Qantas challenges Airbus, Boeing to offer better deal on ultra-long haul jets

SYDNEY (Reuters) - Qantas QAN.AX has asked Airbus AIR.PA and Boeing BA.N for a better deal on planes capable of non-stop Sydney-London flights before deciding whether to place an order.

FILE PHOTO: Workers are seen near Qantas Airways, Australia's national carrier, Boeing 737-800 aircraft on the tarmac at Adelaide Airport, Australia, August 22, 2018. REUTERS/David Gray/File Photo

“We asked them to go back and re-look at that to sharpen their pencils because there still was a gap there,” Qantas International Chief Executive Tino La Spina told an investor briefing on Tuesday after Qantas outlined plans for capital spending to average A$2 billion ($1.36 billion) a year.

The Australian airline is considering launching the world’s longest non-stop flights because it sees demand for time-poor travelers willing to pay a premium to cut out stop-overs.

Qantas is looking to replace its aging fleet over the medium term and said it expected capacity growth in the domestic market to be near-flat in the current half.

On its non-stop Perth-London route, it is achieving a 30% fare premium in business and premium economy over one-stop flights from rivals, La Spina said.

“That surprised us, just how much people valued direct flying,” he said.

In addition to Sydney-London flights, the fleet of Airbus A350-1000 or Boeing 777-8 jets under consideration could also fly Melbourne-London and from Sydney and Melbourne to New York and Chicago, La Spina said.

Qantas is examining an initial order for 12 planes, a source familiar with the matter, who was not authorized to speak with media, told Reuters.

La Spina and Chief Executive Alan Joyce declined to be drawn on exact numbers during the briefing.

“You have to have a big enough sized fleet to make the economics work,” Joyce said.

Last week, following a London-Sydney test flight, he said Qantas would decide by the end of the year whether to proceed with plans for ultra-long haul flights and could place an order for planes early next year.

Citi analysts in July forecast non-stop flights from Sydney to London and New York could add A$180 million annually to the carrier’s profit before tax, which was A$1.3 billion in the financial year ended June 30.

Reporting by Jamie Freed in Sydney; additional reporting by Nikhil Kurian Nainan; Editing by Chris Reese, Lisa Shumaker and Alexander Smith