Qantas Plans to Buy Up to 188 New Aircraft

Qantas Airways, Australia's largest airline, on Wednesday agreed to buy up to 188 new narrow-body planes worth more than $12 billion at list prices to defend its domestic routes and expand into Asia.

Qantas passenger jets parked at their terminal at Sydney Airport.
Mark Baker
Qantas passenger jets parked at their terminal at Sydney Airport.

Qantas, which already has $22 billion in aircraft on order, announced its latest fleet upgrade as management prepared to meet shareholders angry over its board's support for a failed buyout bid earlier this year.

The airline said it would buy 99 planes from planemakers Boeing and Airbus, with options and purchase rights for another 89.

They included 68 A320/A321 planes with options and purchase rights for a further 40, as well as 31 B737-800 aircraft and 49 options and purchase rights. The planes on firm order will be delivered over the next six years, while the options would have delivery slots through to 2017.

Qantas, which will take delivery of the superjumbo A380 next year, declined to comment on the value of its latest order but at list prices the 188 aircraft are worth well over $12 billion.

Qantas said the aircraft will be used to defend its 65 percent domestic Australian market share and expand its low-cost subsidiary Jetstar's aggressive expansion in Asia with new bases in Darwin and Perth over the next two years.

Qantas held its annual shareholder meeting on Wednesday. Shareholder groups and some key institutional shareholders have expressed disappointment in the strong support by Qantas management for a A$5.45 per share takeover offer by a private equity consortium earlier this year.

Since shareholders voted against the offer, Qantas shares have risen to as high as A$6.06. The stock was trading 0.2 percent weaker at A$5.83 in the Wednesday session.

Qantas is reviewing the ownership of key operations, including its aircraft fleet, frequent flyer program and freight business, following the failed bid.

In a pre-prepared speech to shareholders, Chief Executive Geoff Dixon said the airline would comment further on separating its key businesses at its half-year results.

Dixon also said the airline had 79 percent of its fuel needs hedged for the current year, as airlines globally raise fuel surcharges in the face of oil prices above $90.

"We have been largely able to mitigate the current impact because of the strong demand environment, the escalating Australian dollar and the use of fuel surcharges. But we still need to monitor developments closely," he said in a speech to shareholders.