The Middle East conflict caused more than just a fuel shock with shifting travel patterns and capacity resulting from airspace closures leading to higher revenues on some international routes that helped mitigate the shock. Qantas estimated a net negative impact of $420 million (i.e. less than the $610 million in higher fuel costs), suggesting that PBT would’ve increased in the absence of the conflict.

The top level numbers aren’t the most interesting part of the results, so we wanted to delve into a few things that stood out to us. Qantas is a vast airline group and it’s impossible to provide a comprehensive rapid or concise response to the financial result, so we’d rather focus in on a few interesting areas in detail rather than an overly broad and generic analysis. In addition to analysing the financial statements, annual report and presentations, we were also able to listen into the presentation and press conference, helping us provide a little more nuance.

We’ll be focusing on the performance of the various business segments with an emphasis on Jetstar and Qantas Frequent Flyer, revisiting fleet developments and capex, and finally looking at the impact of higher fuel prices.

Let’s delve in …

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Instead, we headed to Singapore on Qantas, and from there on Ethiopian Airlines via Addis Ababa. Our Melbourne-Singapore flight was operated by VH-EBC, one of Qantas’s oldest A330-200s. Sadly, it’s likely our last flight on “Surfers Paradise” as she’s headed for retirement in the coming weeks along with her sister ship VH-EBD early next year.

These aren’t the only Qantas widebody retirements expected in the coming years as 36 widebody aircraft are due for delivery from early next year. There have been persistent rumours that Qantas are planning to accelerate the retirement of the A380 fleet, possibly as soon as 2029. The A380 had previously been slated for retirement starting in 2032, and its replacement capacity not yet confirmed, but covered by purchase options attached to the existing order book.

It’s no secrete that Qantas would like to accelerate the A380s retirement. Urgency has increased in recent months driven by higher fuel prices due to the conflict in the Middle East and ongoing operational reliability challenges, but accelerating its retirement is constrained by the availability of replacement capacity.

The increasing urgency is supported by a Reuters report in June that Qantas were in talks with both Airbus and Boeing for an order for an additional 20 B787 and/or A350 aircraft. The trail has done quiet, but with Qantas’s annual results due for release this week it’s also as good a time as ever to make sense of what’s happening with the Qantas widebody fleet.

We’re interested in several aspects including the current replacement capacity on order, the timing of these deliveries in the context of additional delays, and the ability to extend the life of the current fleet by considering the tradeoffs around heavy maintenance intervals.

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The question has become: what’s wrong with easyJet? In our opinion there’s nothing wrong with easyJet, rather they’ve pursued a very conservative strategy while the market is demanding growth.

One critique surrounds aircraft utilisation, arguing that significant seasonality in European travel leads to poor aircraft utilisation. This argument has been promoted by ACMI operators who suggest that better use of wet leasing during seasonal peaks would benefit easyJet. There’s an inherent conflict of interest in their argument, so let’s consider this from a neutral and data driven perspective.

Is easyJet’s aircraft utilisation poor?

Very conveniently, the UK CAA publishes detailed data on fleet level aircraft utilisation, allowing examination of utilisation by airline, by fleet type and month. The database only includes aircraft on the UK aircraft register which adds a layer of complexity for airlines like easyJet with AOCs in multiple countries. Thus, the UK data only covers the easyJet fleet registered on their UK AOC, and not those on their Austrian and Swiss AOCs. The seperate AOCs are an artefact the European Common Aviation Area which the UK left in 2020, and which Switzerland was never a member of.

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Airlines must choose whether each aircraft is to be owned or leased, generating a myriad of implications. Owning the aircraft means that the airline takes all risks and rewards, but also requires them to pay for the aircraft in full from its own cash resources, often having to raise debt to do this.

Leasing the aircraft means that a lessor takes the capital risk and rewards while limiting the airline’s share of risk and reward to the operational side and only for a fixed period of time. The lessor, rather than the airline, pays for the aircraft upfront, while the airline pays the lessor a rental for its use.

In practice, there are several modalities by which aircraft can be leased including operating and financing leases, the latter being a hybrid mechanism whereby the aircraft is leased with an option or obligation to purchase it at the end of the lease. An operating lease is a rental agreement that grants the airline the the right to use the asset for a specific period without transferring ownership rights, meaning the lessee simply returns the aircraft at the end of the lease.

It should be obvious that purchasing an aircraft requires more of your own money (and/or debt), while leasing requires significantly less upfront cash. It’s for this reason that many startup and rapidly growing airlines are heavily dependent on leasing. VietJet Air are a typical example of this!

Since commencing operations in late 2011 they’ve grown to a fleet of 108 aircraft plus 23 more at their Thai franchisee (Thai VietJet Air). Of the 131 aircraft, only 9 are owned, while 122 are leased with 5 on finance leases and 117 on operating leases. Leasing accounted for 93% of their aircraft expenses in 2025 (VND 14.5 trillion in leasing costs and VND 1.1 trillion in depreciation, itself including VND 0.3 trillion depreciation for finance leases). By comparison, this proportion was 7% and 55% for Qantas and Virgin Australia, respectively, putting in perspective how much VietJet relies on leasing.

While there are several mechanisms for entering into operating leases, VietJet have utilised sale and leaseback transactions extensively. SLBs are a common and well-regarded aircraft financing mechanism (for both new and in-service aircraft). Almost every airlines uses SLBs, but there’s something unusual about the scale and impact of SLBs at VietJet. Let’s explore …

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Nevertheless, Qantas utilised this time productively, with OGA and OGB conducting 346 training, maintenance and positioning flights prior to EIS. This appeared excessive at the time but likely helped ensure a smoother EIS.

Subsequent deliveries in December 2025 (OGC), and February, April and May 2026 (OGD, OGE and OGF) have entered into service significantly quicker, taking less than two weeks from delivery to EIS. The 7th aircraft (OGG), sporting a special livery supporting Qantas’s partnership with the Great Barrier Reef Foundation, was delivered on 13 June 2026, entering service just one week later.

We thought it would be a good time to have a look at the A321XLR’s EIS program, exploring its route network and utilisation, and looking forward to its likely flying schedule over the next few months. This includes a detailed look at Brisbane-Perth to explore its relative prioritisation in the the A321XLR’s flying schedule over the coming months. This analysis doesn’t try to understand why Qantas have ordered the XLR over the baseline A321neo or A321LR. This has been litigated to death, but we do touch on this in understanding the relative prioritisation of its flying schedule.

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While the headline in that article is provocative, the article itself is pretty good, highlighting the industry response. As expected, they criticised the move and we don’t blame them (see here, here). Global fuel prices are pushing up costs for airlines, leading to increased prices and demand destruction. The timing couldn’t come at a worse time for airlines.

Some of the framing has been absurd, for example some resorting to calling it a “big new cost”, despite the PMC having been around since at least 1978 (and probably earlier in some form or another). It was introduced at a rate of $10 in 1978, equivalent to $65 in 2025. While the PMC has increased quicker than inflation it’s hardly a “big” increase or “new”.

Analytic Flying isn’t a political blog and we try to avoid politics at all cost. We have political views, but they aren’t interesting to our readers, so we leave them at the door. Today’s post isn’t about the politics of the PMC, but the economics of it. We’re here to talk policy, not politics!

To some extent we write in defence of the PMC, but also in criticism of its regressive and distortionary structure, arguing for much needed reform!

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Alongside the release of their half year results in February 2026, Qantas announced sweeping changes to its US network over the forthcoming NW26/27 season (i.e., starting from the end of October 2026). These include the inauguration of a new seasonal route to Las Vegas, but more significantly frequency reductions and aircraft changes on several routes.

These changes have led many, including ourselves, to argue that Qantas are significantly reducing capacity between Australia and the US. We thought we’d delve into the changes in more detail and consider how they affect capacity, but also the distribution of capacity, highlighting the continuing strategic shift in US hubs.

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This isn’t to say that loyalty programmes aren’t an immensely important and profitable part of the airlines business, but it’s become a hit-and-run critique of specific airlines and the industry as a whole. We wanted to tackle this question in a sober manner by outlining the financial accounting practices of airline loyalty programmes, not just to dispel the myth, but also to allow readers to better appreciate the actual importance of loyalty programmes.

Part 1

When customers sign up to an airline loyalty programme they are aiming to earn points (or miles as they’re known in some countries) that they can then utilise to redeem for rewards. A secondary consideration is earning sufficient points to gain a higher level of status that increases the rate of earnings for given activities but also avails the customer of a range of benefits from increased baggage allowances, priority check-in, lounge access, etc. In some cases, status benefits themselves can be of considerable value.

Customers earn points through two mechanisms: 1) by flying on the said airline or their partner airlines, and 2) through purchases from external partners. The later include other travel providers like hotels, car hire and even taxis (e.g. taking an Uber to the airport earning a handful of Qantas points), or purchases from non-travel providers. The most significant of these are credit card companies, which have become an increasingly large points earner over time, so let’s focus in on that.

I have a NAB Qantas Rewards Premium Credit Card. At present, it’s offering a 60,000 points sign-up bonus if I spend A$3,000 on everyday purchases within the first 90 days of account opening, and a further 40,000 points if I keep the card for 12 months. In addition to the sign-up bonus, I’ll also points on a recurring basis, earning 1 point per $1.50 spend on the first A$3,000 per month, and 1 point for every A$3 thereafter.

If I spend A$6,000 per month on the card, I’ll earn 36,000 points a year plus 100,000 bonus points in the first year. That’s a substantial number of points given that a return business class Melbourne-London flight including the Platinum One status bonus would amount to 80,600 points.

Qantas doesn’t give away the point for free, so NAB must purchase these points from Qantas. The exact price isn’t public, but it’s like any other commercial transaction. Qantas will offer NAB better terms for purchasing more, providing volume guarantees or greater advance purchases, etc. It’s safe to assume that NAB are paying less than A$0.0273 per point (2.73 cents per point) since this is the price (including GST) that Qantas will sell you and I “top-up” points. So let’s assume a price of A$0.02 per point, meaning that it’ll cost NAB A$2,720 to purchase 136,000 points (A$720 for the 36,000 and A$2,000 for the 100,000). That’s probably generous, but let’s run with it for an our instructive example.

Part 2

Some people assume that this results in Qantas generating A$2,720 in revenue as a result. But the financial accounting is more complex than you might think. Until the customers spend those points (or until they expire), Qantas are unable to recognise it as revenue. They certainly have the cash (which sits on the balance sheet as an asset), but they also raise a liability in the form of unearned revenue.

The unearned revenue only gets raised as revenue once those points are spent! This is important to note since many assume that airlines make the revenue when they sell points to credit card companies, however financial accounting dictates that they only generate the revenue when customers redeem them. This generates an explicit need and incentives for airlines to get customers to redeem those points!

The most recent financial statements published by Qantas and Virgin (HY26), show that at the end of December 2025, Qantas and Virgin had A$3.7 billion and A$674 million unearned loyalty revenue, respectively, having increased from A$3.6 billion and A$630 million, respectively, six months earlier.

We said it only becomes revenue when miles are used, so how much was used? In the last six months, Qantas and Virgin recognised A$1.4 billion and A$242 million in revenue, respectively, meaning that customers redeemed points for flights and other rewards to these values during the six month period.

What’s also notable is how the net balances changes. In both cases, unearned revenue increased, meaning that the customers accumulated more points than they redeemed (or expired). See the details below for the accounting for that.

The relative net accruals amount to 5.6% of Qantas’s June 2025 balance, compared to 7.0% of Virgin’s June 2025 balance. We might argue that Qantas achieved a higher or more efficient burn rate, but this isn’t a critique of Virgin or a virtue of Qantas.

Part 3

A far more important misconception is that this revenue is pure profit. It’s an error that many commentators make because they don’t understand, or don’t want to understand the financial accounting. In some cases, it appears as though commentators intentionally misrepresent this to generate a narrative that airlines don’t make money from flying. It’s not clear why they’d need or want to do this, but when people continue to push the narrative even once the error is pointed out to them, their motives come into question.

When a customer redeems points the airline raises revenue, but the error is made in assuming that no costs are raised to provide the redemption. While those costs may be relatively small, they aren’t negligible. For example, if the customer redeems a reward from an external partner, say a hotel or car rental, the airline will have to purchase the redemption. Even if you redeem a reward on the airline, there is still a cost associated with it. The flight utilises aircraft, crew, fuel and other resources that cost money. Even if the seat on that flight was dead stock, there are still costs associated with it.

In a widely quoted article last year, The Economist published an analysis claiming that “Last year Delta Air Lines notched up an operating profit of $6bn, comfortably ahead of its domestic rivals. Buried in the financial statements, however, was a more revealing point. Without the revenue from its loyalty programme, it would have operated at a loss.”

But alas, this is absolute bullshit!!!

The article correctly states Delta’s 2024 operating profit (or operating income as its called in their financial statements) of $6 billion, however it then claims that after excluding loyalty-related revenue of $7.1 billion that Delta would’ve incurred a loss of more than $1.1 billion. Note that they exclude the revenue, but not the costs! So how did they get to this?

Delta’s financial statements disclose loyalty-related revenue in some detail (see breakdown below). They don’t disclose the costs generating that revenue, and while that might be problematic, it doesn’t mean that one can assume that there are no costs involved in generating that revenue and that revenue equals profit. But inexplicably, and absurdly, The Economist’s analysis simply assumed that Delta incur no costs generating loyalty-related revenue.

The flights for travel awards still require an aircraft, crew, maintenance and fuel. The non-travel awards require Delta to pay suppliers, while lounges cost money to operate. The conceptual misunderstanding of the financial accounting may lead people to assume that the revenue has not cost basis. While Delta don’t do any favours by not spelling out the cost basis in the financial statements, it doesn’t mean we have the liberty of assuming there is no cost basis.

Other airlines spell it out more explicitly. For example, going back to our Qantas and Virgin examples, in the six months to December 2025, Qantas reported an EBIT (earnings before interest and tax) of A$286 million on A$1.4 billion in revenue, while Virgin reported an EBIT of A$74.4 million on A$242.4 million in revenue.

This means that Qantas injured costs of A$1.114 billion to generate their loyalty revenue. While the margin of 20.4% is very high, and much higher than even the best performing airline within the group (Qantas domestic with 16.1%), it still shows that loyalty programs cost money to operate. Meanwhile, Virgin incurred costs of A$168 million to generate that revenue, with a 30.7% EBIT margin, also much higher than the airline’s 13.1% margin.

While we don’t know Delta’s loyalty margin, it would need to be a operating margin of 84% or higher for The Economist’s claim to be true. This isn’t just implausible, but downright laughable!!!

Qantas and Virgin operate their loyalty businesses at 20% to 30% margins, and industry wide estimates put the higher end at 30% to 40%, and as high at 60% to 70% for milage sales, showing just how unlikely it is that the claim is true.

Why is this even important?

I can hear my grandfather saying “yada yada yada, all this talk of numbers is just confusing me. What’s the tachlis, boy?”

Maybe he’s right and this explanation is all just sophistry. Financial accounting is both brilliant and manipulative, and it’s probably not relevant to most people. It’s absolutely necessary for some, but the average punter probably doesn’t give a damn.

So, what’s the tachlis?

Those who make the claim that loyalty programmes make otherwise unprofitable airlines profitable require and use financial accounting to show this. To put it bluntly, we didn’t make the claim. Those who make the claim use financial accounting to show it, however the claim simply doesn’t hold up to scrutiny.

At best, they don’t understand the financial accounting and would earn a failing in high school accounting, and that’s not an exaggeration! At worst, it requires fraudulent accounting to justify, and it’s not even a sophisticated fraud, rather just ignoring the costs associated with the revenue. We don’t argue that The Economist are guilty of this, rather they haven’t understood the accounting. Concerningly, there are plenty of commentators who do this knowingly, likely exaggerating to generate outrage and clicks!

This diverts from legitimate debate around the benefits for airlines beyond profitability, including revenue recognition and cash flow. Airlines generate a lot of cheap working capital from loyalty programmes and this generates poor incentives for airlines, ultimately leading to devaluations of rewards as loyalty programmes becomes too successful. This is probably a seperate discussion altogether that we can come back to in a few weeks.

No doubt, some readers will counter that we’re missing the point and that (some) airlines are increasingly reliant on loyalty programmes to generate revenue and profit. We agree with that, but not that it’s a bad thing. The counter argument de facto implies that increasing reliance on loyalty programmes to generate revenue and profit is somewhat of a bad thing, and it’s not.

The extent to which airlines rely on the loyalty programmes to generate revenue and profit varies. For example, it generated 11% and 18% of Qantas’s revenue and EBIT, and 7% and 15% of Virgin’s revenue and EBIT. It generated 12% of Delta’s revenue, but an unknown amount of profit. These are impressive numbers, but let’s consider the counterfactual. What if airlines didn’t have loyalty programmes?

One argument is that they’d have to generate more revenue from flying, meaning higher prices leading to reduced demand. Both would be a poor outcome for consumers. Reductions in demand would lead to reduced supply, leading to reduce capacity. Effectively, loyalty programmes mean that consumers pay lower prices and have more market capacity.

There’s no such thing as a free lunch though, as loyalty programmes have externalities that we shouldn’t ignore either. Sometimes these might be the monetary costs we pay for, e.g. paying a slightly higher price to fly on the airline you’re chasing status on, or using a credit card for a transaction that might be cheaper another way, or even the annual credit card fee. However, we choose to do that! Because we make these choices, they’re not really externalities, rather the price that we willingly pay. If we don’t value it sufficiently, then don’t do it!

The corollary is that the “externalities” of a world without loyalty programmes will be borne by society at large. As individuals we won’t get to choose to pay the higher direct costs. At least we can choose whether to take part the loyalty programme rate race or not.

The bottom line is that loyalty programmes are incredibly important to many airlines, and a significant source of revenue and profit, but it’s safe to say that as a generalisation airlines are not dependent on them for profitability. The claim that flying doesn’t make money and they’d be loss making without them is not supported by evidence. The claim relies on a shoddy understanding of financial accounting.

Global air travel has been significantly impacted by the outbreak of the Middle East conflict on 28 February 2026. The closure of airspace in multiple countries led to the temporary grounding of several Middle Eastern airlines and disruptions to flights that transited through affected airspace.

While the affected airlines have attempted to mitigate disruptions, the impact continues to be felt a month later. During some previous analyses over the last month we’d framed mitigation strategies around disruptions “persisting”, and it’s fair to say that things are certainly persisting!

A unique challenge for Australia is the significant impact that these disruptions have had, and continue to have on travel between Australia and Europe. This is ultimately due to the dominance of Emirates, Etihad Airways and Qatar Airways (ME3) on these routes. We’ve previously highlighted how the ME3 accounted for more than 50% of the total Australia-Europe market in recent years.

With the ME3 running a skeleton operation with very little connecting traffic passing through their hubs, and passengers showing significant risk aversion to flying through Abu Dhabi, Doha and Dubai, there’s a significant capacity crunch occurring. Australia-Europe isn’t the only market affected, with the same constraints affecting most east-west traffic between Europe and Asia.

Why is Australia-Europe so important?

According to ABS data, 3.6 million people traveled between Australia and Europe in 2025, with approximately 44% traveling between the Australia and the UK and Ireland. The remaining 56% were fragmented across Europe, with Italy and France the next largest markets accounting 11% and 9%, respectively.

The market is marginally dominated by outward bound travel, with 54% comprising Australian residents and 46% foreign visitors. This varies significantly when considering the UK and Ireland separately to the rest of Europe. Outward bound travel accounts for 46% of the UK and Ireland market, whereas Australians account for 61% of travel between Australia and the rest of Europe.

The distribution/fragmentation of the outbound market also varies, with the UK and Ireland only accounting for 37% of travel by Australian residents. Italy and France comprise 16% and 9%, whereas Greece is a significant 8% of the market.

This has turned Europe-Asia into the bottleneck in Australia-Europe travel. There is ample capacity available between Australia and Asia, but simply no seats available between Asia and Europe. For example, there are seats available on nearly all of Cathay Pacific and Qantas’s flights between Australia and Hong Kong over the next week (Friday 27 March though Thursday 2 April), but not a single seat available on any of Cathay and British Airways’s flights between Hong Kong and London over the same period (other than the odd spattering of full fare first tickets). Similar patterns are found through other Asian hubs to most European cities.

Impact on Qantas

Qantas have already run into several challenges. Firstly, they move a significant amount of European traffic through their Emirates joint venture (it’s not just a codeshare). Ultimately, passengers that they are ticketing are their responsibility and are having to find alternative routings to get them to their destination.

They have limited redundancy capacity to/from Europe, with daily flights from Perth and Sydney to London, 3x/week Perth-Paris flights, and 3-4x/week seasonal Perth-Rome flights that are only due to recommence from the start of May.

Qantas’s European flights:

QF9/10 Perth-London Heathrow (Daily) non-stop B787-9
QF1/2 Sydney-Singapore-London Heathrow (Daily) A380
QF33/34 Sydney-Perth-Paris (3x/week) non-stop B787-9
QF5/6 Sydney-Perth-Rome (3-4x/week; seasonal) non-stop B787-9

As noted, redundancy capacity through Asia is also limited given the significant capacity bottleneck it now represents. It’s been widely reported that a lot of traffic is now routing through the US, despite the practical challenges as international transit passengers are required to clear US immigration.

Qantas have also had to reroute its non-stop Perth-London flight via Singapore as airspace closures have increased flying time and compounding payload restrictions. Without the fuel stop in Singapore on the westbound leg, the additional payload restrictions would limit passenger uplift significantly. We covered this is a detailed post a few days ago.

Qantas have been on record to indicate that they are considering options to add extra capacity to Europe, so we thought we’d look at the options they might consider. There are lots of rumours going around what they might do and while some of these link to the options we look at, the purpose of this post isn’t to test the veracity of them, rather to consider the relative challenges they face.

Option 1: Increased frequency on Perth-Paris/Rome

The first, and possibly simplest option would be to increase frequency on existing Perth-Europe flights. At present, Perth-Paris operates 3x/week year round with on a B787-9 aircraft, originating in Sydney (QF33/34), while Perth-Rome operates seasonally 3-4x/week, also originating in Sydney (QF5/6) and operated with a B787-9 aircraft. Notably, the Rome flight will run a longer season this year, also with an earlier start date, significantly increasing capacity over last year. This increase was already announced last year, and isn’t a reaction to current events.

While additional flights could be added on an ad hoc basis without significant network changes elsewhere, sustained increases in frequency will require the B787-9 to be taken off other services. This would either require reduced frequencies on other routes, or switching other B787-9 flights to other aircraft.

During the NS2026 season, other B787-9 flights include (excluding European flights):

• Brisbane-Los Angeles (daily)

• Melbourne-Dallas (3-4x/week)

• Melbourne-Los Angeles (5x/week with remaining 2x/week A380)

• Sydney-Vancouver (3-4x/week)

• Sydney-San Fransisco (3x/week)

• Sydney-Auckland-New York (5x/week)

• Sydney-Santiago (4x/week)

One option could be to switch BNE-LAX back to the A330-200 which operated the route after the COVID pandemic until last year, however this would be unpopular with customers. The A330-200 wouldn’t be viable on other routes as it would incur even larger payload restrictions than on BNE-LAX.

An alternative could be American Airlines taking over BNE-LAX to enable B787-9 reallocation to Europe. Notably, Qantas and AA did this recently with AA operating BNE-LAX 3x/week with B787-9s in December 2025 and January 2026 to enable Qantas to reduce frequency from daily to 4x/week and redeploying the aircraft to increase the frequency of MEL-DFW from 4x/week to daily during the same period. On the presumption that AA would have sufficient capacity this would be an elegant solution, although it’s a much easier ask during the southern hemisphere summer. The northern hemisphere summer is AA’s peak long haul season with a greater emphasis on deploying their own capacity to Europe.

Option 2: Add additional London flight via Asia

Another straight forward option would be to add another London flight, similar to adding more Paris or Rome flights. For example, a return of Melbourne-Singapore-London. This could be operate by the B787-9 or A380, requiring some additional aircraft time, however this would require less additional time than additional Perth-Europe flights as the Melbourne-Singapore (and return) sectors would presumably replace existing QF35/36/37/38 sectors. In doing so it has a somewhat smaller opportunity cost.

Routing through Singapore would present the best opportunities for network effects with existing connections, similar to the manner in which QF1/2 already operates. Qantas would have little problem with traffic rights at Singapore, while Heathrow slots could be temporarily sourced from any number of Gulf airlines who are currently not utilising their Heathrow slots (let’s just assume their joint venture partner Emirates).

Option 3: Switch Perth-London to A380

Another solution would be to increase capacity on the existing Perth-London flights by switching the B787-9 to the A380. At present, the outbound leg is currently flying via Singapore to enable higher payloads that are being undermined by longer routings due to unavailability of European airspace. The fuel stop in Singapore is somewhat enforced, and adds significant time to the flight. QF9 was renumbered QF209 to reflect the retiming of the Perth departure from 7:15pm to 3:50pm, maintaining the arrival at Heathrow at 5:05am.

QF9 PER-LHR 7:15pm 5:05am
QF10 LHR-PER 11:50am 12:30pm

QF209 PER-SIN-LHR 3:50pm 5:05am
QF10 LHR-PER 11:50am 12:30pm

The return QF10 remains unchanged, operating non-stop and with the same schedule. This generates downstream challenges with the earlier departure from Perth potentially undermining connecting traffic from the east coast, and limiting options to rotate aircraft to/from the eastcoast.

Switching from the B787-9 to the A380 would generate a large increase in capacity. Furthermore, there is somewhat more redundancy capacity in the A380 fleet compared to the B787-9 fleet. But there are some externalities, and a very big one: the return leg (QF10) wouldn’t likely be able to operate non-stop. At 16.5 hours it would require large payload restrictions. Comparatively, westbound QF8 DFW-SYD is Qantas’s longest A380 sector and is slightly shorter, typically coming in just above 16 hours, however this sector is notoriously payload restricted and QF10 would generate larger payload restrictions, nevermind the need to carry more fuel due to lack of nearby alternates for the A380 at Perth. As we see with the outbound leg, adding the fuel stop adds a lot of additional time (3.5 hours on the outbound leg). Taking the same departure from Heathrow would push the arrival at Perth from 11:45am to 3:15pm.

This would be catastrophic since the current combination of QF9/10 and even QF219/10 ultimately required two aircraft for a daily service. Switching to the A380 and adding a fuel stop in Singapore on the return leg would mean the aircraft arrives at Perth at 3:15pm with an outbound departure of 3:50pm meaning it would require 3 A380s to operate. This means that the B787-9s that might come off Perth-London wouldn’t be able to replace the A380s it displaces elsewhere on a one-for-one basis.

But something magical has happened. Just today we’ve seen that Qantas have retimed QF219’s Perth departure to 7:35pm with London arrival now 10:05am. The flight number has subsequently been changed again, this time to QF219. Once again, QF10 remains non-stop with an unchanged schedule. This change is effective from 29 March, coinciding with the start of the IATA NS2026 season. This has neccesitated a change in their Heathrow arrival slot, likely affected through a temporary slot swap with another airline or a temporary dispensation from the slot coordinator. Eiether way, this likely explains why the retiming of the Heathrow slot coincides with the start of the IATA NS2026 season.

QF9 PER-LHR 7:15pm 5:05am
QF10 LHR-PER 11:50am 12:30pm

QF209 PER-SIN-LHR 3:50pm 5:05am
QF10 LHR-PER 11:50am 12:30pm

QF219 PER-SIN-LHR 7:35pm 10:05am
QF10 LHR-PER 11:50am 12:30pm

The retiming reclaims ground time at LHR, allowing improvement of connectivity at Perth (or at least allowing the original connectivity to return). Furthermore, it gives Qantas better options to rotate aircraft to/from east coast.

But this opens the door to the A380. This is pure speculation: what if QF10 were to be replaced with the A380 and a fuel stop in Singapore introduced? Let’s call it QF210 and assume it adds 3.5 hours flight time.

This would put QF210 arriving in Perth at 4:00pm, allowing departure as QF219 at 7:35pm. While there are some connectivity issues related to the later departures, it would now require 2 A380s instead of 3. This would allow a straight swap between the B787-9 and the A380 on other routes (e.g. SYD-DFW/JNB/LAX/SIN)

Furthermore, aircraft rotation to/from the east coast is not a challenge as it could rotate with the QF1/2 aircraft at Heathrow, similar to how Qantas typically rotate B787s and A330s at other outstations (e.g. AKL, DFW, LAX, SIN).

So this is doable? Well, there’s one big catch. Qantas’s Perth terminal doesn’t have A380 capable gates and utilising the A380 would mean operate to/from T1, undermining connections and lounge options. Ironically, the emphasis that Qantas have had on engagements with Perth Airport regarding the importance of operating their international flights to/from the Qantas terminal would almost preclude this. But desperate times call for desperate measures?

Option 4: Extend Australia-North America flights to Europe

The most complex and even risky would be to extend one of existing North American flights onward to London. This has several challenges and options. At present, their North American network looks as follows:

BNE-LAX (daily)
MEL-DFW (3-4x/week)
MEL-LAX (daily)
SYD-AKL-JFK (5x/week)
SYD-DFW (daily)
SYD-HNL (5x/week)
SYD-LAX (daily)
SYD-SFO (3x/week)
SYD-YVR (3-4x/week)

Each option has its own idiosyncrasies. Firstly, we might remind readers that the US doesn’t have international airside connectivity meaning that connecting passengers much clear US immigration. That creates a range of externalities and even risks. In the past, some US airports had an international transit lounge meaning that same flight passengers didn’t have to clear immigration, however it seems as though this is no longer available. While passengers don’t have to collect bags and clear customs, passenger need to clear immigration and would require an ESTA or visa.

Secondly, it’s not operationally practical on all routes. We can exclude SYD-HNL since it would require a change from the A330 currently operating on the route, and also SYD-AKL-JFK since this would imply a 2-stop route to LHR.

To some extent, we might exclude SYD-SFO/YVR since its only operated 3x/week and wouldn’t generate any network effects without and BNE/MEL-SFO/YVR connections, making BNE/MEL-LHR a 2-stop itinerary. Another consideration for YVR would be the bilateral arrangement. The 1988 Australia-Canada air service agreement doesn’t make provision for points beyond Canada. However, this agreement has recently been updated, and while reported as an open skies agreement that enters into force at the end of March 2026, it’s not clear whether this is an open skies agreement that would allow points beyond Canada or just moving to unlimited frequencies (e.g. similar to Australia-Singapore that doesn’t have any capacity constraints, but still limits intermediate and points beyond).

That leaves us with DFW and LAX. Let’s presume the option is to extend SYD-DFW or SYD-LAX to LHR. Both operate daily with the A380, proving Qantas with a large capacity platform. LAX provides daily connecting feed from both BNE and MEL, while DFW only less than daily from MEL. Furthermore, the westbound DFW-SYD leg operates under significant payload restrictions, limiting the incremental capacity it might provide.

And finally, assuming LAX is the most practical option due to connectivity to/from BNE, MEL and SYD, a final challenge is the lack of schedule coordination between these flights. For example, if the SYD-LAX flight were to continue to London it would be too early for BNE connections, and far too late for MEL connections. This would require multiple pieces to be rescheduled.

QF11 SYD-LAX 5:50pm 2:30pm
QF15 BNE-LAX 8:35pm 4:30pm
QF93 MEL-LAX 9:45pm 7:05am

QF16 LAX-BNE 10:10pm 5:00am
QF94 LAX-MEL 9:50pm 6:45am
QF12 LAX-SYD 11:30pm 7:30am

Thus, we’re heavily discounting the US option due to the lack of connectivity, scheduling challenges and challenges with respect to international transit passengers needing to clear US immigration.

No need to speculate, here’s the answer

Correct as of 4pm Thursday 26 March:

Just as we were finishing this up we began to notice a number of schedule updates appearing, so no need speculate any further. These are schedule updates now showing and on sale!

Rome: Perth-Rome was due to recommence in early May with 3x/week flights, increasing to 4x/week from late June until late September. Instead, it will operate daily between 18 May and 26 July, with select flights not originating in Sydney.

Paris: Paris flights will increase from 3/x to 4x/week between 20 April and 17 May. Westbound routing will operate Sydney-Singapore-Paris, excluding Perth, although its uncertain whether this routing only applies to the additional flight or all flights. Sydney-Singapore-Paris is now QF233, while Sydney-Perth-Paris remains QF33. Eastbound routing remains unchanged.

From 18 May to 26 July, Paris increases to 5x/week and operating via Singapore in both directions, thus operating as Sydney-Singapore-Paris, and vice versa, excluding Perth.

To accommodate the additional B787 flying time on the Rome and Paris routes, Brisbane-Los Angeles will switch back to the A330-200 during the affected period, while some domestic A330 flying has been replaced with narrowbody aircraft to free up the A330s for Brisbane-Los Angeles. Flights to London will remain unchanged with the Perth-London flight continuing to operate westbound via Singapore, and non-stop on the return.

Apologies for any typos or inconsistencies, but we’re pushed this out a little quicker than expected! We’ll update it later!

The northerly routing adds 30 to 45 minutes to the flight time. This seems like a small amount of additional time, so why such a significant payload restriction necessitating a refuelling stop? It’s easy to forget that even at the best of times, QF9 is one of the world’s longest non-stop flights, pushing the capability of the B787-9.

It’s also not the first time Qantas have rerouted QF9, having done it twice in 2024 for similar reasons (12-27 April and 8-22 August). As with the previous times, the return leg (QF10) remains non-stop.

The logistics of adding a fuel stop mean that it can’t be implemented on an ad-hoc basis or scheduled at short notice. If it were to take an unscheduled stop it would certainly lead to the crew exceeding their flight duty limits, leading to the remainder of the flight being cancelled. This would lead to greater disruption for passengers and knock-on effects to the rest of the network with an aircraft and crew being out of position for at least 24 hours.

Scheduling the fuel stop in advance takes time as a replacement crew needs to be positioned to Singapore ahead of time. Singapore isn’t a regular Qantas B787 station, limiting its ability to utilise crew that may already be in position. Thus, despite the first airspace closures occurring on Saturday 28 February, Qantas only began the rerouted QF209 on Wednesday 4 March.

In the interleading time QF9 continued to operate non-stop, utilising the longer northerly routing, taking a payload penalty to carry additional fuel and/or lighted the load to reduce fuel burn. But just how big of a penalty is it?

Qantas were on record saying that introducing the Singapore stop would enable an additional 60 passengers to be carried. That’s a surprisingly large number for an aircraft that only seats 236 passengers, right? Were they really limited to just 176 passenger?

It’s actually missing some context! Firstly, we shouldn’t assume that QF9 was able to operate with a full passenger load prior to Saturday’s disruptions. Furthermore, we also shouldn’t assume that it can do this year round.

As usual, we brought the receipts! We’re able to estimate the payload restrictions that Qantas typically face on the route by analysing the declared seat capacity on QF9 and 10 from BITRE data.

Over the last year, the outbound seat capacity on QF9 (westbound Perth to London) averaged 219 seats per flight, while the inbound seat capacity on QF10 (eastbound London to Perth) averaged 235 seats per flight. We can interpret this to mean that they had to leave 16 seats empty on the average westbound sector, but just 1 empty on the average eastbound sector.

More importantly, we see significant variation in the payload restrictions throughout the year. Seat capacity was as low as 203 in January 2025, and as high as 234 in August and September 2025. There is also a clear seasonal pattern, with payload restrictions significantly more severe through the Australian spring and summer.

Back to our analysis, capacity was limited to an average 206 and 219 seats in February and March 2025. If we were to assume that this holds for February and March 2026, this would indicate a loss of 30 and 17 seats even before the rerouting. So the question becomes, how does the rerouting lose and additional 30 to 43 seats?

Thanks ACARS!

We have a single snapshot to show this in practice using the ACARS loadsheet for QF9 on 3 March. We don’t generally see Qantas’s loadsheets on ACARS since they’re typically not transmitted to the aircraft via ACARS (at least not utilising methods that allow us to see them). However, they tend to be transmitted by ACARS when flights are departing from outstations or when there are late changes. Basically, we got lucky!

We picked it at the time and referenced to it in some exchanges on social media, but we thought that it deserved more detailed analysis. QF9 on 3 March was the last non-stop to London before the rerouting via Singapore and it shows us just how challenging things were.

The loadsheet indicated TOB of 172 meaning “total on board” of 172. As an aside, during the Bad Bunny charter shenanigans a few weeks back some people misinterpreted this number as passengers on board. This isn’t passengers on board, but total, thus including crew. The flight typically has 16 crew member including 4 flight deck and 12 cabin crew, meaning that there were 156 passengers on board. Provided this was the full load that they could’ve carried it means the rerouting could carry 80 more, not 60, but we’ll give them some latitude here.

But this is where it gets really interesting! From the loadsheet we can also see that the estimated take-off weight (TOW) was 247t, well short of the aircraft’s maximum take-off weight (MTOW) of 254t. So did they leave 7t of payload behind? Well, no.

The loadsheet also tells us that take-off fuel (TOF) was 100.3t. The Boeing ACAP manual tells us that the B787-9’s physical fuel capacity is 126,429 liters or 101.5t. But does that mean they could’ve taken 1.2t more fuel? Again, no.

Fuel density varies with temperature. As temperature increases, the same weight of fuel takes up more volume. Perth is pretty hot at this time of year, and even at 7pm, temperatures are still in the low 30s (celcius). At 15C, 126,429 liters weighs 101.6t, but at 30C, the same volume weighs 100.1t.

Safe to say that the tanks were full. We’re just noting this so that people don’t critique the next part arguing that they could’ve taken more fuel. They couldn’t take more fuel, not because they were limited by weight, but because they were limited by volume!

So they were full of fuel with only 156 passengers on board and 7t short of MTOW. So why didn’t they take more passengers? Couldn’t they have increased the passenger load to increase payload by 7t and achieve MTOW?

We said Perth is hot at that time of the year, but even at 30C in still air, the B787-9 should lift nearly 250t, very close to its MTOW, and with just a small headwind it would lift MTOW. So it wasn’t take-off performance limits either.

The limits of absolute range

A few weeks back when we were analysing United’s new low density B787-9 configuration we received some criticism that our analysis didn’t take into account the impact of the B787-9’s forthcoming MTOW increase on its range.

We countered that the MTOW increase doesn’t increase absolute range because it doesn’t coincide with any increase in fuel capacity. While the MTOW increase is very useful for many missions it doesn’t change anything for missions that are already requiring the maximum fuel volume of the aircraft.

The increase in MTOW will increase the range at maximum payload, but this is already at a point where fuel has been traded for payload. The nuance here seems abstract, but its important. And this is where the rubber hits the road:

Fuel burn is a function of the weight of the aircraft. All else being held constant, a heavier B787-9 will burn more fuel than a lighter B787-9. Thus, had QF9 on 3 March carried more passengers it would’ve been heavier, burning more fuel. As we have already noted, it can’t carry more fuel, not due to weight limits, but the volumetric limit. Essentially, adding the extra flight time pushed the aircraft to its absolute range.

And that’s the real issue for QF9. It’s already at or so close to its absolute range. And further endurance needed, for example by taking a longer northerly routing can’t be made-up but trading payload to carry more fuel, rather it needs to reduce payload to reduce fuel burn. In some respects, it’s so close to the edge of its absolute range that its far more sensitive to the effect of a longer routing.

Some implications

Adding a fuel stop creates logistical challenges, but also may adds significant flight time, increasing the block time between Perth and London from from 17.5 hours to more than 20 hours. If sustained this may reduce the popularity of the flight with passengers, although it appears moot as long as significant capacity constraints exist at a market level with continued Middle East disruptions.

The positive externality is that it generates a significantly larger net gain in capacity. On the presumption that it can now carry a full passenger load it adds as much as 80 seats compared to the constrained longer non-stop routing. Comparatively, QF9 on 3 March lost between 50 and 63 seats compared to February and March averages. This is where Qantas is probably getting its 60 passenger number from, but as we can see, the number might be a little higher.

Another consideration is whether the Singapore stop would need to remain year round. As noted earlier, payload restrictions are less significant in the Australian autumn and winter. By August, near full passenger loads can even be carried on the typical non-stop routings. However, as we also noted earlier, this isn’t the first time Qantas have rerouted QF9, and one previous rerouting was implemented 8-22 August 2024, suggesting that Qantas will maintain the rerouting year round if the situation were to persist.

We hope this has been instructive, highlighting just how significant the payload restrictions become when adding an extra 30 to 45 minutes flying time to QF9, and why the Singapore stop is both necessary and useful at the current time given the significant supply constraint in the market.

Also, it goes a long way to show that the forthcoming increase in the B787-9’s MTOW just isn’t going to be much use for ULH flights since this isn’t the binding constraint on range.

It’s disproportionally impacted Australia given the importance of these airlines to international capacity. In the last year, they carried 4.6 million passengers to/from Australia, accounting for 10% of all passengers (12 months to September 2025).

The effects are particularly felt traveling between Australia and Europe, given the relative importance of their connecting capacity. Data presented by Virgin and Qatar during their ACCC JV application showed that they held substantial market shares between Australia and Europe. In the year ended May 2024, the ME3 accounted for 44% of the Australia-UK market, and 64% of the market between Australia and the rest of Europe.

The loss of this capacity is near catastrophic. Now into its third day, it’s affecting about 13,000 passengers a day just to/from Australia. The fleet is grounded, with many aircraft and crew “stranded” at outstations. Just in Australia there are 30 widebody aircraft on ground, with 9 at Melbourne and 8 at Sydney alone!

We’ve been getting lots of questions asking why don’t they just fly these aircraft direct to Europe, bypassing their hubs in the Middle East, utilising regional hubs in Southeast Asia instead? For example, people have proposed flying Sydney-Singapore-London, arguing that a large proportion of passengers on ME3 flights stuck in Sydney are headed to London.

While they don’t have the appropriate traffic rights under existing bilateral air service agreements, force majeure makes a case to allow such flights, even if just as ad hoc flight to allow stranded travellers to return home. While it would require some bureaucratic gymnastics to make it happen, it’s difficult to see governments preventing this. However, none of the airlines have indicated any interest or willingness to do this.

While it would be logistically difficult and very costly, it doesn’t really solve the problem. The strength of global connecting hubs is the fragmentation of traffic and diversity of destinations they serve, but it’s now their weakness. While a large proportion of those Sydney passengers might be headed to or from London, not all are, and those that aren’t are fragmented all over their networks, not just Europe. While it might get many passengers home, it won’t get anywhere close to all.

It would provide some relief for some passengers and send a signal of their willingness to mitigate the challenges that many are facing. However, the reason that they’re not doing it is more strategic and possibly for the greater good. It’s because this is their mitigation plan! This sounds ludicrous, right? Okay, but hear us out …

They’ve had months of warning and plenty time to plan it out. They’ve no doubt learned from previous airspace shutdowns over the last few years. Surely they could have come up with a plan to mitigate? Yes, and this is the plan!

Whether it’s the right contingency plan or it’s being well implemented, the plan is to keep the operation primed for a rapid restart. This is their focus, but to have a rapid restart they need aircraft and crew ready and waiting in the right places. And that’s exactly what they’ve done!

We can see this in action from the start. When UAE and Qatari airspace closed on Saturday the plan kicked into gear. There were a few key elementsn:

1. Flights departing from Abu Dhabi, Doha and Dubai: those that had departed

   would continue to their final destination, while flights that were awaiting departure from would be cancelled.

2. Flights returning to Abu Dhabi, Doha and Dubai from outstations: aircraft that had already departed from outstations to Abu Dhabi, Doha and Dubai would initiate diversions back to their point of origin.

3. Also flights returning to Abu Dhabi, Doha and Dubai from outstations: Aircraft yet to depart would not depart and remain on ground.

This strategy meant that very few aircraft and crew ended up stranded in the wrong places. Instead of having aircraft continue towards Abu Dhabi, Doha and Dubai in the hope that the airspace reopened by the time they got there, and ending up scattered all over the region, they now have all the aircraft and crews waiting at their point of origin, ready for a rapid restart ops at very short notice.

The success of this strategy is predicated on restarting operations in a matter of days. They can’t drag this out for weeks and months, and in some respects it’s a gamble. This explains why they haven’t implemented another plan, including a complex attempt to reroute flights bypassing their hubs since that’ll just end up with aircraft and crew scattered, slowing down or even breaking any quick restart.

It’s also why we’re not seeing forward looking cancellations. It’s noticeable that at no point have either of Emirates, Etihad or Qatar cancelled flights for an extended period, rather cancelling on a day-by-day basis.

For example, on Monday 2 March (at around 10am UAE time, 5pm AEDT), Emirates announced they were cancelling all flights to/from Dubai up until 3pm UAE time on Tuesday 3 March. This followed a similar announcement on Sunday 1 March, indicating that they were cancelling all flights to/from Dubai up until 3pm UAE time on Monday 2 March. Etihad and Qatar followed the same pattern.

Keeping it day-by-day allows them to restart at a day’s notice, hoping the situation improves sufficiently to allow a restart of flights. Keeping the aircraft and crew at outstations means they’re able to restart at short notice, while starting a bypass operation scatters crews and aircraft, and even if brilliantly planned and executed will end up with crew duty limits potentially impeding a restart.

But this strategy can’t go on indefinitely. You can’t go day-by-day for weeks or months. How long can it go on for? We simply don’t know!

Longer term trends are even more impressive. Over the last decade, travel between Australia and India has increased 81%, and has increased in relative importance having grown from 3.2% of all travel to/from Australia a decade ago to 4.9% in 2025.

The market is also relatively balanced with the Australian point-of-sale accounting for 57% of the market. Furthermore, the Australian point-of-sale has grown more rapidly in recent years, increasing 9% over the last year and 41% since 2019.

We’ve previously analysed the reasons for this growth, ascribing it to growing migration, cultural and economic links between the countries, spurred on by India’s strong economic growth.

The growth has contributed to a large build-up in direct flights. In 2019, Air India were the only airline providing direct flights, operating 3x/week Delhi-Melbourne and 5x/week Delhi-Sydney flights (both B787-8). Since then, both routes have increased to daily, while Air India also introduced 3x/week Mumbai-Melbourne (since suspended due to aircraft availability challenges). From July 2026, Air India will upgrade Delhi-Melbourne to the B777-300ER, resulting in a significant increase in capacity.

In 2021, Qantas reentered the Indian market after nearly a decade long absence with seasonal Melbourne-Delhi (3x/week) and year-round Sydney-Bengaluru currently operating up to 6x/week.

Despite the large and growing market, passengers on direct flights make up a small proportion of the market. In 2024, BITRE indicates 301,934 arrivals on direct flights from India, while ABS indicates 992,730 total arrivals from India, meaning that net transit traffic accounts for 70% of total travel between the two countries (BITRE data is not yet available for 2025).

We’ve previously argued that this is due to the fragmentation of the market, particularly on the Indian side, as well as the seasonality of the market. But what does this mean? We’ve come across some detailed data on O&D city pairs between Australia and India that helps us explore this in more detail …

Read more

Melbourne-Sydney alone accounted for 15.0% and by any metric is one of the busiest and most lucrative routes in the world. While substantially smaller, Brisbane-Sydney and Brisbane-Melbourne are still the 2nd and 3rd largest routes in the country, accounting for 7.9% and 5.9%, respectively.

RPT refers to scheduled airline services in Australia that are available to the public for purchase. This excludes charter flights, including FIFO mining charters that are a significant portion of air travel in Australia. FIFO flights are not available for sale to the public and rarely serve major routes, rather serving remote mine sites.

The dominance of triangle isn’t surprising given the concentration of population around the physical triangle forms by the three cities. The broader metropolitan areas of these cities accounted for 51% of Australia’s population. In fact, their dominance in Australia’s population results in the “center of population” lying just to the west of the “triangle” near the town of Ivanhoe, NSW.

What is surprising though is how the dominance of the triangle has waned in the aftermath of the COVID-19 pandemic. This wasn’t a slow or consistent decline, but what appears to be a structural downward shift.

In the 12 months to October 2025, the triangle represented 26.7% of domestic passengers, with a relative peak of 26.9% in April and May of 2025. This is significantly lower than the the 28.7% in 2019, and the relatively peak of 29.0% observed for several months in late 2017 and early 2018. Not only is the current proportion lower than the pre-pandemic period, it’s the lowest recorded since the late 1980s, before the deregulation of the Australian domestic airline market.

The data shows a clear structural break which likely has significant implications, yet we’ve heard very little in the public and policy discourse. While the trends have been noted by the ACCC’s monthly reporting on domestic airline competition (for example, see February 2025), there’s been no substantive analysis or discussion of it. This is surprising (and concerning) given the acute attention on competition policy and market regulation in the domestic aviation market in recent years.

It suggests that policy makers are flying blind. This isn’t a critique of the ACCC’s work, but rather of the broader policy ecosystem including Parliament and multiple government departments and agencies that don’t conduct regular and ongoing market analysis. Simply put, most analysis conducted in the public sector has been superficial.

Unusually, our analysis didn’t open with a question that we were looking to answer, or hypothesis that we were looking to test. Instead, this analysis is descriptive, highlighting a surprising and unexplained observation. It raises the obvious questions: why has this occurred and what’s driving the change? In our analysis we propose some potential drivers, however no single cause appears to explain the change.

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It’s somewhat unusual for a European network carrier not to develop their primary hub in their largest O&D market, like British Airways at London Heathrow, Air France at Paris CDG or Iberia at Madrid. One of the primary reasons that Lufthansa’s didn’t develop Berlin as their primary hub in the post-WWII era was its dislocation from the rest of West Germany, and Berlin’s split into West and East Berlin.

Geopolitics isn’t the only reason, and there’s a strong argument that even in a unified post-WWII Germany that Frankfurt would’ve served as Lufthansa’s primary hub anyway. Frankfurt served as a major logistics hub prior to WWII and the fragmentation of Germany’s population across a larger geographic area means locating logistics hubs closer to the geographic centre of the country made more sense. To put this in perspective, London accounts for 13% of the UK population, while Berlin only accounts for 5% of the German population.

Yet, Frankfurt was the 22nd busiest airport in the world, and the 5th busiest in western Europe, handling 59.3 million passengers in 2024. Given that it’s only Germany’s 5th city, who the hell is actually flying there? Well, the answer is quite simple, most of those 59.3 million passengers are actually just connecting through Frankfurt.

Analysing connecting hubs is really difficult since few airlines share sufficient similarities in strategies and economic models to make a like-for-like comparison. Lufthansa gives us a unique opportunity due to their split hub model. While Munich is a much smaller hub, it’s still substantial, handling 31.6 million passengers in 2024 and making it western Europe’s 8th busiest airport.

This allows us to make a like-for-like comparison between Lufthansa’s operations at Frankfurt and Munich. One interesting point of comparison is the proportion of O&D versus connecting traffic they’re carrying on overlapping routes (i.e. routes which are operated from both Frankfurt and Munich, e.g. Frankfurt-London and Munich-London).

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The B787-9 is already a major part of United’s widebody fleet with 48 of the type, accounting for 20% of their widebody fleet. In the coming years it’ll become the mainstay of their fleet with at least 141 more on order, slated to replace all of United’s B767, a large chunk of the B777s and providing the opportunity for significant incremental growth.

United’s contemporary B787-9 configuration is already relatively premium heavy, seating 257 passengers in a 3-class layout with 48 business, 21 premium economy and 188 economy class seats. United further segment economy class into economy plus and economy, however this is a branding exercise for seats with extra legroom - there’s no need to consider it as a seperate cabin.

Meanwhile, the new configuration is even more premium heavy, seating 222 passengers in a 3-class layout with 64 business, 35 premium economy and 123 economy class seats. The configuration trades 65 economy class seats for 16 more business class and 14 more premium economy seats. Not all B797-9s will be configured in this very low density version, with United committing to at least 30 aircraft by 2027, likely from new orders rather than reconfiguring existing aircraft.

The commentary on social media is reacting as if this is extraordinary or unusual. While the new configuration does represent a significant reduction in cabin density compared to their contemporary configuration, it’s not extraordinary. In fact, several airlines equip their B787-9s with similar, and sometimes even lower density cabins. For example, Japan Airlines and ANA both have configurations with fewer seats, while Air New Zealand’s forthcoming low density configuration is relatively similar.

But this is somewhat besides the point, as the commentary has missed why United are implementing this new configuration. For example, Kyle Potter from Thrifty Traveler questioned whether it’s an overcorrections to the boom in premium travel, while Zach Griff argued that “United is betting big on premium demand sticking around”. We don’t think it’s an overcorrection or a big bet. Instead, we think it’s about payloads, payload restrictions and United optimising their cabins for their now large ultra long haul (ULH) network, something they hadn’t necessarily contemplated when their inducted the B787-9 in 2014.

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Many observers initially labeled Project Sunrise a publicity stunt. Even Cam Wallace, currently the CEO of Qantas International but then an executive at Air New Zealand, initially wrote it off as one. Qantas are very, very good at PR, so it’s easy to be cynical about it. However, recent history has shown Qantas’s ambitions to push the envelope on ultra long haul (ULH) flying. In the last decade, Qantas have launched several new ULH routes, each significantly longer than their previously longest flight from Los Angeles to Melbourne. Qantas’s push into ULH flying was enabled by their acquisition of the B787-9 that allowed them to extend flight times by nearly two hours.

Route     Distance Block*  Start
PER-LHR   7829nm   17:50   2018
DFW-MEL   7814nm   17:40   2022
PER-CDG   7702nm   17:30   2024
JFK-AKL   7671nm   17:40   2023
DFW-SYD   7454nm   17:25   2014**
PER-FCO   7211nm   16:25   2022
LAX-MEL   6883nm   15:55

* Block time of longest/westbound leg.
** Prior to 2014, westbound leg was operated via BNE.

In some respects, it’s not surprising to see Qantas pushing the envelop once again. We wanted to understand why they’re doing this? What’s motivating them in pushing block times to 21 or 22 hours that’ll be required for the westbound Sydney-London sector?

We’re not interested in how people feel about it, rather we’re interested in cutting through the nostalgia, resistance to change and spin, to understand the strategy and economics behind it. There’s a lot more nuance than meets the eye, so we wanted to challenge some of the simplistic narratives and understand the costs and risks involved, and the prize.

This analysis is very long, so apologies in advance, but there are a range of factors, and a whole lot of history that needs to be understood to help us reach an incredibly provocative conclusion: the tyranny of distance and the inability to compete on cost with one-stop carriers means they don’t have much of a choice other than a “deal with the devil”!

How people feel about it

Didn’t we just say we’re not interested in how people feel about it? We did, but let’s allow ourselves a short digression to reinforce why “how people feel” about it isn’t interesting or important. We know this sounds condescending, but bear with us.

Social media is a cesspool of engagement farming these days and Project Sunrise has been perfect fodder for asking people how they feel about 22 hour non-stop. The replies are just what you’d expect, with a lot of strong feelings about not wanting to do it. The algorithm will boost negativity and have us believe that the overwhelming opinion is that people hate the idea.

We’ve seen this before though. For those of us old enough to remember, there was a time when most long haul flights required several fuel stops. These have declined over time as aircraft technology improved. Old hands remind us how people bemoaned when flights like Melbourne-Los Angeles or Sydney-Johannesburg went non-stop following the introduction of the B747-400. Or how the 2nd stop was dropped from Sydney-London (and presumably the 3rd, 4th and 5th stops before that). These are now a distant memory, and most contemporary passengers would cry foul if any airline suddenly reintroduced a fuel stop in Fiji or Mauritius!

Los Angeles is no longer the frontier either, with non-stop flights to the United States now targeting more efficient connection hubs further afield (e.g. Dallas and Houston), providing passengers with more efficient connections to a wider range of destinations in the US. Really, who the hell wants to transit at LAX if you can avoid it?!?!

Nostalgia is powerful aphrodisiac and it’s hard to change the mind of someone who “feels” strongly about it. Qantas continue to shift capacity from Los Angeles and San Fransisco to Dallas, while American (Dallas) and United (Houston) have followed suit. We can only suppose they’re doing this because they’re following what customers want rather than strong feelings on social media.

As an aside, have a look at a short “chart of the week” we published earlier this year showing how patterns between Australia and the US have evolved over time.

More importantly, we’ve also seen a comparable evolution of flights between Australia and Europe, beginning with Qantas shifting the stopover point on their Melbourne-London flight from Singapore to Perth in 2018. Technology played a big role in this with the introduction of the B787-9 allowing Perth-London to be flown non-stop. The Perth-London sector has been so successful that Qantas dropped the Melbourne leg in 2024.

Our analysis at the time showed that the share of Melbourne passengers declined consistently as the non-stop Perth-London leg became more popular over time. By 2024, Melbourne O&D passengers accounting for one-fifth of the total passengers while the flight boasted load factors of well above 90%. Quite frankly, nobody predicted this was an outcome in 2018.

Qantas have since introduced other non-stop flights from Perth to Europe: a seasonal 3x/week Rome flight and more recently 3x/week to Paris. The success of Rome has led Qantas to announce a 4th weekly frequency and a longer operational season in 2026.

Feelings and nostalgia aside, it seems the median Qantas passenger either prefers these non-stop flights or at the very least is ambivalent about it given the plethora of alternate options, whether that be one-stop flights to Europe or connecting through Los Angeles or San Francisco.

Putting feelings aside, what is Qantas’s strategy?

Some question whether or not Project Sunrise is a huge risk for Qantas. They’re spending a lot of money on at least 12 purpose built and highly customised aircraft. The more customised an aircraft, the greater their residual risk (i.e. risk that the resale value of the aircraft declines very quickly).

Conceptually, the more customised an aircraft is the more likely it is that residual values are likely to be lower as there will be fewer buyers for them on the secondhand market. Furthermore, previous attempts to stretch the range of aircraft have rendered them significantly less efficient and less suited to deployment elsewhere in the airline’s network.

And finally, the high cost of operating ULH flights requires much higher yields and unit revenues, not just to compensate for the higher costs, but to increase margins. It’s a point of nuance, but Project Sunrise needs to outperform incumbent routes to justify the risk. Simply matching the performance of incumbent routes doesn’t justify the capital expenditure and risk!

Let’s consider these two constraints in more detail. We’ll deal with the fleet question first, and come back to yield, revenue and cost after.

Fleet: the A340-500

We need to take a step back into history and revisit the A340-500. The A340-500 was a progenitor of the current generation of ULH aircraft and its failure has important lessons for contemporary ULH strategies.

It was first introduced in 2002 and is a “shrink” of the A340-600, made shorter by removing several frames from the fuselage, but kept the rest of the structure and wings, and a very similar engine. The resulting aircraft was significantly smaller than the A340-600, making it a similar size to the A340-300, but because it shared the A340-600’s bigger wings, engines and fuel capacity, it lifted a much larger fuel load and carried it over an incredible distance. But there was a catch: while the burned fuel like the A340-600, it carried a similar payload to the A340-300!

It was a niche aircraft and only a handful of carriers ordered it, most notably Thai Airways and Singapore Airlines who were the only carriers operating them on ULH routes. Emirates and Etihad also ordered them, albeit not operating them on ULH routes, instead utilising its lifting power.

In order to operate it on ULH routes, Thai and Singapore both required very low density configurations. Thai introduced it with 215 seat configuration with only 53% of the seats in economy class (C60 W42 Y113). Comparatively, their B747-400s had a 84% economy class density. Singapore went with a straight 100 seat business class configuration.

Thai and Singapore’s low density cabin was not a choice, rather forced on them by payload restrictions required to enable non-stop flights from Bangkok and Singapore to New York. Just shrinking the A340-600 wasn’t enough to enable the non-stop flights and both airlines required a limited payload to make the trip. A secondary consideration was that the premium heavy cabins enabled higher yields and unit revenues to overcome the higher costs (more about that later).

Reinforcing our initial framing, this meant the A340-500 was a niche aircraft. The low density configuration made it difficult to utilise elsewhere in the network, effectively making them orphan fleets. But it wasn’t just the the configuration but also the higher fuel burn on comparative sectors. Let’s put this in perspective:

• We previously noted that the A340-500 was a shrink of the A340-600, giving it a similar size to the A340-300, but with the fuel capacity and lifting power similar to the A340-600. See the scaled image below showing the lengths of the three aircraft remembering that they had the same cross section.

• The implications are profound: while the A340-500 has a similar maximum payload to the A340-300 (54t versus 52t), it has a much higher structural weight with an indicative OEW (operating empty weight) of 168t, 37t higher than the A340-300 (131t). The heavier structure was required to carry the larger fuel load required for ULH flights. For comparison, its maximum fuel capacity is 175t, compared to just 110t on the A340-300.

• This means that the A340-500 is carrying an extra 37t of structure for just 2t more potential payload. Unless you need that extra structure to carry fuel for an ULH flight, you’re carrying 37t of deadweight around your neck!

• Meanwhile, when carrying the extra structural weight on the A340-600 (OEW 174t), you’re also able to carry a much larger potential payload (66t). The extra 12t or 14t of payload makes it more worthwhile as you can generate more revenue to overcome the higher costs! The net result is that the A340-500 is a gas guzzler, and unlike the A340-600 it’s not guzzling the fuel to carry more payload, but simply to fly further.

• Rough estimates put the A340-500 and A340-300’s fuel burn at about 8.0t and 6.5t per hour in cruise, meaning the A340-500 burns 23% more fuel than the A340-300 on a comparable mission. But as we’ve just observed, it doesn’t carrying 23% more potential payload. It burns 23% more fuel to carry just 4% more payload and highlights why it made it cost prohibitive to operate the A340-500 on anything other than ULH sectors.

A few years down the line, Thai (2012) and Singapore (2013) ended their ULH flights and withdrew the A340-500s from service. They were unable to generate the necessary yield and unit revenue premium to make these flights viable. The aircraft were too expensive to utilise elsewhere in their network and, absurdly, it was cheaper to park relatively young aircraft than fly them elsewhere. They were less than 10 year old at the time!

Fleet: enter the A350-900ULR

After a 5 year hiatus, Singapore returned to ULH flights in 2018. It’s doubtful that the market changed that much of the 5 years, i.e. beyond cyclical variations in demand, it’s doubtful that customers were willing or able to pay significantly more for it in 2018 than 2013. Instead, the change has been on the cost side, with the significant improvements that the A350-900ULR offered. Let’s consider the aircraft in more detail.

The A350-900ULR’s long range capability isn’t generated by shrinking the aircraft like the A340-500. Rather, it took the A350-900 and significantly increased its fuel capacity while making a more typical trade of payload for range. This was achieved without larger fuel tanks, but modifications to the aircraft’s fuel system, including structural and software modifications allowing greater utilisation of its existing fuel capacity.

This means that the A350-900ULR doesn’t have the exaggerated fuel burn of the A340-500. In fact its fuel burn is similar to the baseline A350-900. Two A350-900s (one baseline and one ULR) with the same payload and fuel load will burn a nearly identical amount of fuel on the same route.

Let’s look in more detail:

• Singapore’s A350-900ULRs have a MTOW of 280t. If it carries it’s maximum fuel load of 129t its usable payload is just 16t (using an indicative OEW of 135t).

• While the baseline A350-900 has several MTOW options, let’s use the same 280t MTOW version to allow a like-for-like comparison. Its maximum fuel load is just 108t and assuming the same OEW of 135t, its usable payload would be 37t.

• Note, the A350-900 is now available with a higher 283.9t MTOW, however 280t was the highest option when Singapore’s ULRs were manufactured. Presumably, they’d take the higher version now if they were ordering the ULR now. For the sake of the comparison we’ll stick with 280t.

• So the A350-900ULR can carry 21t more fuel, but that costs 21t of payload. It’s a sizeable tradeoff since every 1t of extra fuel the ULR carries compared to the baseline A350-900, 1t of payload is given up. This clearly shows how the A350-900ULR is trading pure payload to carry the fuel, but they’re doing this without compromising fuel burn.

• You may have noticed that there’s an externality to this. In trading off payload to carry the fuel, it’ll significantly limit the number of passengers that the aircraft can carry on ULH missions, far more significantly than the A340-500, but it’ll be a whole lot cheaper and less risky to do it!

The trade-off means that the A350-900ULR will still have to utilise a premium heavy, low density configuration. Singapore’s A350-900ULRs carry just 161 passengers (C67 W94). For comparison, Singapore also operates baseline A350-900s in medium and long haul configurations, carrying 303 (C40 Y263) and 253 (C42 W24 Y187) passengers, respectively.

While the operational and trip costs of the A350-900ULR will be comparable to the baseline A350-900s, they will be constrained by the configuration. This would still limited its ability to be deployed elsewhere across the network, however doing do would only be limited by cabin configuration, and not fuel burn like the A340-500.

Importantly, it has relatively lower residual risk. If the ULH routes fail, the A350-900ULR could be converted into a baseline A350-900 following a cabin reconfiguration and some software update, both things that an airline would do several times during the course of its normal working life. So if there’s a dramatic market shift or the project just doesn’t work, they’re not left with an expensive aircraft corroding away in the desert.

It would be remiss of us not to note the A350-900ULR’s limitations. Even with its much larger usable fuel load, Singapore’s configuration isn’t just a function of their desire to generate higher yields and unit revenues, but also its operational limitations. Its fuel capacity isn’t infinite and 161 passenger configuration is limited by the payload restrictions required to carry the larger fuel load. Simply put, it’s not making the non-stop trip with 200 or more passengers, so reducing density is a necessity, thereby generating a range of externalities including Singapore’s limited ability to generate higher utilisation by rotating aircraft through the network. So you don’t see Singapore sending the A350-900ULR on shorter runs to Bangkok or Jakarta during the day other than IROPS or AOG scenarios.

Fleet: enter the A350-1000ULR?

So if the A350-900 worked for Singapore, then why didn’t Qantas just copy them? Quite simply, it doesn’t carry enough fuel. Sydney-London is 900nm further than Singapore-New York, and additional payload restrictions would’ve been catastrophic! And even if it carried more fuel, what would the remaining payload be? Rough guess is that it would’ve been close to zero!

Qantas needed a new aircraft. While they considered various options from Airbus and Boeing, they chose the A350-1000ULR. We’re not going to analyse the choice of the A350-1000ULR against its competitors. It’s a sunk cost, so there’s limited value from considering the advantages or disadvantage of one or the other.

The A350-1000ULR bears similarities to the A350-900ULR. Airbus have used the same playbook to increase the aircraft’s fuel capacity. Initially it was thought that the increase in usable fuel would be achieved using the same fuel system modifications, however it’s now confirmed that the A350-1000ULR will also sport an additional fuel tank. The RCT (Rear Centre Tank) is a permanent fixture and similar in design to the RCT used on the A321XLR, albeit a lot bigger, carrying an additional 16t of fuel.

When combined with a boost in the MTOW to 322t, the A350-1000ULR’s range will be extended sufficiently without requiring the extremely low density cabin that Singapore requires on their A350-900ULRs. This doesn’t mean Qantas can deploy a similar cabin density to their other long haul aircraft like the A380 and B787-9, rather that it has somewhat more flexibility than Singapore.

Qantas will deploy the A350-1000ULR with a 238 seat configuration with 59% economy class configuration (F6 J52 W40 Y140). This compares to 70% economy class configuration on their A380s and B787-9s (notably, airlines tend to maintain a similar premium mix across their long haul fleets). Comparatively, Singapore’s economy class configuration varies between 70% and 74% on their A380s, B777s and long haul A350s, yet they have no economy class on their A350-900ULR due to operational necessities.

This gives Qantas a more versatile aircraft, while also reducing operational risk and increasing flexibility compared to Singapore as it’ll be easier to deploy it elsewhere across the network . Similar to Singapore, residual risk is reduced as the aircraft can be reconfigured and integrated into the regular fleet if needed. Just a reminder, Qantas have an additional 12 non-ULR A350-1000s on order with additional options to replace the A380s in the next decade. This highlights and reinforces the existing economies of scale and reduced residual risk.

In the same way that we considered the externalities of Singapore’s ULRs, we should consider the same for Qantas’s ULRs. The most significant externality isn’t the cabin density. In fact we’d consider that an advantage compared to Singapore’s strategy. The externality is the higher structural weight of the A350-1000ULR due to the RCT. While it’s not in the same realm as the A340-500, it can’t be ignored. Unfortunately, the specific weight of the RCT hasn’t been published by Airbus yet, limiting our analysis in this regard.

Prices, yields and unit revenue

Is Project Sunrise a bet on whether or not people will pay higher prices for a non-stop flight? It’s a popular narrative, but somewhat of an oversimplification.

Qantas have been open about how they expect to generate a 20 to 30% revenue premium, but this has been misinterpreted as 20 to 30% higher prices. They’re not the same thing! So how do they generate a 20 to 30% revenue premium without increasing prices by 20 to 30%? Higher yields, right?

“Yield” is one of the most misused term amongst avgeeks, mostly because it’s often confused with “unit revenues”. A typical example is when our dear friend Caleb says Airline X should fly so-and-so route because it’s “high yielding” and, as all avgeeks know, high yielding means it’s a sure thing, right? The only more egregious use of terminology is when passenger load factors as used as evidence of a route being successful.

By themselves, yield and load factor are meaningless! You can fill any route, generating a 100% load factor if you sell tickets cheaply enough. Alternatively, you can generate stellar yields with just one passenger. Both routes will fail miserably, so Caleb’s strategy of just flying high yielding routes isn’t going to work, nor will the alternative of maximising load factor. However, a route with high yields and a high load factor will be very successful, because high yields combined with high load factors generates high unit revenues! But what do these terms even mean?

Yield is the revenue earned per passenger, often weighted by distance to allow comparison across routes (i.e. revenue per revenue passenger kilometer). It should now be obvious that yield by itself is problematic, since if you only sell one ticket on the flight but sell it for an incredibly high price, you’ll have a very high yield. And that’s where unit revenue comes in, instead of dividing revenue by passengers, it divides revenue by the available seats on the aircraft (i.e. revenue per available seat kilometer).

Meanwhile, the load factor is simply the number of passengers divided by the number of seats available. A keen mathematical eye (read: high school maths) would notice that unit revenue is the product of the yield and the load factor. All else held constant, maximising unit revenue is what maximises the airline’s revenue on a flight, not yield or load factor by themselves.

When trying to maximise unit revenue, or at least increase it, the airline needs to either increase the yield or the load factor. In the real world, yield and load factor are not independent of each other. Increasing the load factor often involves a trade-off with yield as you will likely have to sell more cheap tickets to increase the load factor, thereby reducing the yield.

But we digress, back to the point at hand. Let’s consider a practical example of how Qantas prices non-stop and one-stop flights using the existing Perth-London flights, and how it is aims to increase unit revenues, not just yields, on Project Sunrise. Perth-London passengers have two options:

1. Taking the non-stop Perth-London flights (QF9/10), or

2. Connecting through Singapore, taking QF71 from Perth to Singapore and then connecting onto QF1 (originating in Sydney); taking QF2 to Singapore and connecting onto QF72 on the return.

Qantas don’t necessarily price tickets higher on the non-stop flight, at least not in economy class. For example, picking a random date in the future we see the non-stop is actually priced slightly cheaper than the one-stop via Singapore. The variance is isn’t due a difference in base fares, but rather the additional airport charges and government taxes for the stop in Singapore. The base fare, i.e. what Qantas is charging, is the same for both the non-stop and one-stop flights.

If you bring the date closer, you start to see a variance between the flights with the non-stop flight now more expensive than the one-stop option. Critics might push back at this point, see it’s more expensive! Not so fast!

The fare on the one-stop option is in a cheaper fare class (i.e. saver fare), while the non-stop is a more expensive fare class (i.e. flex fare). There’s a crucial nuance here: the base fares in each fare class is the same. So the prices are the same, but one or both of the following are happening:

1. The cheaper fares are getting sold more quickly on the non-stop flight, and/or

2. There are fewer cheaper fares available.

The irony of the 1st point isn’t lost on us. How could that be with everyone on social media telling us they don’t want non-stop flights? Well, it’s always the dissenting voices that are the loudest!

The 2nd point should be obvious since there are simply fewer economy class seats available! Let’s consider this with a conceptual example of a very simplified market and assume Qantas offer three economy class fares of $1200, $900 and $500. These are made-up bullshit numbers, but bare with us:

• On the one-stop flight via Singapore, capacity is limited by the smaller A330-200 that flies the Perth-Singapore leg (rather than the A380 that flies the Singapore-London leg). Qantas’s A330-200 has 243 economy class seats. Simplistically, if we assume they sell one-third of the seats at each price point (i.e. 81 seats at each price point), this would generate total revenue of $210,600 and unit revenue of $867 per seat.

• On the non-stop flight, they fly the B787-9 that only has 166 economy class seats. If they followed the same strategy of selling one-third of the seats at each price point (i.e. 55.3 seats at each price point), they would generate a lower total revenue of $143,780, but the same unit revenue of $867 per seat.

• But why would they do that? If they were able to sell 81 seats at $1200 and 81 seats at $900 each on the A330, then why wouldn’t they just sell 81 seats on the B787-9 at $1200, and 81 at $900, and only the remaining 5 seats at $500.

• This is exactly what they would do, and this generates total revenue of $172,600, resulting in unit revenue of $1037 per seat, 20% higher than the A330, and this is the 20% revenue premium!

The smaller economy class cabin means there are simply fewer seats to fill and by filling them from the front they generate a unit revenue! It’s a gross over simplification, but highlights how lower density configurations can generate revenue premiums - in the same cabin - without having to increase ticket prices. As a reminder, Qantas’s A350-1000ULR will only have 140 economy class seats, even fewer than the B787-9, despite it being a larger aircraft!

Premium cabins are different though and we would expect to see higher prices for the non-stop flights. For example, looking at the same dates as the previous example, we observe a higher base fares in business class for the non-stop compared to the one-stop flight for the same fare classes. However, these premiums are nowhere near the 20 to 30% quoted earlier, rather about 7% and 9% for business saver and flex, respectively. Premium economy is unavailable on the A330, so there is no point of comparison, while first class isn’t available on either aircraft.

Even in the premium cabins, the revenue premium isn’t generated by higher prices alone, but by smaller cabins. Comparatively, the A350-1000ULR will have 6 first class seats compared to 14 on the A380 that currently flights Sydney-London, 52 business class compared to 80 on the A380, and 40 premium economy compared to 60 on the A380, and 140 economy class compared to 341 on the A380. There’s a lot of scope to increase unit revenue by filling from the front!

Higher unit revenues, but won’t costs also be higher?

In our analysis of the A350-900 and A350-900ULR we noted that the cost of operating them on the same (shorter) route would be similar. Specifically, we highlighted how carrying the same payload over the same distance would burn a similar amount of fuel. We can extend this to the A350-1000 and A350-1000ULR, albeit the ULR will be slightly more costly since it’ll be carrying the additional structural weight of the RCT fuel tank, however we don’t expect this to be very large.

This is a distortion view of the cost dynamics since it only considers "trip cost”. While the trip cost will be similar, the unit cost or average cost per available seat kilometer will be different. Since the A350-1000ULR will seat fewer passengers than the A350-1000, it’ll have a higher than the A350-1000, with the specific magnitude dependent on the configurations of the aircraft.

We don’t know the configuration of Qantas’s non-ULR A350-1000s yet, but it’ll certainly be less dense and have more seats than the 238 seat ULRs. For comparison, British Airways, Cathay Pacific and Qatar Airways seat 331, 334, and 327 on their A350-1000s, respectively. If Qantas follow suit, this would mean that their fuel unit cost of the ULR would be approximately 39% higher than the baseline A350-1000, at least on the same route.

But fuel isn’t the only cost meaning that this cost premium isn’t directly comparable to the revenue premium. In FY25, fuel accounted for 24% of Qantas’s expenditure. If we simply scale this it’ll translate into a 9% unit cost premium, still well below the revenue premium of 20% to 30% that they are targeting, generating a significant boost in margins.

Even then, a 9% higher unit cost might be an overestimate as non-stop flights will generate other cost savings, particularly lower crew costs (single crew working a longer flight is cheaper than two crews working two shorter flights, especially when taking into account the extra stopover), lower airport costs (see the example of the Perth-London non-stop), IROPS costs from additional connection, etc.

While we don’t have a lot of hard evidence to go on here, we can’t simply isolate the cost impact to reduced cabin density. But even if we did, we must consider that Qantas haven’t had to compromise cabin density to the same extent that Singapore have, reinforcing our earlier discussion.

Yet, we’ve also seen Qantas show a willingness to compromise unit costs by employing payload restrictions to enable some of its current ULH routes. Dallas-Melbourne is a good example of this: Qantas operate 4x/week flights, increasing to daily during peak season, operated by the B787-9. This is Qantas’s 2nd longest non-stop flight, however the westbound leg encounters significant payload restrictions due to en route weather. We’re able to investigate this more utilising USDOT data.

Over the last 12 months, Qantas’s declared capacity on the eastbound leg averaged 235 seats, compared to just 225 on the westbound leg (the B787-9 seats 236 passengers). This indicates an average gap of 10 seats, meaning the payload restriction on the westbound leg averaged 10 seats more than the eastbound leg over the last year. For comparison, there was no gap between the east and westbound legs of their Melbourne-Los Angeles B787-9 flights over the last year (excluding those operated by the A380).

There’s a lot of seasonal variation in westbound payload restrictions. There was no gap in October, while the gap remained less than 10 between July and January, however it grew from February to a peak of 22 in April.

The impact of payload restrictions is profound since it reduces the denominator that costs are shared over. An average payload restriction of 10 seats implies a 4% higher unit costs. While this may appear trivial, it highlights that Qantas are willing to tolerance higher unit costs in search of higher yields and unit revenues on ULH flights.

Given Qantas’s recent capacity increases on the route, it is a tacit acknowledgement of the revenue premiums they’re generating from ULH flying. It goes a long way to reinforce their confidence that such premiums are exceeding the marginal cost sufficiently.

But there’s a caveat: on ULH missions, one carries fuel to carry fuel! Simply put, an A350-1000 taking off at 283t is going to burn more fuel over the same route as the same aircraft taking off at a lower weight. Thus, a 22 hour non-stop flight is going to burn, on average, more fuel per hour to carry the same payload than the same aircraft and payload taking a well-timed fuel stop halfway.

But here’s where the A350-900ULR and A350-1000ULR have taken a giant leap forward. Unlike the A340-500, they’re not carrying the same deadweight! As fuel is burned during the flight the aircraft gets lighter, however the A340-500’s excessive structural weight to carry the huge fuel load just didn’t get lighter as the flight wore on.

While this may appear abstract, the fact that the A350-900ULR and A350-1000ULR aren’t meaningfully heavier structures compared to their baseline peers means that they’re more efficient than a previous generation of ULH aircraft. The “delta” to carry the extra fuel for their ULH mission is significantly less than their predecessors.

Project Sunrise isn’t that original!

As our discussion has highlighted, Singapore Airlines have been pushing the boundaries of ULH flying for some time, while Qantas have been doing the same. Project Sunrise will pushing the boundaries further, and significantly so with Sydney-London being 900nm or 11% further than Singapore-New York. Yet, our thesis speaks of it as somewhat inevitable, driven by the technological gains and Australia’s “tyranny of distance”.

While opposing voices will be the loudest, we might look back on this in a few decades as the inevitable evolution from 5-stops to non-stop. And if you don’t like it, then don’t do it. In addition to the plethora of one-stop connecting options, Qantas have indicated that they’ll also maintain one-stop flights to London (via Singapore) and New York (via Auckland).

Many commentators continue to argue that it’s just PR and spin. Yes, Qantas are very, very good at this, but one can’t ignore the technological, regulatory and operational challenges that Qantas have had to, and still need to overcome. They’ve had to order a highly customised aircraft, engage with regulators to reform flight duty limits, and renegotiate employment terms. Nevermind the massive reorganisation of their network that will have to occur (e.g. have a look at our previous analysis on the difficulty in coordinating their existing slot portfolio at Heathrow simply to schedule the Sydney-London flight). This seems like a lot of work, money and risk for a stunt!

So if it’s not about the PR, then what is it?

So far we’ve looked at the technological, operational and economic considerations, but it hasn’t answered the question why they feel compelled to take the risk. These are actually more strategic in nature.

First and foremost, it’s about competition. Qantas’s one-stop flights are forced to compete on price and/or product with other airlines, and in many cases, they’re at a significant cost disadvantage, making it a battle they simply can’t win. This has been a significant contributor to the reduction in their London capacity over the last two decades.

When it comes to Project Sunrise, the competition can’t or won’t do it! This may appear flippant, but it’s at the core of the strategy. Simply put, there are no other airlines that have a fleet capable of non-stop flights between Melbourne or Sydney and London, nor are they likely to.

British Airways are the only other airline with direct flights between Australia and London. They don’t have an aircraft capable of making the non-stop trip and Qantas are making a relatively safe bet that BA won’t suddenly order the A350-1000ULR. Firstly, it simply doesn’t make sense for BA to acquire the niche aircraft on just one route. BA won’t have the scope to build scale over several routes and there aren’t many other 22 hour routes from London that BA would want to fly that would enable them to build a fleet of A350-1000ULR aircraft. Secondly, even if they were to do so, Qantas have the first mover advantage, reducing the likelihood of BA doing it.

The same factors also apply to Virgin Atlantic (or Delta UK as some might tease), who have shown little interest in recent years beyond Trans Atlantic flights or flights that benefit from Joint Venture feed. The other Virgin, Virgin Australia are only operating long haul flights on wetleased aircraft at present. They are a long way away from returning to their own long haul operations, nevermind trying to operate a niche sub-fleet of ULH aircraft. It could take a long time before Virgin could even consider it, and more to operate it if they wanted to. It would appear as thought Project Sunrise would give Qantas a monopoly on non-stop flights to London, and probably to Western Europe as well.

A similar case can be made to the US. Are United, Delta or American Airlines going to acquire a special fleet simply to operate non-stop flights to Australia? Again, the question would be are there other ULH routes that may interest them to build scale around an ultra long haul business? The scope is a little broader for the US carriers, but despite their growing international ambitions, there have been no suggestions that they’re interested in it. US carriers haven’t attempted to cover Singapore’s New York routes, and there’s no indication that they’d do the same to cover Qantas’s New York route.

The lack of (potential) competition on non-stop routes gives Qantas an advantage that competitors can’t match, or at least are unlikely to. In fact, Qantas’s most significant competitors to London aren’t BA or Virgin. It’s the one-stop options, primarily Emirates, Qatar, Singapore, Cathay, etc.

The most recent market share data between the Australia and UK shows Qantas and BA with just 20% and 5% of the market, respectively. The remaining 75% is held by one-stop carriers, led by Emirates, Qatar and Singapore with 23%, 17% and 12%, respectively. It’s this 75% that Qantas are targeting with near certainty that they’ll have a monopoly on non-stop flights between Australia and the UK!

In addition to the strategic advantage, the lack of competition brings two practical advantages. Firstly, pricing power, allowing Qantas to generate higher yields and unit revenue, particularly from the front cabins, but secondly reducing the need to discount to attract or defend market share!

At the same time, Qantas are being rewarded for their patience. While Singapore got to market first, Qantas’s patience means they entering the stage with a better solution and considerably lower risk. A dalliance with the the A340-500 would’ve cost Qantas a lot of money and set them back a long time. The evolution to Project Sunrise isn’t a zero risk strategy, however they’re not facing a catastrophic scenario if things don’t go as planned. The aircraft will simply be converted into a regular configuration and fly on across the rest of the network.

But really, why are they doing it?

By this point it’s taken a lot of convincing and not everyone would be convinced by this argument. Despite the relatively lower risk compared to a decade or two ago, it’s still a risky endeavour. We’re made the operational and strategic case, but it still involves a leap of faith. These arguments don’t explain why Qantas feel they need to take the risk. They’ve have had a run of incredibly strong results, so why now?

We titled the article “how to think, not feel about Project Sunrise”, yet the question we pose now asks “Why does Qantas FEEL compelled to take the risk?”. We’re on shaky ground here, so one final point of analysis to nail the argument:

Qantas’s international operations are the worst performing part of the Qantas Group. This isn’t a shot at Qantas International and shouldn’t be misinterpreted as an argument that they’re performing poorly, rather it’s an empirical point that Qantas International is lot less profitable than Qantas Domestic and Jetstar. This relative profitability within the group has implications for capital allocation.

In FY25, Qantas International contributed just 25% of airline EBIT (earnings before interest and tax), despite accounting for 41% of airline revenue and capacity (measured by available seat kilometers). We’re referring to airline EBIT and revenue, so stripping out the non-airline parts of the business including Qantas Frequent Flyer and corporate.

This isn’t a recent trend and Qantas International didn’t suddenly have a poor year. In fact, FY25 was a very good performance, as the years leading up to the pandemic saw its share of airline EBIT consistently lagging its share of airline revenue and capacity, and by even wider margins in most years.

Some commentators argue that Qantas International’s profitability is undervalued given its importance to Qantas Frequent Flyer (QFF). QFF is an immensely profitable part of the group, earning A$ 556 million in EBIT during the last financial year. Let’s humour this for a moment: if we generously add all of QFF’s EBIT to Qantas International, it would contribute 39% of EBIT, broadly in line with its share of capacity (41%). However since QFF’s revenue is also now included, the share of EBIT is still lower than the share of revenue that now stands at 47%. FY25 is consistent with historical trends, including the periods before the pandemic.

Thus, it would require the most generous assumption for Qantas International’s performance to even be comparable to the rest of the group, highlighting a clear underperformance of Qantas International. The reason for this is fairly simple: Qantas International faces a lot more competition compared to the Qantas Domestic as the domestic market faces larger barriers to entry. While this is somewhat beyond the scope of our analysis, the implications are relevant.

At a group level, it’s not rational to disproportionately deploy capacity - and thus capital - towards the least profitable part of the group. In the long run this has the potential to drag the rest of the group down with it. This is particularly consequential for an airline given the highly capital intensive nature of the business. Again, this isn’t the focus of our current analysis, but have a look at our previous work on the topic to give more context why this is so important:

As noted, Qantas International’s relative underperformance isn’t a new phenomenon, and it’s arguably already had consequences for the group’s capacity allocations. Qantas International accounts for 41% of ASKs, down from 46% in FY19. However, if we go back even further back, Qantas International accounted for 77% of group ASKs in FY01 (it’s the furthest we could quickly find). It’s a different baseline (i.e. no Jetstar), however it clearly shows how Qantas have steadily “underinvested” in Qantas International’s capacity.

This shouldn’t be interpreted to mean that they’ve marginalised the business, rather the more profitable parts of the business have attracted capacity more rapidly. And before anyone quips that Qantas International’s poor performance is due to this underinvestment, let’s remind readers that we’re not using the term in an absolute manner, rather relative. In fact, Qantas’s mainline fleet is slightly younger (average age of the A330, A380 and B787 fleet is 15 years) than the domestic mainline fleet (average age of the B737 and A321 fleet is 17 years).

My head is spinning right now, so can you pull it all together now?

So here is our hypothesis: Qantas is in the early stages of an extraordinary and near total fleet renewal. With the exception of the B787s and a handful of newly delivered A321XLRs, every mainline aircraft will be replaced in the next decade. The order book already includes replacements of all B737s, A330s and A380s, with the bulk of the B737s and A330s being replaced within the next 6 years.

The relative performance of Qantas International makes the business case for this investment relatively weak compared to Qantas Domestic and Jetstar. To justify this incredible capital expenditure, Qantas International has to make a deal with the devil by increasing its margins, and by a lot! If it’s unable to do so, the board will have little option but to continue the relative underinvestment in Qantas International, limiting their capacity growth or even shrinking capacity.

Arguably, the A350-1000ULRs have been ordered to provide incremental capacity growth as they’re not replacing an existing fleet, at least for the time being! The rest of the order book is replacement capacity: the A330s will be replaced by a confirmed order for more B787s and A350-1000s (non-ULR version). However, it’s notable that the A380s, which are due for replacement from 2032 or thereabouts, don’t have confirmed replacement orders. While Qantas have confirmed that the A380s will be replaced with more A350-1000s, these orders aren’t confirmed (at least based on most recent AFS) and will utilise purchase options that were part of the previous orders.

And this is Qantas’s failsafe: if Project Sunrise doesn’t live up to expectations and if Qantas International are unable to increase margins significantly between now and 2032, or at least show some evidence of their ability to do so, the Board won’t hear a convincing case to exercise the options to replace the A380s. Instead, it’ll make more sense to limit Qantas International’s growth, or maybe even reduce capacity or shift capacity to Jetstar or joint venture partners, all things they’ve done in the recent past. Instead, the A350-1000ULRs could/would become the de facto A380 replacement.

In the introduction, we pointed out that Cam Wallace, the CEO of Qantas International, initially wrote-off Project Sunrise as a publicity stunt. So we wondered what changed Cam’s mind? We think Cam was convinced that Qantas International needed a paradigm shift to increase margins and maintain its relevance within the group. Gimmicks and small changes weren’t going to drive the structural shift needed in margins.

Project Sunrise is a paradigm shift! But it’s also a bet, a big bet, that they can increase margins by shifting a significant portion of capacity to routes with limited competition, allowing them to gain pricing power and exploit lower density cabins to increase unit revenues (doing so significantly quicker than unit costs will increase). Moreover, it does this with a relatively low risk failsafe! While it’s not zero risk, it’s not taking on same degree of risk that Singapore and Thai did with the A340-500.

Now before you think it’s too fanciful, we’re not trying to suggest that this was a grand strategy plotted in a smoke-filled room more than a decade ago. Instead, Qantas International faced a challenge: develop a strategy to increase margins to justify their capacity! They were simply sick and tired of seeing the relative investment in Qantas International declining over time.

The problem that lead them down the path is there aren’t many things that can systematically increase their margins. They’re already exceptionally good at generating strong yields and competition limits their ability to increase this further without increasing costs quicker. Frankly, they’re already a pretty efficient operation. It’s not like there’s a trick they’re missing on the cost side. No doubt, everyone has their pet idea, something that they think can improve margins, but Qantas recognised the need for a paradigm shift, rather than small ideas.

While the idea isn’t novel, the relative success of pushing the envelope with the B787 on ULH routes like Perth-London, Melbourne-Dallas and Auckland-New York, has convinced them that the concept works. They’ve seen the data and it shows them the secret sauce: increasing unit revenues quicker than costs increase, thereby increasing margins. It’s reinforced their confidence that this will also be the case from Sydney and Melbourne, non-stop to London and New York!

It was just a matter of when to roll the dice. They remained patient, waiting for the technology to find the sweet spot where they could do this without risking the whole show! They’ve eventually found their aircraft and pulled the trigger!

Hopefully this provoked you more about how to think, and not feel about Project Sunrise! Thanks for reading, and please share it with colleagues and friends!

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This short article outlines a technical thread we posted on social media on Sunday morning, highlighting Qantas’s IROPS masterclass! We thought we’d repost it here with a little bit more detail to work through the IROPS challenges and implications, and quite frankly, just how well they responded!

Additionally, our post was plagiarised, word-for-word, by at least one publication. We wanted to post it here to ensure our analysis was documented. As we’ve noted before, it’s why we’re considering placing our work behind a paywall and promoting the use of an ethical paywall.

Background

Thunderstorms at SYD and CBR meant QF22 DFW-MEL had to take unscheduled fuel stop at AKL, while QF12 LAX-SYD and QF8 DFW-SYD both diverted to BNE. Why does SYD and CBR weather force MEL bound flight to stop in AKL for fuel you ask?

Poor weather was forecast on Sunday morning at Brisbane, Melbourne and Sydney, as highlighted in the daily ATFM plan published by Air Services Australia. The forecast wasn’t catastrophic, however it included the chance of thunderstorms at both Brisbane and Sydney. A particular challenge with thunderstorms is their localised impact, while their exact timing and location can be difficult to predict. This makes planning flights around thunderstorms difficult with a lot of uncertainty.

QF22 DFW-MEL

• QF22 DFW-MEL, operated by a B787-9, made an unscheduled fuel stop at AKL. It seems obtuse that thunderstorms at SYD and CBR meant a flight to MEL needed to stop along the way for fuel, however QF22 couldn’t use SYD or CBR as their alternate since poor weather was forecast. For flight planning purposes, one needs good weather at your alternate or a 2nd alternate further away with better weather.

• This meant that QF22 needed to carry extra fuel for an alternate further away, however the flight is already carrying a significant payload penalty and pushing physical fuel carrying capacity. It’s one of the longest flights in the world and already operating at the edge of the aircraft’s capability.

• It’s likely that QF22 simply couldn’t carry any more fuel, or would’ve required a catastrophic payload penalty to carry fuel the additional fuel required. Instead, QF22 was replanned to depart DFW for AKL. The ADS-B data clearly shows the aircraft heading directly for AKL after departure.

• Taking a tech-stop at AKL generates several externalities as crew will exceed their duty limits and time out at AKL. It’s not like airlines just keep B787 crew hanging out at AKL just in case. While Qantas do operate B787 flights to/from AKL, it’s not a B787 crew base. This meant that an alternative crew had to reposition to AKL. This may have occurred ahead or time, or possibly the crew was switched with QF3/4 (SYD-AKL-JFK flight).

• ACARS messages show significant care to mitigate passenger disruptions. For example, this included arranging catering for additional leg in the middle of the night and rebooking of connections. We really loved this one:

• Onward business class passengers from MEL to PER were given option of rebooking on immediate onward connection without their bags, or a later connection with bags, however this would be in economy class due to limited seats available on that flight. Furthermore, the message gives a clear indication that ground staff were prepped to help, but also giving passengers autonomy to make decision!

• All in, they arrived at MEL just short of 3 hours late which is good going for unplanned stop which required crew change! But that’s not all …

QF12 LAX-SYD

• QF12 LAX-SYD, operated by an A380, diverted to BNE. Unlike QF22, this decision wasn’t planned ahead and a relative late decision was made a few hours out of SYD. This is obvious from the ADS-B data which shows the flight clearly heading to SYD.

• Weather at SYD was somewhat worse than expected with the thunderstorm expected over the airfield near landing time which would’ve required significant additional holding. Waiting that out at SYD would’ve risked landing below minimum fuel or encountering a fuel emergency.
  

• The diversion to BNE was ostensibly for fuel, however the much shorter length of the flight compared to QF22 meant that if the aircraft were refuelled quickly they could continue to SYD without exceeding the crew’s duty limits.

• No crew had been repositioned and there was a significant risk of hitting duty limits. If the aircraft wasn’t refuelled quickly it would’ve required termination of the flight at BNE.

  

• Once again, ACARS messages show s sense of urgency with ground crew prepped to hustle for 45 min splash and dash. That’s clearly aspirational since it was very unlikely to turn an A380 that quickly. Nevertheless, they managed to get out of BNE in time and made it to SYD a little over three hours late.

QF8 DFW-SYD

• QF8 ran into similar troubles to QF12, with an even later decision to divert to BNE. Also operated by an A380, QF8 has a longer block time than QF12 meaning that it was inevitable that the crew would exceed their duty limits as a result of the diversion.

• As a result, the flight was terminated at BNE and passengers rerouted to their final destination on domestic flights from BNE. The aircraft ferried empty to SYD later that day.

• BNE isn’t an A380 crew base and with no relief crew available at BNE it highlights how the proactive decision to replan QF22 to AKL limited the impact of diverting like QF8 did.

Concluding thoughts

In practice, managing IROPS is incredibly challenging. While an individual passenger is focused on their flight, staff at Qantas’s integrated operations centre are handling multiple flights simultaneously. Three flights took unscheduled stops or diverted, but the same attention would’ve had to be applied to countless other flights that didn’t stop or divert.

Furthermore, the environment is dynamic with parameters changing constantly as evidenced by the situation devolving through the night while the flights were already in the air. This is evident by the examples, highlighting how different flights encountered different constraints (e.g. flight duty limits affected each flight differently).

It’s all good having great IROPS plans and procedures in place, but implementing them in a dynamic and evolving environment is difficult, especially when resources are limited. Airlines simply can’t have unlimited redundancy (e.g. it was possible to plan for crew redundancies on the B787 at AKL, but not for the A380s at BNE).

No doubt a lot of passengers will be irate, but this is as good as it gets! There’s no better outcome here, just much poorer outcomes. The public doesn’t get to see what happens behind the scenes. They don’t see how decisions - invariably focused on the least worst outcome rather than an optimal outcome - get made under pressure with imperfect information.

But this isn’t the public’s fault. They aren’t technical experts and we shouldn’t expect them to see the big picture. They will inevitably focus on their flight and the impact on their plans!

We can’t ignore that airlines don’t do a great job at communicating just how complex and difficult this is! Actually, they do a terrible job often dumbing things down and being incredibly vague, and Qantas are far from the worst!

As we’ve argued before when analysing the potential impact of flight delay and compensation schemes, it often appears to the customer that the airline is hiding information or not being truthful.

Airlines are simply too scared to say too much. A culture of risk aversion dictates that they mustn’t say anything that the public may use to hold them to account. So instead they’ll say vague things like “your flight is delayed by weather”. It’s true, but is infuriating to hear because it’s obvious.

Why don’t more they communicate more transparently? Do they think people don’t want to know, don’t care or can’t understand? We’re not suggesting a sinister motive, rather just risk aversion, but we argue that transparency builds trust and shows customers that they’re not the victim of a random bureaucratic decision.

This was a great opportunity for Qantas to communicate the challenges that running an airline encounters and just how professional their handling of it was. It was a masterclass!

Our mate Caleb reckons Qantas hates Melbourne because they no longer have non-stop Melbourne-San Francisco flights despite United still flying the route and because Qantas fly to San Francisco from Sydney. San Francisco being United’s largest west coast connecting hub is irrelevant to Caleb, while Qantas’s strategy of shifting US capacity to Dallas is #fakenews!

On a more serious note, many will argue that Qantas’s cancellation of direct Melbourne-London flight via Perth in July 2024 is evidence of Qantas’s anti-Melbourne bias. Furthermore, as recently as 2012 they operated twice daily direct flights between Melbourne and London.

None of these flights were non-stop, rather direct flights operating via Dubai, Perth, Hong Kong and/or Singapore. The loss of the direct flight may be temporary as its likely to return as a non-stop flight as part of Project Sunrise in the coming years.

The counterargument is that the loss of direct flights to London on Qantas is purely symbolic. Other than a change of flight number, is there really much difference flying on QF37 to Singapore and connecting on QF1 to London (and QF2/36 on the return)? In fact, the outbound to London has a shorter stopover in Singapore compared to the direct flight from Sydney (and identical on the return).

QF1  SYD SIN  3:55pm  9:05pm
QF1  SIN LHR 11:05pm  6:15am⁺¹
QF2  LHR SIN  8:10pm  5:40pm⁺¹
QF2  SIN SYD  7:40pm  6:35am⁺¹

QF37 MEL SIN  4:55pm 10:05pm
QF1  SIN LHR 11:05pm  6:15am⁺¹
QF2  LHR SIN  8:10pm  5:40pm⁺¹
QF36 SIN MEL  7:40pm  6:15am⁺¹

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We prefer to follow the data rather than rumours, speculation and 3rd hand accounts. We like to consider the data in an analytic framework to test whether the rumour is plausible and even viable. Call it a smell test, but we can try and use the data to answer some simple questions:

1. Does the underlying demand or network flows support the potential route?

2. Is it operationally possible from a fleet availability or aircraft performance perspective?

3. What is the airline’s history on the route and what have they been saying?

4. What is the opportunity cost or trade-off?

We can’t always answer all these questions as we often won’t have enough data, but using the framework is a very helpful smell test!

For example, a few months ago there was a rumour that Qantas are planning to start two Brazilian routes, the first during the 2nd half of 2026 with Rio being flown as an extension of the Sydney-Santiago flight on the B787-9, and during the 2nd half of 2027, a non-stop to Sao Paulo on the A350. We immediately discounted the rumour utilising this framework, for example:

1. In the 2024/25 year, the total Australia-Brazil market was 68,400 inbound passengers, amounting to an average of 187/day (according to ABS data). This is relatively small and compounded by Brazilian point-of-sale bias (ABS data tells us 62% are visitors and only 38% Australian residents). Furthermore, Brazil is covered through Qantas’s codeshare partnership with LATAM with competition from other stopover carriers limited by geography.

2. Fleet time on the B787-9 is scarce and even precious, and whenever B787-9 time has become available in recent years it’s quickly been applied to Europe (SYD-PER-FCO/CDG) and North America (e.g. SYD-YVR, BNE-LAX and MEL-DFW). Furthermore, the additional block time as an onward leg from Santiago to Rio would require a reorganisation of the schedule adding 11 hours block time.

3. The 1st A350 is arriving in late 2026 with deployment on non-stop Sydney-London from the start of the NS27 season (end of March 2027). Non-stop Sydney-London will require at least 3 aircraft, and with the 4th A350 expected by end of FY27, it seems unlikely that something like Sydney-Sao Paulo would be flown in 2027 and prioritised over non-stop Sydney-London, Melbourne-London and Sydney/Melbourne-New York. The latter routes are what Qantas have been telling us they’ll be flying.

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Update: the data used in this analysis is available on our Capacity Tracker dashboard. It’s easy to use and pretty fun to play with, allowing you to filter data by any combination of airline, Australian destination city, or international city and country of origin.

Last week, we published a poignant Chart of the Week showing how international airline capacity to Australia has finally returned to its pre-pandemic baseline. In the 12 months to July 2025, international reached 24.8 million seats, slightly exceeding the 24.7 million seats in the 12 months to January 2020. It took five and a half years to recover what was destroyed in a few weeks by the COVID-19 pandemic.

Given the length of time its reasonable to expect that the distribution of that capacity would’ve changed significantly, augmented by the dramatic structural shifts in the global economy. We’ve observed significant changes in the airline landscape with some new carriers having appeared or grown their Australian presence, and several notable casualties. Travel patterns have also changed, with the popularity of several destination increasing while other historically important destinations have suffered from slow recoveries and macroeconomic shocks.

As promised last week, let’s delve into the trends, first by looking at the distribution of that capacity on the Australian side of things and then the countervailing countries before looking at the evolution by airline. The BITRE data we use tracks capacity utilising inbound seats. We’ve included a methodological note at the end of the article to explain how we handle the data since there are some quirks as to how capacity is measured for multi-stop flights.

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