KEY POINTS:
British Airways kicked off the revamp of its long-haul fleet yesterday, agreeing to buy a significant number of state-of-the-art aircraft, including 12 of the new Airbus superjumbos and 24 Boeing Dreamliners, at what is likely to be a knockdown price.
It is the biggest order the airline has placed in nearly a decade and provides it with some good news after a difficult summer, due to the strikes and wave of criticism of Heathrow airport, and the record fines levied by British and US regulators over fuel surcharge price-fixing.
The company has also secured an option to buy a further seven Airbus superjumbos and 18 Boeing 787s as part of the deal and will continue to consider further upgrades. BA said the list price of the 36 planes - about US$320 million ($423 million) per Airbus A380 and US$180 million for the Boeing 787 - totalled US$8.2 billion.
However, the airline has picked up the aircraft at a heavily discounted price due to problems developing the Airbus A380 that have delayed the launch of the world's largest passenger aircraft by two years, and the fierce competition between the two aircraft manufacturers.
Deliveries of the new aircraft will begin in 2010.
Andrew Fitchie, an analyst at Collins Stewart, said BA was likely to have paid about £3 billion ($8 billion), representing a 25 per cent saving on list prices. At that level, he said, the cost of purchasing the new aircraft was in line with BA's guidance that it will spend around £900 million a year in capital expenditure. BA has already secured US$1.5 billion in debt financing to fund its firm orders to late 2011.
Willie Walsh, BA's chief executive, said the deal had been dependent on resolving the company's large pension fund deficit but that the timing of the contract had worked out well.
The long-awaited move by Europe's third-largest airline represents a coup for EADS, Airbus' parent company. BA has previously used Boeing only for its long-haul fleet and the decision to split the order between the two rivals came as a surprise. It is the first order from a new customer that Airbus has won in almost two years and, says Airbus' chief executive, Tom Enders, was a "breakthrough" deal.
Walsh said the decision to order both the giant Airbus A380 and the smaller Boeing 787 Dreamliners to replace BA's ageing fleet of 747 jumbos, represented a "perfect fit" with the company's growth strategy. He expects the new aircraft to increase the airline's capacity by about 4 per cent a year, helping it to keep pace with growth at rivals such as Virgin Atlantic.
He said the Airbus superjumbos would better serve routes between London and destinations such as Hong Kong, Los Angeles and South Africa, where BA needed to maximise its capacity, whereas the Dreamliners would better suit routes such as New York where the frequency of flights was important.
The new aircraft were the most fuel efficient on the market and also the quietest, he said.
The BA chief executive denied he had been under any political pressure to place an order with Airbus to safeguard British jobs.
- Independent
