British Airways is a Profit Machine

[Music] Hello and welcome to the airline Weekly Lounge. I'm your host Gordon Smith and this week as usual I'm joined by Cohost J. Shabbat. In part one we're looking at the latest numbers from British Airways and in part two we're heading down under to discuss Aussie Fled carrier Quantas. [Music] Hey J. How's it going? Alright Gordon, how are you? Doing very well, we're discussing Quantas in part two which means we've avoided the opportunities to start conversation with a good day but we're talking British Airways in part one so it's probably more of a "How do you do?" Yeah, I had trouble with both of these airlines because as an American I speak neither British nor Australia but fortunately I'd you to help me out with the British. A little bit of chat GPT for the translation and I'll be able to bridge any gaps as well. Basically any Zeds you turn into an S and you put you in almost any word that has a O in it so color or color that sort of thing. You'll pick it up no problem at all, you'll be fluent in no time J. I'm working on it. You sure are. Okay, let's talk British Airways because as we are recording here on Monday 3rd of March last Friday we had which sounds further away actually it's only because it's February and it's only 28 days. Sounds ages ago but last Friday we had I.E.G which is a parent company of British Airways report their full year 24 earnings. We're not going to go into the details of I.E.G because that obviously spans I.E.G. Air, Linguist, Welling level not to mention the cargo division and other parts loyalty as well but we are going to focus our conversation in part one on it show medley on British Airways and I'm sure we'll get across to some of the other airlines in future episodes J tell our listeners the headline numbers that they they need to know from from Friday's results. Yeah, the headline numbers for British Airways were spectacular and you could put that in capital letters. I mean they were really really strong particularly for the fourth quarter and that's one reason why we Gordon Knight decided to talk a little bit about them today and hopefully help everyone understand why this airline is just just hitting hitting the ball out of the park but I guess that would be an American baseball reference. So I don't know is there a back of the next cycle. Okay, there you go. Yeah, and it's it was just really in all seriousness just just a quarter for the ages. They the number specifically they're operating margin for for the October to December period was was 18% and you know if you tell me that an airline like this to 18% for the summer I'd say wow that's good but you know fourth quarter is not even peak. So something is going very very right here. I have to I did this calculation three times because I didn't trust it. I was like is it really 18% but you know if anybody wants to check my math they're welcome but I I did it again this morning and 18% it was so and it and it makes sense because for the full year they came out at 14% which was was also great and that followed a third quarter that's the peak summer where they did 21. So this is just you know like again wow capital W. W. It's very very impressive. And I think it's fair to say J the North Atlantic is always an important part of the world for for I. G. but particularly for British airways and you know scrubbing away the industry talk that's essentially flying for the most part from London to the US and of course we're Mexico the Caribbean Canada and so on. For most intense purposes we are talking London to the United States and you've said previously J when North Atlantic is good British Airways is good and it sounds like almost sort of near utopian environment for for flights and anyone operating particularly premium heavy business between those those two regions. Yeah totally and what we've you know we've talked about it so so often on this podcast and in in our newsletter just how the both the trans Atlantic market and premium markets long haul premium particular are just performing so well these days and you know British Airways certainly has a lot of a lot of each of those on its bingo card so it's it's really in the right place the right time and just to go a little bit deeper here. Back in November British Airways gave and we're not even talking about the larger international airlines group were specifically talking about British Airways management back in November delivered and invest their presentation and one of the slides they published they showed that this is for 2023 so you know I'm not sure it's all that different 2024 but and 2025 but they said that. In the London market there are 9,560 international premium passengers that fly every day each way so from to London 9560 the next largest market in the world for international premium is New York and that's just 5,054 so it's it's almost double I mean London is just as math the premium is just massive and you know I don't know these numbers it looks like they're you know they're estimates of course but so you know you can take them with a little bit of a grain of salt but the the general the general idea is is valid that London is just this massive massive premium market and of course British Airways is just so exposed to to the US they're able to fly because that market is so big and it is so much bigger than let's say US the France or US the Germany US it's just so big that they're able to serve non-stop places like you know Nashville Tennessee and what are Cincinnati Ohio they do Rolly Durham now I mean just they they're able to do these relatively small medium sized cities because that market so big and on top of all that they have a joint venture with American so they're running virtual shuttle like service between New York JFK and London every day so they just are really in the in the right space to take advantage of some of the parts of the market that are booming right now they sure are I was flying on a BA triple 7 300 from Heathrow to New York last year JFK that is I was in the cheap seats at the very back but you obviously have to walk right through all the fancy stuff for at least most of the fancy stuff to get eventually to whereas Miriam Ortel's sit and on that triple 7 300 J there were 76 76 club suites that's what that's what British Airways calls it's relatively new business class and that's before we consider first class and that's ignoring premium economy and you step in and it is just like when you're a kid you have a sort of kaleidoscope things and you sort of look down and you sort of peer into it it just seems never ending it was like that you know everyone with their own little sliding door just this cavern never ending and it was it was an overnight flight to be fair but it was I didn't see an empty seat and I bought it pretty pretty late so remarkable numbers like you suggest there J and I actually do another set of numbers here which I do shared last week I G claims to have 58% of capacity share between London and the United States with the US comprising 37% of London's overall long hole capacity so yeah take any sort of number there and you get a re-indication for what I G but specifically as always is doing Nicholas Cadbury the chief financial officer at I AG he said quote strong performance was widespread however you mentioned it with regards to North America and I think those numbers certainly back that up J but British Airways of course very very strong in the US as we've established already but there are other parts of the world that are important to them not least Clutch at home in in terms of Europe they they've got a very important feeder network they're going into going into Heathrow don't they yeah they do and they gave some data on that short on network as well if you look at just a London Heathrow shirt hall about 30% of the people traveling on that on those planes are connecting to to long haul so you can see they don't really need to rely on point to point short haul demand very very much they they've downsized a lot of that over the years because that stuff is a lot of that is is hard to to make money on because you know some of those roots you've got easy jet on or you've got you know Ryan air I mean obviously I've talked about Heathrow he throw those LCCs don't exist but from from a London getaway keep got easy jet and you know in general just London if you're traveling from London to somewhere else in Europe you have a lot of options so that's a lot of that capacity is connecting and yeah they they it's not just North America is you could suggest they have you know pretty pretty good network in South America Africa Middle East they're not as exposed to East Asia is say Air France K-Lam or the tons of group which is helpful right now Asia has been a bit bit tougher in the post pandemic era They do, you know, they do have, I think, a very competitive position in Tokyo, for example, which is, you know, that Mark is doing well. So they, yeah, it's a great long haul network, but obviously North America is, that's where, that's kind of hard of it. And that's where, you know, you could say it's Brenton Butter. They also, in that presentation I referenced back in November, from November, they did say that their long haul capacity has very much lag demand over the past couple of years. And they, you know, kind of gave some data on that about, you know, the growth of GDP and their own ASK capacity growth. And they're convinced that supply is definitely running behind demand, which is obviously a good thing for yields. And of course, when you're talking about London Heathrow and the very privileged slot position that British Airways has there, you're talking about markets that are by nature, or less night, not by nature, but by, by, by slot constraints are heavily supply restricted. And then, you know, that raises the interesting topic of London Heathrow expansion. And for that matter, London Gatwick expansion, that's also being kind of back on the discussion circuit again across British government. And you know, one of the more interesting philosophical questions, I think I might have posted this question on LinkedIn, if not, maybe I'll have to repost to see how people feel about this. So, what should be a hope for? Should they want expansion of Heathrow? Do they want a third runway? Now in one sense, yes, that's good. They really feel constrained at Heathrow right now. They would, there were so many opportunities to grow and they're just unable to realize that because of the lack of capacity, lack of slots. However, they, you know, third runway comes on all of a sudden, the market becomes a lot more competitive, yields are going to fall. So, you know, it's a little bit about, be careful what you wish for scenario. What do you think, Gordon, do you have an opinion on that? If you are British arrowways, would you want a third Heathrow runway? I would want a third runway, but not at any cost. If I could get an assurance that this wasn't going to result in huge airport charges, which would never typically come back to the airlines. I would be mindful to approve, but I think your point is very valid, Jay. They're onto a pretty good thing right now and, yeah, sure, they could expand quite comfortably into a number of routes, increased frequencies, whatever else. But, yeah, the tight market certainly has some benefits. It's interesting you raised the third runway point, Jay, because just last week, as we're recording here, American Airlines, which is part of that joint business across the North Atlantic with British Airways, also a one-world partner, they threw its weight, but American Airlines, that is, behind a new campaign to overhaul how Heathrow is regulated. So it's called Heathrow reimagined, essentially, a pressure group, a campaign group, call it what you will. American was the first airline signatory based outside the UK, so its intervention was reasonably notable. And you might wonder, "American Airlines, yeah, sure, they fly to Heathrow, whatever." They claim to be the third largest airline operator at Heathrow in terms of total seats. So American Airlines offered around 4.7 million seats out of the airport in 2024. So you have other airlines that operate more flights in total, but they're generally using smaller aircraft, I'm thinking they're like, "of Luftwanzer group" and so on. But it is very interesting, this third runway saga, if you like, it's been rumbling for decades and the relatively new Labour administration, they came into power last summer. They said that they are happy for a third runway, but of course it's not quite that simple. You've got not least planning permissions and all the regulatory elements there, but also the fact that it's privately financed and not directly financed from the government means that there's essentially more stakeholders in the mix. So it does complicate things a little bit, but this pressure group, Heathrow reimagined. They're not against a third runway in principle, but they are calling for a review of the product expenditure and the airport's current operating model. A spokesperson for the group claimed that Heathrow has quote, "the world's most expensive airport" and they claimed that passengers and airlines paid 1.1 billion dollars, sorry, 1.1 million pounds, that's about 1.4 billion US dollars more each year than if the charges were closer to those equivalent European hubs. It's not just British Airways, either Virgin Atlantic's assigned the campaign as well. This CEO, Shai Vice, previously said the situation was monopolistic and alleged that Heathrow was abusing its power. So lots of interesting plates being spun at the moment, Jay, I did speak to Heathrow last week and they refused to comment directly on the fact that American Airlines had thrown its weight behind the campaign, but more broadly, my understanding is that the airport is currently working with government ministers, and airline tenants and others regarding possible adjustments to the regulatory model. But I think one thing is for certain that there's going to be a lot of scrutiny around how the airport not only expands, but also how that expansion, if and when it does come, will be financed. Right, how much ultimately cost? Absolutely. Yeah, exactly. Two runways, Jay, and I fly through Heathrow a reasonable amount. You can often spend longer sitting on the plane, waiting for a slot, then you actually do on the flight, or at least how that's how it feels. You compare it even to, we had the CEO, outgoing CEO of Dallas Fort Worth International, Sean Donahue, on the show a few months ago, and he's very lucky in some respects to have seven runways at DFW. That's obviously an outlying example, but even European comparisons, ski pole, in Amsterdam, that's got six and Charles De Gaulle, I think, has got four. So Heathrow's arguably deserving of a third runway, but that part of West London and the general sort of get the commuter belt to the west of London, it's a very, very, very expensive sort of land base around there. Lots of what some people might be describing is sort of nimby's, not in my backyard types, who say, sure, yeah, I want to fly off Heathrow, but I don't want the planes flying over my house. So very, very heated discussion, and I'm sure we can go into much more detail in a future episode. But, sure, answer to a short question, Jay, if I was BA, yes, to a third runway, but I would want some sort of magic, win-win situation where it doesn't cost me much more. Yeah, that's a no good answer. And then, of course, they're also discussing capacity expansion at Gatwick Airport as well, which also just has one runway, right? Well, technically, it has two runways, and I don't want to fall down, I get what Grabberhole is very interesting. They have two runways, but only one's operational any given time, and the second runway is, if there's some sort of issue with the first runway and needs to be out of action, then it's really a fallback sort of emergency runway to call it in short-hand terms. But during the pandemic, I was lucky enough to actually get to go on to what they call the northern runway. And this is when Gatwick was down to just one terminal, they have the north terminal and the south terminal. So I got to walk through the deserted terminal. It was old moth-bowled. It was fascinating, particularly in retrospect looking back on it. But they need to move that northern runway, 12 meters to the north, so there's going to be adequate distance between the two runways, because you wouldn't be able to have them simultaneously operating because they're currently too close together. But I'm sure we will revisit Gatwick in a future episode, because the government, the UK government, said last week, Harry Alexander, the transport secretary, that she was, quote, "minded to approve Gatwick's expansion," but the government has basically pushed it down a little bit. So I think it's going to be October or around then, whether we'll get the final answer, and they're looking for a few additional securities in terms of noise reduction, public transport, and so on. But yeah, definitely one, definitely want to watch Jay. Before we wrap up the British Airways discussion, it's worth pointing out that BA holidays is incredibly profitable part of the business now, not part of I.E.G. loyalty that was spun off. Have you got any numbers on that, Jay? Only that the company said that BA holidays doubled its profits since 2019, so they don't actually break out the numbers, but they did happen to say that. And that's pretty impressive. I mean, we don't, you know, maybe 2019 was zero, but I don't think so. I think they are legitimately doing very well. And we know that from my inference, because we know that easy-gen holidays is doing really well, two E, which is another big competitor in the UK for that kind of traffic, like packaged holiday traffic, they seem to say that their business is doing well, so no surprise. And we know that, however difficult the British economy might be having, Brits are completely unwilling to give up their vacation. So it kind of makes sense that BA holidays is doing very well, so that seems to be a nice alternative engine of profits for them. I.E.G. Loyalty on the earnings call on Friday was Adam Daniels who heads I.E.G. Loyalty and he's actually the former chairman of British Airways' Holidays, BA Holidays. So it's fair to say you know the business better than most. And for me, Jay, I don't know about you, but he delivered one of the call's most interesting commercial insights. I was going to read it to you quickly here. He said, quote, "Currently only 5% of British Airways club members, that's the Loyalty scheme, the executive club, book a BA holiday. These numbers represent nearly 80% of BA holidays, bookings. And only around 20% of those bookings use aviose, which is the sort of point currency operating at British Airways, Finneur, Catero, isn't a few others. Here's the interesting part for me. We forecast that a 10% increase in BA club members, booking a BA holiday will double revenues. This is a huge opportunity for us. That was Adam Daniels who heads I.E.G. Loyalty. So yeah, I think it's certainly a growth area for the business to put it politely and asset light, capital rich. It's got a lot of boxes ticked from a management point of view. Yeah, and I remember, I think I'm remembering this correctly because it's not something BA holidays, not something they haven't really talked about much. But I do seem to recall that it was one sort of an afterthought. You know, okay, we've got these, you know, we've got this little holiday package division here, you know, throw some stuff over a gapwick and, you know, it's low yielding. But that's really, really as we've been, you know, talking about for the past three minutes here. It's, um, really turned into a nice business. Oh, yes. Oh, yes. I need to start taking notes in terms of future topics for discussion, because we so often get on to these interesting tensions. I'm like, dang, that could be an entire episode. But we've done a lot of time for that. Jay, anything else to add to before we get into the break? No, I think we've covered. I mean, there's so much more to say, but I think, um, you know, make sure I encourage everybody to read. Airline weekly will have more about British Airways and upcoming issues for sure. Um, I guess the only other thing I'll point out here that is interesting is that British Airways always, always, always, always orders the largest airplanes they can find from the Airbus and Boeing catalogs. They'll never pass on, uh, whether it's three eighties or seven seven nine's or eight three fifty one thousand's or seven eight seven tens, you know, whatever the largest is. And that totally makes sense because of what we talked about earlier with those London Heathrow slot restrictions, you want to, you can't grow by adding new flights. It's very difficult to do when you have a very finite supply of slots, but you can grow by operating larger planes from those slots. So that is, uh, one reason why, uh, every time Boeing Airbus has a new, you know, ultra-large aircraft product, they, uh, they go straight for, for BA and, uh, and send their salespeople straight for, for the BA headquarters. Well, by the big one. Yeah. By the big one. Uh, yeah, Louise Gallego, who's the CEO of I.E.G. said it's going to be probably on 2027 before they're expecting their first triple seven X's, uh, right. And they are, by the way, still, you know, one of the, uh, not too many airlines still flying the A380, but they did mention that they're actually, uh, reconfiguring their A380 so that you're getting a lot more premium seats in them. And that kind of goes back to, you know, what you were saying before about how you walked on to that aircraft and there was just, you know, endless, uh, just an endless stream of, you know, premium seats. Um, they, they actually, the A380s, it looks like the original configuration, about 60% was, uh, of the, I guess that's, oh, it's actually sorry, in 60% of the floor area was, uh, dedicated to the premium cabins. And that's going to go to 73%. So it's, uh, that's 22% increase. So you can see that they're very much, uh, and this is not unique. Um, you'll see this, uh, among full service airlines, long haul airlines around the world, they're very much leaning into this premium boom. Absolutely. There's no sense of, uh, hey, this might end soon. Maybe we should be, you know, a little bit, uh, reserved about this. It's now the whole industry is really, uh, convinced that premium is here to stay. Doubling down. Doubling earth. Thank you for that, Jay. And as we say, uh, topic that I'm sure we visit in a future episode, not or, uh, future issue of AW, uh, just before we go into the break, we will be discussing quantists in part two, of course, uh, quick reminder to send any questions or comments that you might have for us to podcasts at skift.com. That's podcasts with an S at the end. And please don't forget to follow or subscribe to the podcast wherever you are listening or watching. And if you are enjoying the show, please rate us five stars or leave us a positive review so we can continue to spread the word about the airline weekly launch. Don't go anywhere. We'll be right back. Hello, and welcome back to the airline weekly launch. I'm Gordon Smith joined us usual by co host Jay Shabbat. Part one we were discussing British Airways and its various, uh, very profitable parts of the business. Uh, we are now turning our attention to quantists. And that's another airline that had a, a pretty decent set of results. Jay, tell our listeners what they need to know. Yes, and quantists, uh, unlike I.G. and unlike most publicly traded airlines, quantists, uh, only reports twice a year. So they're going to do their January to June, which is their, I think they call, yeah, they call that their technically their second half of their fiscal year. But we'll be, we'll keep it simple on the calendar year. We'll call it the first half of 2024. And then they report again from July to December, as we'll call second half. And during that second half, they reported a 12% operating margin. Very good. And then at the time you get into double digits, especially for these really long haul airlines with big expensive wide body planes, uh, once you get into double digits, that's always, uh, you're, you're in kind of a sweet spot. So 12% is very good. And, uh, the, that 12% figure was exactly what they earned, uh, a year earlier. So in the, in the second half of 2023, um, give you some fully, the full year numbers to. So this is all of calendar year 2024, 11%. So there you go, double digits and, uh, they ding, yeah, check that box. And then 2023, they had a, uh, 13%. So a little bit tail off on the annual, but, um, but, but, yeah, this is, this is an airline that's performing very, very well. And we can break it down for you a little bit. There's no, uh, well, let's go say there's no obvious area of strength in the same way that we say, you know, British Airways immediately point to North Atlantic premium. Uh, it's not quite that obvious. Um, I can't say that there is one area of the quantest business that really produces, uh, very, uh, heavy, you know, upsized margins, outsized margins. And that's a domestic market, the mainline domestic market. They really do well on that, um, which is a little bit unusual because we talked about how British Airways and European, kind of full service airlines tend to struggle or historically, anyway, they tend to struggle on short haul. Uh, that's historically been true in the US market as well. Uh, in Australia, it's a bit different. You really only have, it's essentially a duopoly between quantists and Virgin Australia. And Virgin Australia over the years is that many problems they were bankrupt pretty recently during the COVID crisis. Uh, so quantists has really over the years just acquired a lot of strength in the domestic market. Um, there's all sorts of, uh, different business segments that they cater to, including, um, a big mining segment. If you know anything about Australia's economy, it's very heavy on commodities, natural resources. One of the reasons why their economy did so well during the 2010s is that they sold a lot of coal and iron ore and, uh, and whatnot, a lot of commodities to China as China was rapidly growing and industrializing. So, uh, quantists cater to a lot of that traffic, you know, miners flying out to, uh, you know, Western Australia for, for, uh, business purposes and things like that. So there's that. But, um, the, the jet star, which is their low cost carrier, also, I mean, that was, they did a 15% operating margin last half, which is extraordinarily good. Uh, they say that leisure demand is really, really strong. And, uh, remember that the Australian, Australia's airlines, like many international airlines right now are dealing with a pretty weak currency. Uh, and that's going to inflate a lot of your costs, you know, whether it be fuel costs and, you know, debt costs and maintenance costs, aircraft costs. So they're dealing with all that. And they're still posting these really good numbers. Um, the Australian economy has been a little bit softer in recent years, but still they say, you know, leisure demand for jet star has been, uh, don't have the exact words in front of me. I'm looking for it, but I think they described it as something to the effect of, you know, spectacular. It's really, really strong. So, um, they, uh, tremendous demand. There it is. I just saw it. They say that jet star is seeing tremendous demand on the price sensitive travelers. So, so there you go. Um, I haven't yet talked about the international, the quantest, kind of mean line branded, uh, international, the one with the big, you know, kangaroo on the tail. That is the weakest part of their business, which is not to say that it's weak. I mean, it's solid, but, uh, that was a business that used to be weak, by the way, but they've restructured, reformed it over the years. God. They've taken delivery of just better aircraft that serves that segment well But that business the international business did a 7% operating margin during the last half of 24 and Looks like the full year was 6% so you know not not great not bad that market is changing a lot though and It is going to be changing in the future as well. Oh, yes Yes, and I think you know where I'm going with this Gordon. Well, I'll take your pick J version Australia getting into bed with Cataro ways or the other way round. I don't know who but also Turkish Airlines making some reasonably deep moves into the Australian market and that's before we consider any of the imbalanced Chinese carriers flooding some of the big East Coast cities in particular in Australia with some very attractive fares particularly on the On the economy side of things, but yeah, I think the the biggest of all of those certainly from my reading of it is The the Virgin Australia deal with with with with cataro ways The competition authorities in Australia have essentially given that the green light and that will enable Quantas sorry Cataro ways to deliver via Virgin Australia a lot more capacity from its Doah hub into those key Australian cities particularly on the East Coast where they are currently restricted in terms of the number of frequencies because essentially they've bought 25% of Virgin Australia so I think we may have touched on this previously on an issue if not a podcast J It's a very very curious setup in that you've got Cataro ways which is part of the one-world alliance and obviously naturally affiliated to Quantas getting very close to Virgin Australia and you've got a set of circumstances and bedfellows which is sort of probably worthy of some sort of Mexican telly novella in terms of all the crossovers and the You know who who's with who and who is friends with who and who doesn't like who and You know the various behind the scenes twoings and froings, but certainly from a consumer point of view if you listen to the To what they're Australian competition regulators saying is this should be good for For competition and for consumers because it hopefully will bring down fares because you've got more capacity coming into the markets But it has ruffled a few feathers Quantas for its part. I think it was cam Wallace The CEO of Quantas International who said yeah, we broadly welcome any competition. It will benefit Everyone I don't know if that's just them sort of saving face and saying yeah We knew this is going to happen anyway as well look like we we welcome the competition, but an interesting time in We also discussed their Turkish briefly there there. They've been a relatively modest start to their Australian Activities their flying via Singapore. I think it is with their with their triple sevens into into Sydney But they're they're longer term ambition when they get the aircraft is to fly nonstop from Istanbul to Australia so Yeah, a fair amount of New or improved connectivity From Australia via those Middle Eastern and and Turkish hub then awards of course to to Europe and beyond And Quantas has some interesting nonstop ambitions of its own doesn't it? Oh, you've been reading my piece about Quantas's projects sunrise jay. I have been And so the few others is one of our best red pieces last week on skift but Shameless plug there for my for my pylign, but yes, Quantas is now said it's going to be 2027 They think for project sunrise flights, which is their codename both public and internal for nonstop flying from Sydney initially to New York and London you might recall Quantas already operate nonstop from Australia But it's the west coast west and Australia Perth flying nonstop with the seven eight sevens to London Rome and Paris This will be on a specially modified a 351,000 ULR that stands for ultra long range And it's going to be a premium heavy aircraft not completely premium though. There will be a spattering of economy seats in there But yeah, Quantas confirmed last week on an update to investors The first project sunrise a 350 went to the final assembly stage at Airbus in September, September 2025 And that will be followed by flight testing ahead of its delivery to the airline Which is currently expected in quote the second half of 2026 This followed I've set back last year Which essentially pushed the schedule back by around six months With Quantas citing quote manufacturing delays at Airbus nice in general But that sort of peaked the attention of some critics and cynics who said is this is going to be the latest in a series of possible setbacks drawing vague parallels with the triple seven X and so on Is this going to be an aircraft that takes years and years to get off the grounds never mind into service but the mood music was pretty positive from Quantas So what you think Jay book your book your seat London to Sydney New York to Sydney nonstop in 2027 Man, I think about that sometimes would I rather connect or would I'd rather do the nonstop has a long nonstop? I don't know if I 20 hours Yeah, I don't know. What do you think would you would you prefer to go through let's take London Sydney London for example Would you prefer to go through singing forward to buy or do you get on the nonstop unless I had something incredibly urgent like a family emergency or Some legal document that needed my physical signature within hours. There's actually no reason why I would fly nonstop for 21 hours even in the fancy seats I would far rather stretch my legs have a real shower Fresh and up get something decent and the lounge assuming that I'm flying Business or one of the you know premium cabins I would almost always want to break up my journey, but I appreciate not everyone feels the same way and actually looking at Quantas's Consumadative for their existing ultra long-hole routes Notably be a perfect to to London Quantas reported really high occupancy and importantly pass to satisfaction scores the airline said on average run Nine and every 10 seats were occupied And the net promoter scores are the highest of any route on the quantest network. So clearly for some people being able to just strap in and put the i-mask on pop a sleeping pill or get a glass of wine And just sort of sit it out. Well, that seems to be a popular choice, but not for me personally Jay No, and remember the the the Perth non-stops to Europe are on 779s And these 8351,000s are going to be considerably larger now there will be they're surely will be you know Bankers and consultants that will get on that flight to happily save time Um, I just I do wonder how profitable those will be I could be wrong, but um, but um my Kind of kind of my I'm leaning towards skepticism on that on those flights. I mean for for one those are routes where you do have a lot of competing capacity you can go through Singapore you go through Dubai you go through China you go you know Just a lot of places you can Connect alternatively You know at same time the a350 1000 we got to see how the you know, it's it's a special version of that You know, will the economics be all that good? I mean they certainly won't be as attractive as the 779 on that per you know those perth routes So you know, we'll see I don't I don't know um It's also it's gonna be you know very relatively small sub fleet your recall off the top of your head Gordon. How many A through 51,000 the ULRs or whatever they call them um, how many they order is it your testimony here Jay? It's 12 12 okay. Yeah, so I actually look few few more than I thought so um Yeah, I guess you could do Sydney and Melbourne to New York London maybe other Few places in Europe. So yeah, okay, so that's that's not a Terribly small number, but in any case um, there's you know, it won't be a slam dunk as all I'm saying I do just want to if I if I may say a few things about The few more things about the North America In Europe markets for Australia both are very important North America you you do have You do have a very Let's call call it favor favorable conditions right now on the North America to Australia route a lot of demand coming from the US and a lot of premium demand a lot of it is just You know upper income tourists coming from you know across the US getting on the quantest flights From Los Angeles to Sydney or whatever American does have a very close relationship a joint venture relationship with American Which they consider their most important joint venture uh most important partnership They uh in fact they quantest even is able to fly to Americans hub in Dallas for it worth because of that relationship But that market has also had seen a lot of new capacity Recently so that there has been some strains I I have to assume that that those markets have been strong last couple of years But I think the yield pressure has been escalating Intended with all this new capacity that that's come in now shifting over to Europe Europe is a little bit of a tougher one We we talked about the Perth traffic that Quantus is able to funnel though they'll take people from east coast Australia Sydney Melbourne etc And they'll move people through Perth onto London, Paris, Rome, whatever else they're doing from Perth now And they per Perth is if you're wondering you know why they do Perth is because the 7879s can actually do it. They have the range to reach Europe from Perth, whereas they don't have the range to do it from Eastern Australia. So you do have sort of that path from getting people from Australia's heavy Eastern population centers to Europe. You could also go through the Gulf. Now interestingly, more than 10 years ago, Kwanis and Emirates formed a joint venture. At the time, it was really a big deal. I remember just getting a lot of attention. And now they don't even talk about it. Kwanis just doesn't even mention Emirates anymore. I did quickly check the Emirates, the latest Emirates annual report. They mentioned Kwanis twice and very briefly. They're one of our partners. They're just not something that they really consider strategic anymore. And I think what's happened over time is that Kwanis has realized that getting people to, of course, there's the Perth stuff, which is an alternative from getting to Europe through Dubai. But they've also realized that Eastern Australians, it's still, I think, more convenient to go through Singapore. And so they still do that. Now, when Kwanis dreams at night, they dream of having Singapore Airlines as their joint venture partner. But unfortunately, that's not going to happen. That would be like an ideal for both of them, but that never evolved. Singapore's status thrown a slot in over the years with Virgin Australia, which they used to own a big chunk of them in Air New Zealand. They used to chunk of them. And so Kwanis has to sort of settle for serving Singapore on its own. They even fly to Europe with their own metal, metal from Singapore, fifth, we call it fifth freedom. You know, they also, they've built a little short haul operation in Singapore through their investment in a low cost care called JetSkirt Asia. They still do co-chair with some of the one-world airlines that meet in Singapore, including Japan Airlines, including British Airways, which at one time, British Airways actually owned, I think 25% of Kwanis. But again, that was before the Emerge Joint Venture. This is going way back. So they're sort of settled on having to serve Europe through Singapore alone in addition to what they're doing in the Perth now. And then in addition to what they're, you know, still doing at the margins in Dubai. And then what they'll, in a couple of years, be doing non-stop with their new A-351,000s. By the way, I think of those A-351,000s. And I do wonder if Kwanis would have rather purchased the triple-7 X's for those super long haul routes. But unfortunately, Boeing's, you know, those triple-7s are, nobody has any idea when those things are coming. And certainly, they would not be in service by 2027, which is the 2027 was the date you mentioned Gordon, right? When the 351,000s are now scheduled to come? In terms of commercial launch, yeah. I'm quite honest, I should get my hands on them probably next year, but obviously they're a little wild to warm things up. The commercial launch, right? So if you, you know, Kwanis. That was the latest timeline from Vanessa Hudson, the Kwanis groups here. Yeah, right. So Kwanis decided to order the triple-7 they probably would have had to delay their super long haul flying until past 2030. So you can see why the A-351,000 was, yeah, yeah, seriously. So the, you can see why the A-351,000 was really the only option that they had. But yeah, it could be, you know, I could be wrong, it could be a perfectly fine aircraft with a very, you know, the produces nice profits for them. Certainly wish them well. And in the meantime, they are just happily, you know, like I said, printing money domestically, doing really well with Jetstar. And then I guess the final component before we end our Kwanis discussion is that like I.E.G. and certainly like many U.S. airlines, Kwanis makes a pretty penny from their loyalty program. Their loyalty program produced a 19% operating margin. It's not small. It's converted to U.S. dollars. It looks like almost $900 million in revenue just starting the last half of 2024. So, you know, big, big program there producing nice profits to supplement what the rest of the airline is doing. Oh, yes. Well, coming to the end of our ultra-long haul episode here, Jay. But really two fascinating topics, but to share with you our ways and Kwanis and two airlines and broader sectors that I'm sure we will revisit in a future episode and newsletter edition as well. Just a very quick reminder if you enjoyed our episode last week on India about the skipped India forum that's happening March 17th and 18th. So, just a few weeks away now in Delhi. I'll be joined on stage by Campbell Wilson, the CEO of Air India, as well as Peter Elbers, the CEO of Indigo. Lots of other big names from the hospitality and travel sectors go to live.skift.com to get the full agenda, the full program and also importantly to bar your ticket at the skipped India forum in Delhi 17th and 18th of March. Thank you for that Jay. Really enjoyed that conversation and thanks also as always to producers Monica Doug and Cole, wherever you are in the world. Thanks for listening and we'll catch you next time. Whether you're listening to us on Spotify, Apple or wherever you get your podcasts, please make sure to subscribe, rate us five stars or leave us a positive review. This really helps us get the word out about the airline weekly launch. So, we can continue to bring you this podcast every week absolutely free of charge. 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