Qantas Buys Boeing 737-800s

Qantas Airways Limited said today it had selected the Next Generation Boeing 737-800 aircraft to add immediate capacity to its Australian operations.

Qantas Chief Executive Officer Geoff Dixon said agreement had been reached for an initial order of 15 aircraft.

Options had been taken on another 60 aircraft to progressively replace existing 737-300 and 737-400 aircraft and to provide for growth.

The first aircraft would be in service in January. The remainder of the first 15 aircraft would be progressively introduced between February and July 2002.

Mr Dixon said Qantas had worked closely with Boeing and its oneworld™ alliance partner, American Airlines, to facilitate the speedy introduction of the aircraft.

The aircraft will come from existing orders that American Airlines had in place with Boeing.

"American Airlines will assist Qantas with technical advice, simulator training for pilots, spare parts and engines," he said.

Mr Dixon said the new aircraft would have Qantas interiors, more spacious cabins, more headroom and larger windows. They will be fitted progressively with new slimline seats.

The new aircraft will enable Qantas to meet the demand created by the collapse of Ansett Airlines and to provide for growth in all sections of the Australian tourism industry.

Mr Dixon confirmed that, as announced last week, the Boeing 737-800s would be the cornerstone of revamped Qantas domestic operations that will feature:

- the new aircraft, with an all economy class configuration of at least 165 seats, operating on services where there is small or no demand for business class travel;
- reconfiguration of a number of existing Qantas Boeing 737 aircraft to create a total fleet of about 40 all economy class aircraft;
- flights between Perth, Adelaide, Melbourne, Sydney and Brisbane operated by larger, two class, wide body aircraft (Boeing 767s or Airbus A330s);
- regular two class Boeing 747 services between Perth and the East Coast of Australia and on long haul leisure routes;
- a significant increase in direct flights between capital cities with fewer stops at ports in between;
- an extension of the extremely successful Cityflyer service, which currently operates between Sydney and Melbourne, to Brisbane;
- expanded Qantas Club lounges;
- enhancement of the Frequent Flyer program with additional partners such as Diners Club.

Mr Dixon also announced that Qantas had decided to enter into a 10-year strategic alliance with American Airlines, the world's largest airline. Details of the agreement will be finalised in the next few weeks and will involve:

- Qantas using American Airlines specifications as standard for the replacement of the Qantas single aisle fleet (for example Boeing 737s), creating opportunities for short-term leasing between the airlines to cater for peaks and troughs in demand;
- Joint purchasing;
- Qantas progressively relocating to the American Airlines terminal at Los Angeles airport;
- Qantas commencing Auckland-Dallas-Auckland non-stop services when the new, long range Boeing 747-400 is delivered in late 2002. Dallas is a major worldwide hub for American Airlines, particularly to all major North American and South American cities;
- Expansion of the codeshare agreement between the two carriers;
- Expansion of the Frequent Flyer agreement.

Mr Dixon said Qantas had made a huge financial commitment to purchasing the new 737-800 aircraft despite real concerns about Government decisions to subsidise both the operations of Ansett Mark II and the expansion of Virgin Blue.

"As an airline, we have been outspoken against Government ownership of airlines, which is the ultimate form of subsidy in the international market," he said.

"We now see Governments and prospective Governments of all persuasions subsidising and proposing other assistance to our domestic competitors, one of which collapsed through management failures, overmanning and outmoded work practices.

"To subsidise particular airlines on selected routes will create distortions that could harm the industry for years to come.

"Using taxpayers' funds to prop up our rivals is the antithesis of what has been preached in Australia about competition in recent years," he said.

Mr Dixon said that after six years of very effective performance for Australia as a fully privatised company, it was not realistic to expect Qantas to prosper if its competition was subsidised.

"The national interest will not be served by limiting Qantas' chances of success in an attempt to artificially prop up less competitive players.

"Australia still has two domestic airlines and competition, capacity and a wide range of discount fares are re-emerging quickly," he said.

Mr Dixon said it was obvious to all observers that the industry needed to consolidate, and would indeed consolidate, and the practices that have hampered its development for years and harmed efficient carriers would only be further exacerbated by subsidies.