British Airways Selects 777-300ER

After pondering an order for months, British Airways finally joined the burgeoning club of Boeing 777-300ER customers by announcing a deal to buy six of the airplanes with options on four more.

While discussing first quarter results in which fuel costs have risen by 49%, the carriers profits nosedived over 85% to just £37m.

Earlier on this week, low fares rival Ryanair also posted abysmal results.

“We have ordered six new Boeing 777-300ER aircraft for delivery beginning in 2010. They are 23 per cent more fuel efficient than the Boeing 747-400 and give us additional flexibility in the longhaul fleet,” says CEO Willie Walsh.

Surprising is the absence of reference to any potential order for the A350-1000, which despite being the largest Airbus twinjet, is still smaller than the 777-300ER and not available until 2015 or beyond at the earliest. BA’s decision may have partly been influenced by the inherent success of the 777-300ER and also the favourable 2010 slots, just a year after it takes delivery of 4 Boeing 777-200ER’s (2009).

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As opined several months ago, the decision to select the 777-300ER is one that BA could ill afford to miss out on. It could have chosen to wait for the A350-1000 yet miss out on lucrative cost savings on the 777-300ER, which still has the advantage of being able to haul at least an extra 6 tons of freight (based on Emirates configurations/mission rules).

BA’s reliance on underbelly freight capacity would have taken a major hit with the A350-1000, and while the said airplane itself struggles to overcome weight and range issues, BA’s selection of the class winning 777-300ER was almost a “foregone” conclusion. Just looking at BA’s figures today, it reported a jump of 21% in cargo revenue - nothing to be snubbed in a climate of high competition and rising fuel costs, which the carrier cites as being the equivalent of £8m a day.

Qantas too had been eyeing the 777-300ER in the wake of the 787 delays and as an alternative 350-seater to fly selected Pacific-Rim routes. Given BA’s early slots for the type, and the recent management change at Qantas, we may yet see the Australian carrier buy the big Boeing twin, although there is no guarantee that it could get similar delivery slots.

Willie Walsh had mentioned previously the “flexibility” he had for airplane orders, particularly since BA too is on standby while the 787 has yet to be delivered. It may well appear that BA’s relationship with GE may also be on the mend. Should we expect to see a 747-8I order?

 

It’s a distinct possibility given that BA had no choice in the engine selection of the 777-300ER.  As the airline prepares to phase out some of its oldest 747-400’s and with a projected service entry of 2010 for the 747-8I, Boeing still has an outside chance to fill the void beneath the airlines A380-800’s (due for delivery in 2012) and its 777-300ER fleet.

Pending a merger with oneworld partner, Iberia, the likelihood of the Spanish carriers A340’s being dropped in favour of more 777’s and 787’s becomes more attractive to maximise the operational and fleet synergies between the two going forward.

“The combined balance sheet, anticipated synergies and network fit between the airlines make a merger an attractive proposition, particularly in the current economic environment,” says Walsh.

In sticking with its policy of not opting to be a launch customer, BA may yet order the A350-1000. However, now that the 777-300ER has finally found a way into the fleet setup, the prospects of BA buying more 777’s (and 787’s) instead of A350’s increases.

15 comments August 1st, 2008