Qantas cancels 15 Boeing 787 orders, defers 15 others

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Qantas Airways has cancelled orders for 15 Boeing 787-9s and deferred the delivery of 15 787-8s to reduce capital expenditure amid a challenging operating environment.

This is the first major cancellation for the next generation medium-range widebody, and comes days after Boeing announced another delay to the first flight of the aircraft due to design issues.

Australia's national carrier, the biggest customer for the aircraft, still has firm orders for 35 787-9s and 15 787-8s after the cancellation. It says that the delay was not a factor in its decision.

"Qantas announced its original 787 order in December 2005, and the operating environment for the world's airlines has clearly changed dramatically since then," says the oneworld alliance carrier's chief executive Alan Joyce.

The "prudent" decision will reduce capital expenditure by $3 billion and still allow Qantas and its low-cost subsidiary Jetstar to "take advantage of growth opportunities and market demands, both domestically and internationally", he adds.

Under the new delivery schedule, its first 15 aircraft, 787-9s meant for Jetstar's international operations, will be delivered from mid-2013. Jetstar was originally due to take delivery of 15 smaller 787-8s in mid-2010.

Another 15 787-8s will follow over the 12 months from the fourth quarter of 2014 for Qantas' Australian domestic operations, and allow it to retire its remaining Boeing 767-300 fleet.

The final deliveries of 20 787-9s for both Qantas and Jetstar international operations will take place from the fourth quarter of 2015 through to 2017. Qantas retains options for an additional 50 aircraft.

It adds that details of the agreement with Boeing remain confidential, but "the settlement is materially in line with that previously recognised".

"The agreement we have reached with Boeing will provide greater certainty going forward in terms of our fleet renewal and growth strategies as well as broader resource planning and matching capacity with demand," says Joyce. "It will also allow Qantas to manage capital investment more effectively while still delivering an aircraft that offers sound prospects for our flying businesses and our customers."

He added that the airline remains confident that the 787 will provide Qantas and Jetstar with capacity growth and new routes, lower operating and maintenance costs, greater fuel efficiency, and improved environmental performance.

"The latest delay is disappointing, but we do not expect it to impact the Qantas Group given these changes to our delivery program. We remain committed to the aircraft as the right choice - for Jetstar's future international expansion, Qantas' growth and as a replacement for Qantas' 767-300 fleet," says Joyce.