Aviation Leader Interview with Qantas International CEO Cam Wallace

Transcript

Paul Burton:Good morning, ladies and gentlemen. Thank you so much for your support for this CAPA Australia Summit. It's a real pleasure to be here and meet you all this week. My name is Paul Burton. I'm the Managing Director of Aviation Week Network based in Singapore, and I've been in Singapore for 10 years now. So it's really amazing to come to another brand spanking new hotel that actually raises the bar compared to what we're used to in Singapore, which is, as I'm sure you know, is a pretty high standard. So many congratulations to everyone involved. It's a wonderful facility and I'll certainly be bringing friends and contacts to come and experience Brisbane at the Star very soon. Anyway, over to you, Cam. It's a real pleasure to have you with us this morning. Perhaps you'd start by giving us a brief introduction to yourself and some insights into your first year in the role.

Cam Wallace:Well, it's great to be here and thanks for having me. I'm still recovering from Gert's dancing actually. I'm not sure how long it's going to take me to get over that, but certainly some work to do on that front. Look, my role is the leader of the international part of the business and the freight part of the business, and it's been a pretty hectic first first 12 months in the role. It's been actually about 14 or 15 months, feels like a lot longer. But look, what I would say is Qantas is a great company with great people and a great future, and that future is now underpinned by the large fleet reinvestment we've got coming in the next decade or so, and that puts us really well positioned for the future in terms of our strategy, our network, and our growth. And what we've been focused on and really actually more fixated on for the last 12 months has been operational resilience and operational performance and really delivering to our customers. So things like on-time performance, on-time arrival, completion rates, making sure that each and every day we are delivering to what customers want. And it's been really great progress. We've still got a long way to go and we still, you know, you never really get to the destination with, you know, meeting customers' needs because they change all the time. But we're We're really, really happy with the progress. A personal highlight for me has to be kind of waiting in France for the first flight from Paris to land because I think there's a sense of pride in Australia about how we can connect these continents together and just there's an awful lot of work that goes into bringing any ultra-long-haul market to life. It's another important building block in terms of our step towards sunrise. So that was really fantastic to see the pride of all the customers. and the staff coming off that flight in Charles de Gaulle.

Paul Burton:Very good, and we'll be touching on Sunrise of course throughout the course of this interview, but I wonder, starting a kind of a macro level, Cam, if you can offer some general insights for us into the current global and regional market dynamics and the medium-term outlook as you see it.

Cam Wallace:Yeah, I mean, I think what I'd say is if you look at the Qantas Group, we're back to international capacity which is equivalent to pre-COVID. Jetstar's growing quite quickly and Qantas is also rebuilding our capacity, so What we're seeing is seats coming back into the market and fares normalising. We think fares will continue to moderate in the first 6 months of this financial year and then that moderation will kind of level out. That's our best forecast or guess at this rate of time. And what we're seeing in terms of the market dynamics is what we call normalised seasonality. So as probably most people in the room know, post-COVID with pent-up demand and revenge travel, whatever you want to call it, there wasn't any really need for market development or tactical pricing or sale activity because there was just a nearly 12 to 18 month streak of where you just had high seasonality. So there was enough demand and not enough supply, so we saw high prices and a lack of a requirement for tactical pricing. I mean, what we're seeing now is some encouraging signs in terms of our demand outlook because whilst we are going to the market with activity on a more regular basis. We're seeing the market react really strongly to that, so the market is responding to good tactical market activity. And the other thing I'd say is we still see customers at a high level prioritising travel over other categories, so that gives us some confidence for the future that people have changed their purchasing habits, that they really see travel as a high priority. They want to see friends and relatives, Businesses are wanting to connect to their customers more. If you look in our domestic market, we're seeing corporate and resource travel continue to grow. And also in, in the long-haul space, this big movement which I think we've seen across the industry in the last 3 to 5 years of move towards premium cabins, we're seeing that too. That plays well to our future and it's certainly a dynamic that we're seeing continual growth and stability in.

Paul Burton:Thank you. So within that kind of outlook, naturally Qantas is having to reconfigure and reimagine its fleet kind of structure. So can you elaborate on the right aircraft, right route approach and how it will shape your network strategy over the next few years?

Cam Wallace:Yeah, I mean, I'd add the right product for the right market at the right time as well. So We've got close to 200 firm orders, so we're in the midst of embarking on the biggest fleet renewal program the organization's ever had in its over 100-year history. And it's a big job. I think we took 11 aircraft last year, we take 20 this year. There's a couple of things I'd say. One is the flexibility of the order book we've got is really, really beneficial in terms of our outlook. Secondly, the new aircraft will be— will give us more premium seats, which meets that premium demand. It'll have more range. So if you look at an aircraft like the A321XLR, which we're tremendously excited about, that's got 50% more range than a 737, 13% better cost economics. And if you look at what Jetstar's doing with their new A321 fleet, they're getting really great cost outcomes and the customers like them as well. So We're seeing the same. We've got 3 A220s with QantasLink flying at the moment. They're performing well for customers and well for us in terms of the on-time reliability as well as the customer experience. So the key thing that the new fleet gives us is obviously better unit costs, more flexibility, more premium seats, but also it gives us the opportunity to start up and open up new routes which one, our aircraft, our current aircraft don't have the range to cover, but secondly, we can, we can build into thinner routes. And where we are geographically located, that's a huge opportunity for us. So the A321 can easily go from Perth to Auckland, go Perth to India, it can go from Brisbane, Bangkok. There's a large array of opportunities for new city pairs that we just wouldn't be able to achieve with our current fleet. So that is probably one of the most exciting things that we're looking into is the the new opportunities that it gives us, but ultimately our customers and our frequent flyers as well in terms of options.

Paul Burton:Thank you. And kind of shifting the focus from the narrowbody fleet to the widebodies, can you perhaps tell us the status of the remaining A380s and when they're coming back? And aside from the return of those A380s, what other widebodies do Qantas have coming into the fleet over the next few years?

Cam Wallace:Yeah, so the A380, our customers love the A380 and I'm not, I mean, I, you know, Emirates are probably in the— Barry's probably in the room. I had dinner with him last night. He was wearing a beige jacket. He looked like a, he looked like a, um, an old ex— he looked like, he looked like Richie Benno actually. That's what I said.

Paul Burton:You're gonna flush him out.

Cam Wallace:Yeah, yeah, I was gonna flush him out. Um, I mean Emirates are very famous for their A380 fleet. We were actually reflecting on that last night. Um, so we've got 8 8 back in our fleet. We've got 2 to go. The last 2 aircraft will get reintegrated into our fleet in the next 18 months. The cabins have been refreshed. I mean, they're really important aircraft for us for constrained airports, so the likes of Sydney-LA and flights into Heathrow where you've either got a constrained airport or you have a curfew. Those larger aircraft play a big part in our fleet, and obviously we, we on our codeshare offer a huge array of A380s through our partnership with Emirates, so it continues to be a really, really attractive proposition for our customers, so we are keen to get the last 2 back to, you know, build out the fleet. When we bring them back too, it clearly opens up other opportunities for us to move other parts of the network around.

Paul Burton:And any new procurement in the offing that you can reveal, or is that still part of the mix under discussion?

Cam Wallace:Yeah, I mean, the other widebodies that we've got on order are the— is the A350, which is the the ultra-long range with the third fuel tank and the normal A350 as well as some more 787s. So all those aircraft play well to our strategy, which they're more premium dense. If you look at the 787-10 we're getting from 2027, they've got 25% of premium cabin density. At the moment we're flying about 28 A330s and they range from 9 to 11% premium density. So That's one of the big advantages we're going to get as well as the unit cost advantage, the better customer experience. It's also the more premium dense aircraft which gives us a range of options for that aircraft. It's really designed for our flying into Asia.

Paul Burton:And speaking of Asia, and you've alluded to this with the 321XLRs coming on stream, what new routes or destinations can customers of Qantas expect? Um, given this network, um, growth and the, the, the growth of the XLRs, are you focusing on any specific areas at the moment?

Cam Wallace:Well, I mean, I think for us the Western Hub in Perth— I know I'm in Brisbane and I think Gert's gone, which is lucky, he might, um, start dancing again if we'd say this— but, um, Perth is, uh, gonna emerge, or what we call the Western Hub, as over time our second largest international destination. And, you know, whether it's Africa, whether it's Europe, or Asia, we see great potential both for Jetstar and for Qantas as a gateway into Australia, offering tremendous connectivity through our domestic network but also giving us a geographic advantage. So building out that as a sophisticated and quite dense hub is something that we're very focused on, and it's tremendously satisfying to get the deal done with Perth Airport so we can now supercharge the development. So Yeah, we've got any number of different city pairs that the new aircraft, certainly out of Perth but also out of other ports, that we can connect. And those are the, the skinnier routes and the thinner routes that you'll be familiar with where, you know, we either had an aircraft which is too large at the moment or we didn't have the range on our narrowbodies. So out of Perth, we'll be able to connect so many more destinations. It's quite exciting, actually.

Paul Burton:Yeah, absolutely. Sorry, I should have said at the outset, I'll save 5 minutes at the end for questions. So I think you have access to the Slido app. Please start asking questions on that app and then we'll come to them at the end. We have time for a couple of questions.

Cam Wallace:That's good 'cause Barrie asked me a question. I'm waiting for that. Yeah.

Paul Burton:So we get the code back on the screen, I think, then people can download if they haven't. So anyway, Cam, if we can look at specifically some geographies the next part of the, of the conversation. So can we have an update on the Australia North America market, given a significant increase in competition from US carriers over the past year or so? So what is the situation now? Do you think that competition is easing and what adjustments are Qantas making?

Cam Wallace:Yeah, so I mean the competition has been pretty intense in Australia, actually in New Zealand as well, so in this part of the world in the last 12 months. We've seen, um, the number of seats in the market from the big 3 American carriers, um, moderate somewhat, uh, in this season. So they're deploying their capacity in a very purposeful way, uh, on a seasonal basis. So, you know, um, United aren't restarting their LA, uh, Brisbane sector. I think Air Canada are no longer doing Melbourne to Vancouver.

Paul Burton:Mm-hmm.

Cam Wallace:So there has been some rationalisation. I think United also pulled out of Auckland-LA. Our view is it's a tremendously important part of our network. We've been flying to the Americas for 70 years. That's where we've got a lot of our wide-body capacity deployed. We also have a very strong and compelling relationship with American Airlines, our partner. So obviously they're flying into Brisbane with their Dallas services. We have opened up new city pairs. Melbourne-Dallas is going really, really well and Sydney to JFK over Auckland is also travelling well, and I think in the super peak we'll have 6 services a week there. So we're very confident of our market position in the USA, and we've been there a long time, and it's an important market, and it's very important that we succeed in that market. So we keep a close, close eye on the capacity and the demand. One thing I would say about the Americas, it's generally, it is rational and commercial competition. So, you know, the American carriers do want to deploy their capacity where they think they can get a return on that capital. And I suppose that's what we're seeing a little bit of with people moving in and out of markets, probably in a faster way than they had pre-COVID. There's less what we call strategic flying going on, you know, testing out a market and leaving it there for 10 years to see if it turns. So we've been encouraged with our relative performance in the Americas.

Paul Burton:Very good. Um, moving from America to China, um, what are your media—

Cam Wallace:It's a different story in China.

Paul Burton:It is, absolutely. Um, so pulling out of Sydney-Shanghai recently, um, you know, how are you feeling? Are you willing to let, um, your Chinese colleagues take the monopoly, or where is that developing in your mind?

Cam Wallace:Um, well, if we look at the Australia-China, I think there's about 113 services per week serving about 13 ports and about 8 different carriers. And quite simply for us, we did have a relationship with China Eastern which wasn't reapproved by the ACCC. Now, that wasn't the primary reason that we withdrew from Shanghai. It was just the, what I call the basic market fundamentals of a surge in supply and not enough demand to meet that supply. And we had a couple of choices at that point. One is to in a constrained airline way is to redeploy the capacity where we think we could make better returns, and for us that was Singapore and Manila, or we could stay there. Now we'd been in China for 21 long years and had a, quite a volatile history in terms of returns, so the way that we in the short to medium term are proposing to serve China is one, through a codeshare with China Eastern, and and secondly through connectivity through Hong Kong. But, you know, I continue to be convinced that market is oversupplied and it's very tough for us to get a market position against so much capacity and the kind of type of capacity it is as well. So we still see load factors down even with Qantas pulling out in the future.

Paul Burton:Thank you. So back to Project Sunrise with the IATA approving the redesigned additional fuel tank a few months ago. Does the airline see any more significant obstacles between now and the 2026 launch deadline?

Cam Wallace:Yeah, well, I was up in Toulouse after the Paris launch and I was really encouraged to see how energized the team from Airbus are about partnering with Qantas on this new unique proposition. You know, they are really connected to the program. They want it to succeed and they want to get the aircraft to us on time. And I think they're going to be delighted when we start connecting, you know, Sydney and London and Sydney and New York on a non-stop basis. So, no, we've been continuing to work with the Charles Perkins Centre on how we minimise jet lag. I think that's an important part of the proposition. We've been working on the lighting for the aircraft. So we continue to work on the inherent customer experience and how we manage people through a 20, 21, 22-hour flight. We're getting incrementally more confident about the proposition for a couple of reasons. One, there are more people flying on more ultra-long-haul services today. So whether it's Dallas, whether it's JFK, whether it's Paris, Rome, or London, those are all 16-plus-hour sectors and people are enjoying the proposition and our NPS is showing that to be the case. Secondly, the economic case for SunRise has built year on year because we know that some of our best performing city pairs are those 787 ultra-long-haul non-stop services. So that gives us confidence about the business case that supports the fleet and supports the new network. So we're very, we're very motivated about the project. We think it's going to be great for Australia. We think it's going to be good for tourism. Our people are really, really keen to deliver this and We're very focused on it, so we think it's going to be great for the country as well.

Paul Burton:Um, so we can't let you leave the stage without talking about, um, sustainability.

Cam Wallace:Yes.

Paul Burton:Um, so how do you plan to balance all of this expansion with sustainability, um, particularly reducing carbon emissions and investing in SAF?

Cam Wallace:Yeah, well, one of the big things that when we did our fleet reinvestment was the focus we had on flexibility of when and when we get the aircraft. That was a core part of the proposition, but the second one was a real deep focus on sustainable aviation fuel and our access to sustainable aviation. So from 2028, we've got access to 500 million litres through our partnerships with Airbus and Boeing. And, you know, we, at the moment, we pick up fuel in London, in the States, and we are looking to do more and more of that over time. I suppose our big desire and motivation and drive is to work with government to create an industry in Australia because we think Australia is perfectly positioned in terms of its geographic location, the size of the country, how many people live here, to really supercharge jobs and growth around a sustainable fuel industry. So in the future, what we're looking for is a level playing field for all airlines who fly in and out of Australia. That's critically important. But secondly, how can we create an industry, participate in the industry, and then drive economic activity on the base of it so we can pick up SAF here. We've invested in a number of different SAF startups, so one in Queensland, LanzaJet. So we are very focused on how we lean into this challenge and how do we minimise the impact where we possibly can. And we've got a great team of people internally who are tremendously engaged and focused focused on it and you'll hear and see much more from Qantas about sustainability and how we don't follow, how we want to lead because of where we're based in the world.

Paul Burton:Thank you. Another hot topic at the moment is the recent demise of Bonza and the Rex narrow-body jet operation. In your opinion, is— do you think there's room for a 3rd competitor on Australia's domestic trunk routes?

Cam Wallace:Yeah, I mean History shows us there will be a 3rd and 4th and 5th competitor because over the last kind of 3 or 4 decades it's a very seductive industry and people look for market opportunities and generally sometimes in airlines the younger they are the, you know, the lower your cost base is. We take great sadness from what's happened to Bonza and the challenges Rex are having. I think everyone in the room knows that the aviation sector and the wider travel industry is quite tight-knit. And, you know, I've got a lot of friends who work for partner airlines and a lot of friends who are in competitive airlines, and we want it to be a vibrant, competitive industry. So I actually have no doubt that new competitors will emerge. I mean, the constraints and the challenges are always going to be there, and that is the geography, the cost challenges, and the relatively small pool of customers. Cam, I'm going to come back to you. population base. Those things aren't changing anytime soon. But, you know, frankly, for us, having more competition is a good thing. It keeps us on our toes. It means we're providing— we need to provide better service for our customers day in, day out, and we want that competitive intensity. I think it's good for Qantas having strong competitors. We've, you know, Virgin based in Brisbane, they're a very strong competitor. We've got 56 international competitors. That makes us better. And you're in a very competitive industry. We, we don't want any free lunch here.

Paul Burton:Yeah, absolutely. Um, okay, well, I'd like to open up to questions to the floor with the time we've got left. Um, I don't know if we've had any in on Slido. Um, if you can show me the screen. Yeah, there's a couple there. Um, so the first one we've alluded to, Cam, and it's around the 321XLRs. Um, with the thinner long-haul capacity, is that an opportunity to connect regional Australian cities to Asia? or still focusing on connecting capitals? I think that's pivotal to the strategy, right?

Cam Wallace:Yeah, yeah, yeah. And I think in the short to medium term it will be those primary hubs, but in the future, you know, the aircraft with lower cost does give you more flexibility to fly to some smaller city points. It's also an area where Jetstar, as part of our dual brand approach, we've had a tremendously successful dual brand in domestic Australia for over 2 decades now and that works really, really well, we think, for our customers as well as for the company. And we're trying to extend that philosophy of dual brand into trans-Tasman and into primarily Asia because there are markets which are more relevant for Jetstar and their proposition and the way that they serve their customers and there's other markets which are more relevant for corners. And a great example of that is the recent decision we made on Melbourne-Honolulu, which is, you know, quite frankly, it's becoming a higher-cost destination with cumulative inflation, but also the impact of the Australian dollar on the USD. So we made the decision to fly from Melbourne rather than Jetstar. So we're talking each and every day about how between the brands we deploy capacity, not just in domestic but in international. as well.

Paul Burton:Thank you. A couple other questions have come in. I wonder if you have any thoughts on the efforts by Airbus to reduce the number of pilots on the flight deck?

Cam Wallace:No, I mean, look, our, our single greatest priority at Qantas has always been and will always be safety. So that's something that I've, since I've been at Qantas, I've just been tremendously impressed with the safety-first attitude, and not just in the safety team, right through the bloodstream of the 27,000 people who work at Qantas. It's something which is, you know, just tremendously comforting really. So we'll be working with our pilots, our staff in terms of the future, but no thoughts on that at the moment. I think we're—

Paul Burton:Okay, yeah, no change from the Qantas perspective. Reflections on Air New Zealand's position at the moment, how they're trying to forge their niche compared to Qantas?

Cam Wallace:Oh, I mean, I've got a lot of mates and friends at Air New Zealand. They're a great company with great people. Look, they've got obviously challenges with engines, which is, you know, that is disappointing for them, but they've got a really, really compelling and strong market position in New So we expect them to be a strong and serious competitor now and into the future, and I wish them well.

Paul Burton:All right, so I think we'll make this the last one. Careful, remember where you sat. Any thoughts on the potential of Brisbane and Qantas? Obviously you've alluded to the western hub and Perth growth there and opportunities. How are you viewing Brisbane at the moment?

Cam Wallace:Yeah, we've been growing Brisbane domestic and internationally for quite some time. So if you look at the last 12 months, I think we've added 4 international flights. This week we added Vanuatu, we've got Manila and Honiara, so we have a number of new city pairs. Jetstar also have been serving this community well, so we deal in a really collaborative way with Brisbane Brisbane Airport. We really value the relationship, they're easy to work with, and it sets the platform, the agenda for us to be confident to grow out of this part of the world. So yeah, we're pretty ambitious for Queensland and for Brisbane Airport, and we think this will be one of the many ports that we continue to grow into the future.

Paul Burton:Very good, thank you, Cam. Well, thanks for your insights, um, really great way to frame all the discussions today and tomorrow. So Wishing you and everyone a great session and enjoyable CAPA Summit. Thank you so much.

Cam Wallace:Thank you.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.