sydney routes. Vanessa Hudson
Speaker 2: is the CEO of Qantas. She is at the Airbus
Speaker 2: headquarters in Toulouse. And she joins us now. Vanessa Hudson,
Speaker 2: thank you very much indeed for joining us. This is
Speaker 2: obviously a big step that has taken a while to
Speaker 2: get to. You are going to be launching this route.
Speaker 2: You have got the aircraft. How much demand, Vanessa, are
Speaker 2: we going to see for this route?
Speaker 1: Well, thank you for having me this morning. We're so excited.
Speaker 3: I'm coming to you today from the Airbus facility where
Speaker 3: we have seen our first A350-1000 ULR aircraft in the
Speaker 3: Qantas Colours. And this aircraft is.
Speaker 1: A new era of travel.
Speaker 3: Where it will be able to fly from the east
Speaker 3: coast of Australia to London direct and also to New York.
Speaker 3: And we are seeing and hearing from our customers that
Speaker 3: this is something that they really want.
Speaker 1: And I think the one thing to say is that
Speaker 1: this is not a leap of faith. This is happening now.
Speaker 3: We've got some of the longest routes of any airline
Speaker 3: around the world. We're flying currently today from Perth to London,
Speaker 3: from Auckland to New York.
Speaker 1: And those flights are very long. But we are.
Speaker 3: Actually seeing incredible demand for those flights. We're getting some
Speaker 3: of the strongest customer satisfaction and also some of the
Speaker 3: highest seat factors on these flights. So we think the
Speaker 3: extension of that one stop from the east coast of
Speaker 3: Australia to London. And that'll be our first route. We
Speaker 3: announced that yesterday. So we're very excited. And even in
Speaker 3: the current environment, we're seeing that demand even stronger now
Speaker 3: to avoid those midpoints and to get to their ultimate
Speaker 3: destination in one go.
Speaker 2: Do you think the Iran war has made it even
Speaker 2: more attractive? Do you think people will no longer want
Speaker 2: to go via Dubai or Doha to make that route?
Speaker 2: Do you think it is now better to go point
Speaker 2: to point, Sydney to London? And will people pay for that?
Speaker 3: Well, I think that we are seeing today that customers
Speaker 3: are prepared to pay for that. And that is on
Speaker 3: that Perth, London and also Auckland, New York. So we
Speaker 3: know that there is demand that is there. And we
Speaker 3: know with that customer segment that that demand is growing.
Speaker 3: But that's not to say that customers also may prefer to...
Speaker 3: take another alternate route so our partner with emirates post
Speaker 3: the conflict resolving we believe will come back strong and
Speaker 3: we support them with that and i think it's about
Speaker 3: option and i think that's the one thing that's really
Speaker 3: important there are some customers that want to go direct
Speaker 3: but there also will be customers that want to go
Speaker 3: through the midpoints and those options are really important and
Speaker 3: we're going to continue to provide that on our own
Speaker 3: network but also we're going to continue to really value
Speaker 3: the partners that we have particularly like Emirates and also
Speaker 3: American Airlines.
Speaker 1: Vanessa, good morning.
Speaker 4: Can you tell us a little more about what it
Speaker 4: is worth to go direct? Vanessa, what kind of pricing
Speaker 4: power do you anticipate having on those kinds of products?
Speaker 3: Well, I think that obviously the price is going to
Speaker 3: be determined by the demand and our business case for
Speaker 3: Project Sunrise is based on what we are getting and
Speaker 3: what we are seeing today. So this is based on
Speaker 3: fact and the premium that we're currently getting on our
Speaker 3: long routes, Perth, London particularly, we are seeing around about
Speaker 3: a 20% higher yield outcome than what the one point
Speaker 3: routes through either Asia or the Middle East and that's
Speaker 3: been something that we have seen consistently for the five
Speaker 3: years at a minimum that these flights have been flying
Speaker 3: customers from.
Speaker 1: Australia to direct.
Speaker 3: And so it's the proposition of getting there in one point,
Speaker 3: but it's also the fact that Qantas has actually been
Speaker 3: a ultra long haul carrier for many years. Australia is
Speaker 3: at a place in the world that is further away
Speaker 3: for many. And so we have got a capability and
Speaker 3: an experience in the cabin that is going to be
Speaker 3: second to none.
Speaker 1: And it's going to be focused on.
Speaker 3: Making sure that that experience in getting that one stop
Speaker 3: is seamless for customers and we're working with experts. We've
Speaker 3: been working with Sydney University for a decade around how
Speaker 3: to manage jet lag and how.
Speaker 1: To actually make that experience really good.
Speaker 3: So we have taken every kind of approach to make
Speaker 3: sure that the experience is a great one.
Speaker 1: Yes.
Speaker 4: And I'm sure you've learned a lot about that. And
Speaker 4: you seem to have learned a lot from the existing
Speaker 4: long flights that you do, Vanessa, about how profitable they
Speaker 4: can be for you. So back in 2023, Qantas said
Speaker 4: they'd get an operating profit uplift. The company said it
Speaker 4: would get an operating profit uplift of 400 million Australian
Speaker 4: dollars from Project Sunrise. That's a bit of a dated
Speaker 4: figure now. What would the equivalent now be? Is it
Speaker 4: higher or lower than that?
Speaker 1: No, it's the same.
Speaker 3: And we constantly look at the business case and we
Speaker 3: haven't changed that figure. We still expect that the earnings
Speaker 3: uplift for Project Sunrise, so that's all 12 aircraft, will
Speaker 3: be approximately $ 400 million. And that's both from updating the
Speaker 3: revenue assumptions and also the cost assumptions. So we remain
Speaker 3: very confident that the business will actually see that uplift.
Speaker 2: Vanessa, when do we get the next route? When do
Speaker 2: we get New York? What are you looking at? What
Speaker 2: comes next?
Speaker 1: Well, New York will definitely come next.
Speaker 3: The ultra-long-haul market will start with Sydney to London in
Speaker 3: October 27. We will look to take that route to Daley.
Speaker 3: So we'll need three aircraft to do that. And so
Speaker 3: from April next year, we get our first aircraft. But
Speaker 3: we will have five of the A350s by November next year.
Speaker 3: And so that'll enable us, not long after Sydney-London, to
Speaker 3: start Sydney-New York as well.
Speaker 1: So it's all going to happen today. in the second
Speaker 1: half of next calendar year. So very exciting. And we
Speaker 1: go on sale in February next year as well. And
Speaker 1: that'll be for a 12 month period. So London and
Speaker 1: New York will both be on sale.
Speaker 2: Talking about being on sale, there is, and you mentioned
Speaker 2: Emirates a little bit earlier on, there is an expectation
Speaker 2: amongst many in this industry, and we certainly heard it
Speaker 2: a lot at IATA, that we will see the Gulf
Speaker 2: carriers launching a price war to bring back the demand
Speaker 2: that maybe some of them feel that they have lost
Speaker 2: during the Iran conflict. How will that affect the economics
Speaker 2: of all of this? And do you expect that price
Speaker 2: war to materialize?
Speaker 3: Well, first and foremost, our position is we want to
Speaker 3: see the conflict come to an end. That's a good thing.
Speaker 3: That's a good thing for the global economy. That's a
Speaker 3: good thing for aviation, because whilst the conflict has been occurring,
Speaker 3: fuel prices have been incredibly high.
Speaker 1: And so we want to see it come to an end.
Speaker 3: We want to see the Middle Eastern carriers restore their
Speaker 3: schedule and And we want to see the network and
Speaker 3: those customer itineraries get back to the normal. And so
Speaker 3: the short term, we might see some sharper pricing. But
Speaker 3: I think that what we are going to see is
Speaker 3: that the market will normalize quite quickly.
Speaker 1: And we want to see that happen.
Speaker 2: So you don't have any expectation now that there are
Speaker 2: going to be issues around fuel availability, fuel pricing. You
Speaker 2: think that is now in the rearview mirror because you
Speaker 2: have voiced a little bit of concern over the last
Speaker 2: few weeks and months about what has been happening on
Speaker 2: that front.
Speaker 3: Yeah, look, I mean, fuel supply has clearly been something
Speaker 3: that we've been very focused on and we have worked
Speaker 3: with the Australian government and we are seeing really good
Speaker 3: fuel supply to Australia, have been for the last three months,
Speaker 3: but also continue to see that in the months ahead.
Speaker 3: And so now with the conflict hopefully coming to an end,
Speaker 3: we see the Strait of Hormuz open up, we see
Speaker 3: oil starting to flow, and that's actually going to be
Speaker 3: a really good thing. But I'd also like to say
Speaker 3: I think that the Australian government have done a great
Speaker 3: job in working with our counterpart countries around Asia and
Speaker 3: alternate ways of sourcing fuel, and I think that that's
Speaker 3: been a key part of maintaining good fuel supplies to
Speaker 3: Australia during this period.
Speaker 2: Vanessa, you are undergoing one of the biggest fleet renewals
Speaker 2: that your airline has ever seen. It's not just about
Speaker 2: Project Sunrise. It's about a whole range of aircraft. But
Speaker 2: as a part of that, it looks like you are
Speaker 2: going to maybe retire your 380s, which you've been flying
Speaker 2: for a long time. They're quite fuel consumptive. They're quite
Speaker 2: parts consumptive as well when it comes to keeping them
Speaker 2: in the air. When are you going to retire your 380s?
Speaker 2: When are we going to see that happening?
Speaker 3: Well, as you said, we are undertaking the biggest fleet
Speaker 3: renewal in our history. That is our narrowbody fleet, both
Speaker 3: our 737 Qantas domestic fleet and Jetstar fleet are getting
Speaker 3: new Airbus narrowbody. But also the A380, as you say,
Speaker 3: is a key part of our international fleet. Customers love
Speaker 3: those and the A380s are going to retire in time.
Speaker 3: They are going to retire when they get to around
Speaker 3: about the age of 20 and so they're scheduled to
Speaker 3: start to retire from early 2030 and that's going to
Speaker 3: be a key part of the A350-1000ULR but also we
Speaker 3: will see other aircraft join the international fleet that will
Speaker 3: retire those aircraft in time.