Annals of history: How Boeing lost Qantas’s VLA order to Airbus

QF A380 upper deck caption_popular full upper deck seen as good.JPG

During its VLA order decision in 2000, Qantas thought the A380′s dual full-length upper decks would be more impressive to passengers.



It was November 2000 and the Qantas board was deciding between two very large aircraft (VLA) known only as the A3XX and 747X-Stretch to replace and grow its 747-400 fleet, which in turn would replace the 747 classic fleet that would be sold.

The A3XX would eventuate as the world’s largest passenger aircraft, the Airbus A380, while the 747X would be nixed as the manufacturer, Boeing, turned its sights on the medium-sized aircraft market.

Despite Qantas having a previously cosy relationship with Boeing, the Airbus A3XX was the clear winner for Qantas, as documents filed to support the legal case between Qantas and Rolls-Royce indicate in greater detail than previously disclosed.

A3XX Benefits

A3XX_1.jpgThe A3XX offered higher payload despite higher cost, a larger customer base, and “greater developmental potential for further payload and range improvements”, says the Qantas board’s November 2000 acquisition request for approval.

Airbus also offered “superior risk mitigation”, in particular giving walk away rights from the A3XX “if the key payload range, environmental, aircraft program and airport development targets are not met,” the request says.

“The competition for launch customers has helped Qantas secure from Airbus greater delivery stream flexibility and superior walkaway right conditions for the significant elements of project risk, compared to Boeing,” the request says.

Boeing’s approach, Qantas says, “was to require Qantas to take delivery of the potentially infringing aircraft. A capped remedy would be paid to Qantas during a period of up to four years during which Boeing would attempt to rectify the infringement. If Boeing were unable to rectify the shortfall within the four year period, Boeing would repurchase the aircraft at an assessed value.”

A3XX downside

b747x.jpgThe A3XX’s only foreseen downfall was its higher seat kilometre cost compared to the 747X-Stretch, the request says. The A3XX, however, offered a “superior payload range capability” that would offset the higher seat cost.



The A3XX would better alleviate some of Qantas’s 747-400 payload limited routes than the 747X-Stretch. From Los Angeles to Sydney the A3XX was projected to be able to carry 43 more passengers and three more tonnes of cargo than the 747X-Stretch. From Singapore to London the A3XX would have been able to carry 26 more passengers and 5.3 more tonnes of cargo than the 747X-Stretch. Note those figures are based on interior configurations from 2000.

(Payload and seat cost are an interesting contemplation in light of the 747-8 v. A380 sales effort.)

The A3XX’s increased seat kilometre cost, the request says, was “driven primarily by the higher fuel and aircraft weight related charges as well as the increased maintenance cost.”

Both the A3XX and 747X-Stretch faced higher maintenance costs than the 747-400 due “to the premium costed in ‘power-by-the-hour’ maintenance schemes versus traditional maintenance”. Qantas’s TotalCare package for the Rolls-Royce Trent 900 engines it ordered for its A380 has been called into question in light of the QF32 uncontained engine failure and subsequent lack of spare engines.

Price

a3xx.jpgFor price, Qantas says Airbus indicated it would only offer unspecified price incentives until the end of 2000, or for 100 aircraft, whichever came first. The exact discounted price from Airbus and Boeing was redacted.

“It is anticipated that these prices cannot continue to be offered, given the investment required,” Qantas opined. That perhaps explains why Qantas wanted to close the deal before 2000 ended. The Qantas board agreed to purchase 12 A3XX aircraft during a 7 am conference call on 24 November 2000.

Delivery schedule

Airbus would let Qantas reschedule its fifth through twelfth firm aircraft (and every second option aircraft) up to 36 months with 28 months’ notice. Airbus would also permit Qantas to bring deliveries forward subject to availability. Boeing’s flexibilities were not detailed.

Airport readiness

While airport capability was a concern prior to the A380′s entry into service, Qantas found “the majority of the costs associated with Australian airport upgrades could be recovered through the normal landing charges that would apply to the higher takeoff weight associated with the larger aircraft.”

Airbus provided Qantas with walk away rights if Sydney, Singapore, London, and Los Angeles airport were unable to confirm A380 readiness 24 months before entry into service.

Brand factor

Qantas concluded the new wider cabin and full-length upper deck of the A3XX “is more likely to have a positive impact on the Qantas brand in terms of a premium position and technical innovation than the B747X,” the request says.

“This is believed to have been a significant element in the decision by Singapore Airlines to acquire the A3XX.”

The request notes, however, “no financial benefit was given to the new fuselage cross section or new product status of the A3XX.”

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