Qantas threatens to bulldoze its way to higher profits

Qantas Airways Limited (ASX: QAN) is going full throttle into its long-haul flight project and is threatening to leave its pilots behind unless they come to the party.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The flying kangaroo is going full throttle into its long-haul flight project and is threatening to leave its pilots behind unless they come to the party.

This is significant for Qantas Airways Limited (ASX: QAN) as "Project Sunrise" is a key earnings and dividend growth driver for the group.

Management is trying to negotiate an enterprise bargaining agreement with the union representing its pilots. Progress may have been slower than what Qantas would have liked although its decision to clear Project Sunrise for take-off came sooner than I expected.

Bypassing pilot union

Qantas is warning the union that if it doesn't agree to terms soon, it will go direct to its pilots with an offer. If its pilots reject the offer, Qantas will hire new pilots to fly the routes, according to the Australian Financial Review.

There are two key reasons why the airline is fast tracking its plans to offer non-stop flights to New York and London.

Competitors nipping at its heels

The first is competition. The airline noted that trans-Tasman rival Air New Zealand Limited (ASX: AIZ) is working on plans for a direct flight from Auckland to New York. I won't be surprised if Virgin Australia Holdings Ltd (ASX: VAH) is also closely looking at launching a similar service to turn its fortunes around.

The new services are tipped to be a lucrative venture for the airlines as analysts believe they can charge a premium for the convenience. UBS estimated that Qantas' average revenue per available seat kilometre (RASK) on the new flights will be close to 30% higher than on other regular flights.

Airbus playing hardball

The second reason why Qantas is so eager to get the project off the ground is because of aircraft manufacturer Airbus. Qantas will need new long-range aircrafts and it plans to order several A350-1000 planes from Airbus.

But Qantas said that Airbus can't wait. The European manufacturer is warning that unless the airline signs a binding agreement for the purchase, it will reassign its engineers to other projects.

Foolish takeaway

These public threats from Qantas to fly off with or without its pilots may be timed to strengthen its bargaining position with the Australian & International Pilots Association.

The company is probably also eager to put out some good news given how the coronavirus is impacting on the travel sector.

Management complained that reaching an agreement with the union on Project Sunrise is made more difficult because the union changed its negotiation team several times.

Qantas is offering to pay captains on the new flights a base of $395,000 a year. First officers will get $261,000 and second officers $129,000 annually.

The union is concerned that the long flights pose safety and health risks to its members and the travelling public. But it said it is still continuing to negotiate with Qantas in good faith.

Should you invest $1,000 in Nick Scali Limited right now?

Before you buy Nick Scali Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Nick Scali Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough trading day for ASX stocks this Monday.

Read more »

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Broker Notes

Bell Potter names more of the best ASX 200 stocks to buy in May

These stocks could be best buys this month according to the broker.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

ASX 200 energy shares plunge on shock OPEC move

ASX 200 energy shares like Woodside and Santos are tumbling on Monday. Let’s find out why.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why 4DMedical, Gold Road, Syrah, and Tyro shares are racing higher today

These shares are starting the week strongly. But why?

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

2 ASX gold stocks racing higher in Monday's sinking market

Investors are sending these ASX gold stocks flying higher on Monday. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Brainchip, Helia Group, Reliance Worldwide, and Westpac shares are dropping today

These shares are starting the week in the red. But why?

Read more »

Man looking upwards contemplating which shares to buy
Broker Notes

CSL shares have climbed 10% since 11 April. Is it too late to buy?

What are analysts saying about this biotech giant after its recent rally? Let's find out.

Read more »