Qantas Says May Defer Deliveries, Has Option To "Walk Away" From 787 Deal

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By Robert Fenner

Nov. 27 (Bloomberg) -- Qantas Airways Ltd., Australia’s largest carrier, may further cut passenger capacity or defer orders of new planes if the global recession continues to reduce demand for air travel.

Planes may be grounded and more international routes can be cut, Alan Joyce, who takes over as chief executive officer tomorrow, said in an interview today. The company’s domestic sales are helping to “insulate” earnings from the drop in international revenue, he said.

Qantas eliminated 10 percent of international seats this week as it forecast profit will drop 64 percent as the global recession erodes business-class travel demand. Joyce, who is scheduled to receive the first of 115 Boeing Co. 787 aircraft next year, may have deliveries delayed by six months because of strikes at the Chicago-based manufacturer.

“While we wouldn’t want to do it, the 787 is so far delayed that our contract allows us to walk away from it,” Joyce, 42, said in the interview. “We still want to take the 787 and we plan to take them, but we do have options with them.”

Qantas shares rose 18 cents, or 8.3 percent, to A$2.35 at the 4:10 p.m. close of trading in Sydney, paring this year’s decline to 57 percent. The benchmark S&P/ASX 200 index rose 1.4 percent.

Joyce, who takes over from the retiring Geoff Dixon, expects the aviation market to have recovered by the time the first 787 is delivered.

Forecast Cut

After accepting its first Airbus SAS A380 plane in September, Qantas has secured funding for two more of the superjumbos due for delivery before the end of the year. The airline has a firm order for 20 of the aircraft with an option to buy four more.

“We won’t exercise those four options until circumstances change,” he said.

Qantas said Nov. 25 that 2009 pretax earnings may fall 64 percent to about A$500 million from A$1.4 billion a year earlier. On Aug. 22 the airline predicted 2009 earnings this year of A$751 million.