Airbus, Boeing in Bidding War for BA Mega-order
Jan. 19, 2007
British Airways is planning to spend pound stg. 1 billion a year over the next 15 years to update its ageing fleet.
The massive order for up to 135 long-haul aircraft, which BA hopes to announce in about three months, has triggered an "aggressive" bidding war between Boeing of the US and its European rival, Airbus.
The Franco-German aircraft maker is understood to be offering big discounts on the list prices of its airliners to cover the cost of retraining BA pilots and engineers.
Historically, BA's long-haul fleet has been exclusively Boeing - mainly the 747 and the 777 - but senior executives have disclosed that the airline is considering shifting to an all-Airbus fleet.
BA has even altered its view on the A380 in a move that could provide an enormous boost for Airbus's troubled superjumbo project. The airline rejected the A380 seven years ago when it was launched, saying that the 550-seat double-decker aircraft did not fit in with its plans. However, growth in the airline market could now make the A380 viable, BA executives said.
Analysts said that Boeing remained the likely winner, but a competitive bid from Airbus would force Boeing to offer a more attractive price. Delivery of the new fleet will begin in 2009, with BA buying or leasing an interim order of 777s to boost capacity and allow it to open new routes. The airline is hoping that these new aircraft will enable it to increase passenger numbers by between 3 per cent and 4 per cent a year.
From about 2012 the airline will start to replace its older stock. It has decided to delay the fleet replacement so that all the new aircraft bought until that time can be used to increase capacity.
By bridging the order, BA will also be able to wait until the next generation of aircraft is available. This means that it will be choosing between the Boeing 787 Dreamliner and the Airbus A350 and between the 747-8 and the A380 - none of which is in commercial operation. These next-generation aircraft will help the airline to reduce its operating costs because of their fuel efficiency. They will also have lower greenhouse gas emissions, which is a vital issue for airlines.
Howard Wheeldon, of broker BGC, said: "BA used to pride itself on having the youngest fleet in the skies, but it hasn't bought a new plane in years and now has an ageing fleet.
"There are cost, environmental and, of course, image considerations that mean these new planes are necessary."
BA has been forced to delay buying aircraft until its pound stg. 2.1 billion pension deficit is resolved. A deal is being negotiated with trade unions, and airline management is confident that it will be settled soon.