Jack Ma Hi-tech cars Here’s cheers THE AFR Building China’s New players, and out of Max Allen, Jill Dupleix: first global brand this world styling 2017 wine and food trends MAGAZINE Interview Angus Grigg Tony Davis Columns

FINANCIALwww.afr.com | Friday 27 January 2017 $4 INCLUDES GST REVIEW ̈ New-generation jets may replace 747 jumbos ̈ Planning non-stop flights from to Europe and east coast US to fly London, NYC direct

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● Exclusive

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● Joe Aston Qantas is considering replacing its remaining Boeing 747 jumbos with new-generation jets capable of flying non-stop between Sydney and London or New York by 2022, a move that would introduce direct access from Australia’s east coast to the two global financial centres and spark a major reorganisation of the airline’s interna- tional network. In an exclusive interview with Financial Review Magazine, published today, Qantas chief execut- ive Alan Joyce has for the first time canvassed the Airbus A350-900ULR or Boeing’s 777-8 (or 777X) as a legitimate successor to the airline’s final six 747-400ERs loosely slated for retirement by 2022-23. ‘‘[From Sydney or Melbourne] they can go straight into New York, Boston and Washington DC, and that is a complete contextual redesign of our network right there,’’ Mr Joyce said. Qantas has already confirmed the exit of five 747s for eight new 787-900 Dreamliners being delivered between October this year and May 2019, which cannot fly those distances but will start direct Perth-London flights in March next year. Key players in Qantas’ remake: industrial designer Marc Newson, chef Neil Perry, CEO Alan Joyce and fashion designer Martin Grant at Sydney Airport. PHOTO: NIC WALKER ‘‘The question is: do the remaining [747s] get replaced by 787s or do they are more suitable for slot-constrained Investor consensus has been that Qantas management has been get replaced by 777-8s or A350s?’’ Mr global capitals like Beijing, Hong Kong, Qantas would continue switching 747s pressing both manufacturers to deliver ̈ Full story AFR Magazine | Inside Joyce said. Tokyo and London Heathrow. for 787s and only replace its younger its new ultra-long range planes ̈ Chanticleer Etihad to steer new He argued that while the Dreamliner Adecisiontoproceedwitha A380s with the A350 or 777X in the late certified to fly Sydney-London (17,000 route as CEO exits back page is perfect for lower-volume routes with multibillion-dollar order for the new- 2020s. Thus Mr Joyce’s updated think- kilometres) with and against ̈ Rear Window Aviation changes in no slot restrictions, citing Vancouver generation aircraft would require final ing is significant to both Seattle-based directional winds and with a payload of the wings back page and Santiago, the newer, larger models sign-off by the Qantas board. Boeing and Toulouse’s Airbus. Continued p2

Trump optimism may push 20,000 Dow higher Robo-advice to retirees: ScoMo The introduction of tax cuts by US helping propel the President Donald Trump and optim- Dow 9.5 per cent ism around consumption could spark a higher since the reckons it’s a super opportunity further rally in US markets, after the November 8 presi- Dow Jones Industrial Average burst dential election. through 20,000 points for the first time. Rising profits The Dow’s milestone marked a near- and an improving ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● Fleur Anderson The government is considering big eight-year bull market run on Wall global economy changes to Australia’s 500 privacy and Street that has been bolstered by helped tip the blue-chip index over the Treasurer Scott Morrison has secrecy laws, which could allow busi- investor optimism about the outlook historic level. endorsed ‘‘robo-advisers’’ offering nesses and the government to capitalise for the world’s largest economy and Mr ̈ Full report Companies p15 cheap automated superannuation on the ‘‘enormous untapped potential of Trump’s plans to slash taxes, gut regu- ̈ John Authers It’s fake news p27 advice as the next step in Australia’s Australia’s data’’ by giving customers lation and unleash a $US1 trillion ̈ Markets It got there - finally p28-29 financial industry, and has urged con- more control over their personal ($1.3 trillion) infrastructure package, ̈ Karen Maley Investors’ big bet p30 sumers to overcome their privacy fears information and giving greater access to about business and governments shar- ‘‘anonymous government-held data’’. ing personal data. His government was ‘‘keenly aware’’ As the Turnbull government contin- of the financial opportunities of data- Renewable targets ues to battle controversy over Centre- sharing, Mr Morrison said in his clearest unachievable: ERM Fresh faces link’s ‘‘robo-debt’’ letters, Mr Morrison response to date to the Productivity has been spruiking, to his international Commission’s proposed liberation of Exclusive |ThefounderofERM Hot new counterparts, the commercial and government and consumer data. Power, one of the country’s largest elec- wristwear economic opportunities offered by The Productivity Commission, tricity retailers, says Australia has no Life & Leisure automated services and sharing of con- which will deliver its final recommend- chance of achieving its Renewable Britain’s Chancellor of the Exchequer liftout sumer data. ations to the government in March, has Energy Target of 23 per cent by 2020, Philip Hammond with Scott Morrison. ‘‘One of the prime examples is robo- been overwhelmed with feedback from meaning customers will be forced to advice, which has the potential to offer businesses, agencies and individuals pay higher prices for no environmental financial advice to a wider cross- ple engage and prepare more fully for about the future use of consumers’ gain. Amid growing unrest from busi- section of the community,’’ Mr Mor- retirement.’’ data, receiving almost 350 formal sub- ness about the push towards clean rison told a G20 conference in Ger- Mr Morrison plans to encourage missions to its inquiry. energy, Trevor St Baker said the Turn- many. more robo-adviser start-ups in Austra- Mr Morrison said that while con- bull government might have to con- ‘‘In Australia, businesses are begin- lia by giving them greater scope to test cerns about consumers’ privacy were sider amending the legislated RET of ning to integrate robo-advice into the their services in the market without ‘‘understandable’’, it was important 33,000 gigawatt hours again. retirement savings system to help peo- facing the costs of regulatory licensing. Continued p7 ̈ News p3 AFRGA1 A001 2 Friday 27 January 2017 News The Australian Financial Review | www.afr.com AFR

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● ̈ Keep up with breaking stories at afr.com

Contents Top stories

World ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● 12 News Companies & Markets ●●●●●●●●● 15 Facebook moves to flush out fake news PageTwo Jennifer Hewett Street Talk ●●●●●●●●●●●●●●●●●●●●●●●●● 16 Facebook is overhauling the way its users are Financial Services ●●●●●●●●●●●●●●● 19 shown ‘‘trending’’ topics as part of its continuing Tables ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● 21 battle to stamp out fake news spread across the

Financial Times ●●●●●●●●●●●●●●●●●● 27 social media platform. p9 ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●

Markets ●●●●●●●●●●●●●●●●●●●●●●●●●●●●● 28 ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● [email protected] Property ●●●●●●●●●●●●●●●●●●●●●●●●●●●● 31 World Letters/Rear Window ●●●●●●●●●● 35 White House advances oil pipelines Features ●●●●●●●●●●●●●●●●●●●●●●●●●●●● 36 While US President Donald Trump works to Editorial & Opinion ●●●●●●●●●●●●● 38 advance two controversial oil pipelines – Dakota Chanticleer ●●●●●●●●●●●●●●●●●●●●●●●● 40 Access and Keystone XL–awar’sbeing fought in Japan sensitivities lost in translation Washington over a whole other set of lines: natural Companies index gas ones. p11

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●

ANZ Bank ●●●●●●●●●●●●●●●●●●●● 19 Financial Times The Japanese rightly pride themselves attempting to use the framework of the least temporarily, despite regular and May to release detail on Brexit plans on their sense of order, predictability TPP as the standard. That’s even increasing Chinese appearances in Bendigo Bank ●●●●●●●●●●●●● 19 Theresa May has bowed to pressure from Labour, and loyalty. though any prospect of agreement Japan’s declared territorial waters.

CBA ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● 19 the Scottish nationalists and her own backbenchers They are also known for particularly between the parties remains an even That’s in part due to the patrolling to publish a white paper setting out the nuanced public statements. more protracted proposition. Japanese coast guard and Japanese Charter Hall ●●●●●●●●●●●●●●●● 31 government’s plans for Brexit in greater detail p27 But all of a sudden they are having to But while all that is deeply unsettling self-defence forces, but also because of ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● accept that their closest ally is for the Abe government, its national the backing of the US and a clear US Cimic Group ●●●●●●●●●●●●●●●●●17 Property determined to upend all of that interest is more directly threatened by statement the Senkakus were covered

Dexus Property ●●●●●●●●●● 31 Lendlease’s elephant in south London predictability in the two areas most the interplay of the Trump under its security treaty with Japan. Behind much of Elephant & Castle’s transformation important to them – security and trade. administration and the various But Japan, like its neighbours, has Dick Smith ●●●●●●●●●●●● 15, 20 in south London is Australian developer Lendlease, And to do so in a rash and dangerous security threats in the region. remained outraged by China’s steady way while Donald Trump focuses on The fear in Japan about the nuclear militarisation and reclamation of Domino’s Pizza ●●●●●●●●●●●●17 playing out his own emotive attacks on intentions of North Korea is very islands in the region over the past

Fortescue ●●●●●●●●●●●●●●●●●●●●●●● 4 domestic critics and the media. striking. There’s concern that Kim several years. Along with the rest of the world and Jong-Un will use the instability in the The common view in Japan was the G8 Education ●●●●●●●●●●●●● 18 much of the American population, the South Korean government and the Obama administration was too willing

LNG Ltd ●●●●●●●●●●●●●●●●●●●●●●● 18 Abe government is struggling to adjust change of US leadership to focus even to ignore this provocation for too long. to the radical change in rhetoric and more on his nuclear testing program in Although the US eventually started Macmahon ●●●●●●●●●●●●●●●●●●17 direction coming out of the Trump awaythatwillbringonsometypeof paying more attention and increasing administration. Yet nowhere is the crisis. The planned deployment of an its naval presence, including NAB ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● 19 contrast in style more obvious and advanced US missile defence system in conducting freedom of navigation

Qantas ●●●●●●●●●●● 1, 2, 35, 40 more pointed than in cautious Japan – South Korea is also strongly opposed exercises over the past couple of years, especially given the country’s long- by China. it came too late to stop China’s massive Redflow ●●●●●●●●●●●●●●●●●●●●●●●●●● 8 term strategic relationship and building, especially in the Spratly and reliance on the US alliance for security Paracel Islands. Rio Tinto ●●●●●●●●●●●●●●●● 17, 30 which was appointed by Southwark Council in 2010 and for agreed international rules of The new concern is The new concern is that China may Think Childcare●●●●●●●●●● 18 to demolish the Heygate Estate and build around trade and commerce. try to extend its reclamation activities 3000 homes, 50 shops and restaurants and a park, Suddenly, all of that is now under China may try for a to the Scarborough Shoal near the Virgin Australia ●● 35, 40 planting 1200 trees. p33 imminent threat. neat triangle of Philippines to complete a neat triangle

Westpac ●●●●●●●●●●●●●●●●●●●●●●● 19 The typical Japanese mode is to of maritime control. As yet, there’s no demonstrate patience rather than any maritime control. sign of this while China assesses the Woolworths ●●●●●●●●● 15, 20 Comment&Opinion immediate reaction. But that’s not the new Philippines President Rodrigo reason behind the quick refusal of the Duterte as well as the possible Trump Yancoal ●●●●●●●●●●●●●●●●●●● 17, 30 Karen Maley Japanese to agree with Australia in But it’s how to respond to China’s reaction. But Japan is on red alert. Betting on Trump promises promptly promoting a Trans-Pacific activities in the East China and South That means most in the Japanese Weather Investors figure that while rising US Partnership agreement minus the US. China seas that’s a continuing drama in government would welcome an even protectionism would hurt the global Japan just doesn’t think this would the Year of the Rooster. stronger US presence in the South Local economy, the effect on the US would be minor. p30 be worth it given the deal was as much The new US Defence Secretary, China Sea, including more freedom of Brisbane ●●●●● shower or two, 30 ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● aguaranteeofgreaterUSengagement James Mattis, is due to visit Japan next navigation exercises, as a clearer Sydney ●●●●● possible shower, 28 Ben Wellings in the region as an economic advance. week to discuss China and North Korea message to China that enough’s Canberra ●●●●●●● partly cloudy, 32 Be wary of the odd couple Nor does Shinze Abe want to kill off the –and,nodoubt,Trump’sviewthatUS enough. They would also welcome Hobart ●●●●●●●● cloud clearing, 25 achievements of the TPP and the allies should contribute more to their Australia joining in although Japan is Melbournebecoming sunny, 27 As far as the emergent Anglosphere (illusory) prospect of a change of heart own defence. This early sign of US not urging this – especially as it doesn’t Adelaide ●●●●●●●●●●●●●●●●●● sunny, 31 is concerned, Australia needs to from the US at a later date. commitment will help reassure the conduct such exercises itself. Perth ● humid, mostly sunny, 34 develop literacy and fluency in three languages –

Darwin ●●●●●●● possible storm, 31 British, American and European – and not get Instead, Abe will be waiting for his Japanese government. But there’s a lot But Japan does want ever more open World dragged along by the needs of an odd couple. p39 own meeting with Trump next month to be reassured about. naval collaboration between the US, London ●●●●●●●●●● mostly cloudy, 8 to clarify the position while still The Abe government had already Australia and itself, including more ●●●●●●●●●●●●●●●●●●●●●●●●●●sunny, 9 officially appealing for American overcome the extreme sensitivity in joint maritime exercises, as a Frankfurt ●●●●●●●● mostly sunny, 3 support for the TPP. Japan to any form of military activity combined show of international

●●●●●●●●●●●●●●●●●●●●● Subscriptions Moscow snow, -2 He will wait some time – months if by liberalising the rules under which engagement and counter to China. New York ●●●●●●●● mostly sunny, 7 Subscribe today to the AFR not longer – before committing Japan Japan could participate in collective But what it fears most is any form of Los Angeles ●●●●●●●●●●●●● sunny, 18 For new subscriptions, including newspaper to a new path on trade. That might ‘‘self defence’’ and increasing the incident that might escalate on either Tokyo ●●●●●●●●●●● mostly cloudy, 14 home delivery & unlimited digital access Hong Kong●●●●●●●●●●●●●●● sunny, 21 include some form of a bilateral deal, spending on defence, albeit from a base side. For Japan, as for the US, brash (including iPad app), visit afr.com/subscribe or Singapore ●● thunderstorms, 30 albeit as an inferior alternative. the Americans will consider is still way unpredictability is its alarming call us 13 66 66 Beijing ●●●●●●●●●●●●●●●●●●●●●●●sunny, 4 It will also inevitably include more too low. new norm.

Jakarta●●●●●●●●●●●●●●●●●●●●●cloudy, 31 Contact us urgent attention on trade negotiations Earlier alarm over Japan’s Senkaku ●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●● Wellington ●●●● mostly sunny, 20 For current subscriptions and customer service for the Regional Comprehensive Islands – also claimed by China as the Jennifer Hewett is in Japan as a guest of Johannesburg ●●●●●●● t/storms, 26 inquiries call 1800 646 990 Partnership that includes China, while Diaoyu Islands – has eased a little, at the Japanese government.

is $US371 million ($489 million). aircraft? And do you cannibalise your From page 1 Airline customers routinely secure Dallas service?’’. material discounts in their purchasing Mr Joyce is determined to ask differ- Qantas plans to fly contracts. ent questions. ‘‘How does the market London, NYC direct Qantas will stage a fiercely competit- change with evolving capability? We ive tender between Boeing and Airbus used to make multiple hops to America for the new sub-fleet and Mr Joyce will at least 300 passengers. ‘‘At the concede no preference for one over the moment, Sydney-New York is probably other. ‘‘If I did [have a preference], I Sydney-New York is OK but Sydney-London is hard for both wouldn’t be telling you anyway.’’ probably OK but aircraft,’’ Mr Joyce said. CAPA Centre for Aviation chairman However, he remains confident the Peter Harbison believes the bilateral Sydney-London is longer mission will ultimately be trade relationship between Washing- hard for both aircraft. realised by the manufacturers’ ton and Canberra will likely see the Alan Joyce, Qantas CEO programs. 777-8 win out. ‘‘Qantas [mainline] is Singapore Airlines will launch basically a Boeing company with a few 19-hour flights from the city-state to A380s.’’ on Super Constellations through Fiji New York in 2018 with the first Mr Joyce’s predecessor, , and Hawaii, then we became the A350-900ULRs. Doha-based Qatar Air- was widely criticised for shunning biggest international airline at LAX ways has been operating the A350-900 earlier iterations of the 777 in favour of [Los Angeles Airport]. The fact is, a since January 2015. A380s and extended range 747s, the 3D rendering of the Boeing 777X, a new series of the Boeing 777 family under large element of our Australian traffic The 777X remains a ‘‘paper plane’’ last of which arrived in 2003 and will development. There will be two variants; the 777-8 and the 777-9. PHOTO: BOEING connects to the US east coast. (yet to fly), with Germany’s Lufthansa be fully depreciated when the 777-8X ‘‘It’s all still theoretical at this point its likely launch carrier. Its range spe- begins flying. with the 787.’’ received its first partnership, which really covers but we could never replicate [Emirates’ cification is 700 nautical miles greater Airbus’s advantage, Mr Harbison Dreamliner in 2011, four years late. Europe and it would take a fair bit to or American’s] networks ourselves and than its Airbus equivalent. said, is ‘‘actually having a real plane, or Regardless of the new technology, disrupt the relationship with American that remains true with the 777X in the The list price of the A350-900ULR something pretty close to it. That’s a Harbison questions whether the [Airlines], which has been very suc- mix. Our partners are aware of our remains a trade secret although it will telling point if Qantas wants to be sure ground-breaking new routes are com- cessful. What is the cost and the value future ambitions and are comfortable not differ greatly from the 777-8, which this time and not muck around like mercially feasible. ‘‘It’s got an Emirates of flying to New York with quite a heavy with them.’’ AFRGA1 A002 Internet addiction Jack Ma Future cars It’s a thing Exporting Alibaba Self-drive and beyond

FEBRUARY 2017

Qantas is preparing to fly non-stop to London. Flight of fancy or a step-change in aviation? By Joe Aston

Team Qantas: (left to right) industrial designer Marc Newson, chef Neil Perry, CEO Alan Joyce and fashion designer Martin Grant. FLIGHT RISK

Left to right: Key players in the Qantas rejuvenation are industrial designer Marc Newson, chef Neil Perry, chief executive Alan Joyce and fashion designer Martin Grant.

24 THE AFR MAGAZINE | FEBRUARY In the pallid suburbs of Nagoya, Japan’s fourth-largest and easily most boring city, chef Neil Perry and industrial designer David Caon fuss over the still-warm prototypes of Qantas’ new premium crockery. The two Australians are standing in a windowless, harshly lit room on the evergreen corporate campus of tableware An audacious plan to fly giant Noritake, encircled by shelves of ornate tableware and non-stop from Perth to flanked by master designer Tomohiro Kato, august in his London could transform tweed and suede. Noritake has made inflight tableware for Qantas since 1962, for home flag-carriers ANA and JAL even long-haul travel from longer and, more recently, for Emirates and British Airways. this remote continent “I think this has the most potential to be timeless,” Caon – and Qantas is pulling suggests of an elegant white bowl mottled with a hand-painted out all the stops for its motif. “The early transfers came out looking like clouds. It’s March 2018 lift-off. too obvious a reference, but we thought we’d test it anyway.” Will Australians buy it? Weight loss is the permanent obsession of a business that spends more than $3 billion each year burning jet fuel, and this kit is 20 per cent lighter than designer Marc Newson’s

Story ● JOE ASTON Photograph ● NIC WALKER architecturally notable predecessor. “It’s difficult – porcelain weighs what it does; so you have to find quite unique and ingenious ways of making the product lighter without compromising utility or quality,” says Caon. One is to reduce the number of pieces – Newson’s set had 18, Caon’s will have 16 – by improving their versatility. Rockpool Group’s Perry has just clocked up 20 years as creative director of food and beverage at Qantas, while Caon is a relative newbie; Newson’s former apprentice was engaged just 12 months ago to lead the design project for the airline’s long-awaited fleet of 787 Dreamliners. While the new tableware will be ubiquitous at the pointy end aboard Qantas flights and in its lounges by late 2017, the impetus for this redesign was singular: the arrival of the new Dreamliners and the commencement of their non-stop flights from Perth to London. Qantas is promoting its radical rejuvenation of the Kangaroo Route, the Aussie to Britain pilgrimage it pioneered in 1947, as an historic step change in international travel. Those daily flights – 14,498-kilometres in 17 hours – won’t begin until March 2018, yet for cabin crew to begin training in July, Caon and Perry must give the green light for mass production of the tableware within a fortnight of this December meeting. Wearily, Caon rattles dishes that are supposed to jigsaw snugly together. There’s refining to do yet. That’s the airline business for you: millions of moving parts – from the jiggering of a butter tray to the density of a blanket weave – that passengers never see, all in an excruciatingly permanent state of tweak and iteration.

Alongside the automobile, the jet aeroplane was the 20th century’s most significant innovation in civil transportation; as seminal as public medicine’s mass prescription of penicillin and the development of communications through radio, TV, personal computing and mobile telephony. But since Boeing’s iconic 747 jumbos first took to the skies in 1969, advances in the fundamentals of commercial air travel have been at best incremental, at worst cosmetic. More than four decades later, it still takes nearly a full day to travel from Australia to Europe or New York. The speed, range and size of new aircraft types has barely changed, besides the Concorde, whose cost per passenger, let alone patchy safety record, rendered its operation unsustainable. “Technology has been the friend, and then for a while probably the enemy, of Qantas,” its chief executive Alan Joyce tells The Australian Financial Review Magazine in his open- plan office on the perimeter of Sydney Airport. “The 707 really changed the world, allowed us to fly routes we could only have imagined. The 747 democratised air travel. But then over time, technologies helped the hub carriers develop the one-stops to Europe, very much to our detriment.” Joyce is alluding to the 1980s rise of carriers in Asia and then, in the 2000s, the Persian Gulf. Their economics were superior thanks to lower labour costs and alleged state subsidy, while their geography allowed them to hub passengers

FEBRUARY | THE AFR MAGAZINE 25 Left: David Caon and Neil Perry, right, mull over tableware options with master designer Tomohiro Kato at the Noritake factory in Nagoya, Japan.

Below: Qantas Boeing 747s began service in 1971; the luxurious first class upper-deck lounge.

through to multiple endpoint destinations the endpoint and have an hour to shop duty-free.” Harbison estimates that carriers couldn’t individually cover. merely announcing the Perth-London route garnered Qantas Joyce can afford to sound phlegmatic. He’s about to preside at least $1 million in publicity. “This was global news because over the biggest change to the airline’s international network it’s got that magic about it, linking the Antipodes, particularly since 1959, when Qantas was the first airline to operate for Australians. This sort of thing – doing things first – is really Boeing’s inaugural passenger jet service between Australia good for establishing a premium brand in the market.” and the US. The Perth to London route will be a seismic Still, it’s a calculated gamble, one that Qantas’ global advance for Western Australia, materially eroding its isolation. competitors will be watching. To generate sufficient returns on Qantas will count on St Georges Terrace giants such as the hub investment and on its fixed costs, Joyce will want to Wesfarmers, Woodside Petroleum, Rio Tinto and BHP, to add a second daily Perth to London flight – or flights to Paris heavily frequent the new service. or Frankfurt – with subsequent 787 deliveries. He’ll also be For Sydneysiders headed to London, the journey time via counting on getting the improved operating economics Perth will be no quicker and the fares, even on Qantas, likely promised by Boeing and the 30 per cent productivity cheaper via the Middle East or south-east Asia. But from improvements negotiated with his pilots. He isn’t in doubt. Melbourne the advantage is clearer. The Perth-London flight “This thing is going to be amazing for us.” will originate in the Victorian capital, where outgoing Harbison is more sceptical, pointing to the fuel inefficiency passengers will clear Australian customs and immigration and of such long flights – carrying more fuel burns more due to the then travel in the same seat all the way to Heathrow, with extra weight – and the generous configuration at the back of exclusive access to a dedicated new transit lounge in Perth. this bus. “If you’re having to lose 10 per cent of your economy Caon has just started designing that lounge, his early seating to have a bigger seat pitch then you’re largely offsetting concept involving “an amazing and very, very high ceiling” the aircraft’s cost advantage,” he says. “It’s going to be fragile, together with a large outdoor space. Fresh air and sunshine but it’s a good tester. Two years ago, these planes were going will be restorative, especially for jetlagged travellers just off to Jetstar so there’s obviously been quite a shift in the [Qantas] the long leg from Europe. “Without leaving the airport we Group’s thinking. They must believe they can leverage a Strangely, peer-reviewed science on high-altitude health has can get a little bit of nature back into our customers,” he premium out of them.” long been applied to the workflow of pilots, but never in the promises. Inbound customers will enter Australia through a Joyce explains that thinking: “Ours is deliberately configured context of their human cargo. Joyce has thrown big bucks – Qantas-only border facility, avoiding customs halls in to have a high premium seat count and the economics will he won’t say just how many – at the University of Sydney’s Melbourne or Sydney. work very well as a consequence – provided we fill them.” Charles Perkins Centre to fund research into passenger health Peter Harbison, executive chairman of CAPA Centre for Flying farther than a 747 or A380, but with two engines on ultra-long-haul flights. It’s studying the timing and Aviation, says Perth Airport is “stupidly arranged” and that instead of four, will also help when the oil cycle turns again. composition of meals, the effects of cabin lighting and the Qantas investment will give it “a much-needed kick”. The That said, Joyce is mindful that to many customers, 17- temperature, sleep sequencing and seat and bedding textiles. Liberal Barnett government has committed $14.5 million to hour flights don’t sound the least bit Elysian. On the upside, “There’s no medical evidence to suggest punctuating a upgrade Qantas’ terminal at Perth Airport. “I think most the 787 is the first commercial airframe made of light-weight really long journey with a stopover is preferable to a single people who’ve been through Dubai recently will appreciate composite materials, its fuselage principally carbon fibre. hop,” Joyce says. “But we also know we can’t just ‘stretch’ that Perth is a far nicer place to transfer,” Harbison says. Thus the cabin is less pressurised and more humid, with larger the service plan from a 12-hour flight to fit 17 hours.” “Although some will still prefer to hub through Singapore windows for more natural light – all of which reduces jetlag. Adds Perry: “We’re asking [researchers] questions like ‘do ANT GEERNAERT ANT 28 THE AFR MAGAZINE | FEBRUARY we feed passengers first or do we put them straight down to laminates. Even the bulkhead furniture, the monuments in sleep?’ And we’re learning what kind of ingredients are front of the seated passenger, are bespoke.” Then there’s Caon’s preferable for energy, for digestion and all of those bodily new premium economy seat, to begin standard on the 787 then processes that flying interrupts.” Eventually, Joyce says, the be introduced across the fleet. Its dimensions and properties are research will inform the timing of meals, lighting, a heavily guarded secret but Joyce has already declared it will announcements and new communication with passengers be “streets ahead of anything else out there”. Aviation gossip before and after their flights. claims the chair, by Belfast-based industry newbie Thompson Aero Seating, will collapse cushion and back for a hammock- In the fiercely competitive and capital-intensive global like sleeping pose. On this, Qantas would not entertain AFR airline industry, “innovation” is no empty slogan, but a Magazine’s repeated requests for confirmation. trillion-dollar fight for advantage – if not survival. So while Newson, meanwhile, has remained with Qantas as Qantas will be the first airline to fly non-stop between consultant designer while dreaming up editions of the Apple Australia and every populated continent on earth, Europe Watch and various heirlooms for the storied French house of included, its competitors aren’t sitting still. . He led the rollout of Qantas’ Next-Generation Emirates launched the world’s longest flight last October, check-in and more recently has been thinking about the next flying 14,200 kilometres on an Airbus A380 between Dubai big refit, post-Dreamliner – that of the A380. He returned to and Auckland in 16.5 hours, in the process eclipsing Qantas’ Australia late last year to reveal his new version of the airline’s marathon Sydney-Dallas route. Later that month, Air India iconic kangaroo logo and master typeface. snatched the mantle by changing the direction of its Delhi-San “None of us wanted to do anything gratuitous,” Newson Francisco services from westward over the Atlantic to eastward tells us, also in Joyce’s Sydney office. “That would be over the Pacific. Its Boeing 777-LR now flies 15,127 kilometres disrespectful to the heritage of the graphic and the iconography. in 14.5 hours, thanks to favourable directional winds. When you’ve only changed it five times in your history, you Air India’s record won’t stand long. Singapore Airlines will have to be sure. But there was a certain amount of reinstate its Singapore-New York route in 2018 when it takes streamlining.” delivery of the Airbus A350-900’s ultra-long-range variant. Paris-based Australian fashion designer Martin Grant That journey is 16,500 kilometres and will take 19 hours. worked with Newson on the new tail and typography and has Airbus could not have timed the entry into service of its created new pilot uniforms and pyjamas for long-haul US$400 million A380 better – it was 2007 in the froth of a premium passengers. He became the airline’s fashion director, bull market. Travellers were agog at the aircraft’s enormity, conceiving its cabin crew uniforms, in 2014. Top: The more streamlined quietude and unprecedented luxury. Designing the pilots’ threads through Qantas kangaroo was Singapore Airlines installed private suites 2015, he was heavily influenced by launched in late 2016. with double beds in first class. Emirates “There’s no medical Leonardo DiCaprio’s Pan Am costume in Above: The new Dreamliner upped the ante with showers, while in 2014 evidence to suggest Hollywood film Catch Me If You Can. business-class pods. Etihad unveiled a lavish “residence” on its punctuating a really Funny that a decade after the 2002 release new A380s. long journey with a of Steven Spielberg’s box office hit, Joyce But while the “superjumbo” delivered stopover is prefer- was metaphorically on the run. Australia’s greater amenity and capacity, the hype able to a single hop.” most hated businessman grounded the failed to translate to super profits for Alan Joyce, Qantas CEO entire Qantas fleet on Derby Day in 2011, a first-half profit estimated to be between $800 and $850 airlines, nor a bulging order book for leaving 80,000 passengers around the globe million. The reversal of fortunes has enabled Joyce to push Airbus. While perfect as a ferry between stuck for days at airports, and throwing the the button on the comprehensive product and service London’s Heathrow and New York’s John F. Kennedy, or itineraries of world leaders in Perth for CHOGM into disarray. overhauls, central to which is the calculated gamble of the Sydney and LAX, it was too big for most city pairs. His 32,695 employees, including pilots, engineers and Perth to London flight. Luckily for the Franco-German aerospace giant, Emirates baggage handlers taking protected industrial action, were “We couldn’t have done this a few years ago,” he says. ordered 142 of them, 87 of which are already in service. Joyce reeling, just as loyal customers fled to competitors. The Qantas “We had to get our product right, our customer service right, inherited an order of 20, but trimmed it back to 12. “The lead share price plummeted to near $1, where it would languish for our financial position right, so we were putting a new brand times for new aircraft are huge – [former Qantas CEO] James another two years. In Canberra, loathing for the Jetstar on something that is actually new. Now there are new Strong ordered the A380 [in 2000], Geoff Dixon took delivery founder was fanatical, with a Labor government in lockstep uniforms for the pilots, the cabin crew, there are new seats; of the first ones and the last of them arrived on my watch.” with an apoplectic trade union movement. you know, it’s all starting to come together.” Meanwhile, over at Boeing, the development of its Joyce was already being ridiculed for his roster of bizarre So, are direct flights between Perth and London an Dreamliner was delayed by the 2008 collapse of Lehman turnaround plans for the Qantas Group: first a joint venture overblown trinket or a radical reset of global flying? Brothers. “That gave airlines, including us, a moment of pause with AirAsia’s Tony Fernandes, then a new Asia-based “You walk before you run,” Joyce says. “We need to show when it came to ordering new aircraft,” Joyce understates. greenfield brand, dubbed Red Q, of flatbed-only, single-aisle that it can work, that the economics are what we’ve been All Nippon Airways took delivery of the first 787 in 2011. planes, a thought bubble whose prospects of regulatory told.” Joyce goes on to give his strongest indication yet that There are now more than 400 in operation around the world, approval in either Singapore or Kuala Lumpur was always nil. the Qantas board is considering ordering the A350-900ULR with JAL, United, Qatar, LATAM Chile, Air India and Air Two years later, in August 2014, Qantas posted an historic (entering service in 2018) or the B777-8X (from 2021) which, Canada all flying more than 20 each. $2.8 billion statutory full-year loss, having laid waste to unlike the Dreamliner to date, could operate non-stop services Qantas has long pinned its hope on the Dreamliner. Dixon passenger yields defending its inviolable 65 per cent “line in from Sydney and Melbourne to London and New York. That ordered the 787 in 2005, for delivery in 2008. Jetstar got its the sand” of group domestic market share against Virgin, led could be the true game-changer. first in 2013, and it now has 11 of the stubbier Dash 8 variant by John Borghetti and drunk on foreign capital. The following “We’re still working through it, but they will be phenomenal serving international leisure destinations such as Bali, Hawaii, morning, esteemed business columnist Adele Ferguson pushed aircraft,” is all Joyce will say. Japan and Thailand. for Joyce’s resignation on the front page of Fairfax Media’s Harbison surmises: “I think Sydney-London [on the 777- Qantas is still waiting. Its first two Dash 9 Dreamliners will Sydney Morning Herald (Fairfax also publishes The AFR 8X] becomes quite magical, and more sustainable financially. fly the Melbourne to Los Angeles leg, replacing ageing 747s, Magazine). In the cockpit, seemingly navigating the winged But when you’re buying big boy’s toys, you’ve got to think a from December. When the third and fourth arrive in March kangaroo into a mountain, the Irish-Australian was all but a long way out. I would think mid-2020s. And at the same 2018, the fleet will rotate between LA, Melbourne, Perth and dead man flying. time, you’ve got these nasty analysts warning you not to put London. A further four will arrive before mid-2019. “Everyone was baying for blood,” Joyce remembers, plainly too much capital in the pipeline.” Caon – who helped steer Qantas’ A380 project from without relish. “Everybody’s heads were down. But one thing Thankfully for Joyce, he can point them to his record profits Newson’s Paris studio a decade ago – has, since late 2015, resonated: we said we could make this the biggest corporate and the resumed dividend, and keep making best-laid plans. ● quietly been constructing the aesthetic of the interior, designing turnaround in Australian history.” Joe Aston worked for Qantas Airways between 2007 and everything from the seats to the galleys to the curtains. “This After stripping $2.1 billion of costs out of the business, 2009, and at Etihad Airways in 2010 and 2011. Before has been a really quick project,” he says. “By comparison, the Joyce delivered profit before tax of $975 million the following joining The Australian Financial Review, he consulted to A380 took us five years. This isn’t as extensive because there year, and a record $1.53 billion in August 2016, when the Air New Zealand. Aston and photographer Ant Geernaert simply isn’t as much space, but we’ve designed carpets, fabrics, board reintroduced the dividend. In February he’ll hand down travelled to Japan as guests of Qantas.

FEBRUARY | THE AFR MAGAZINE 29