BA chief hints he may buy new Boeing, not Airbus

[BOEING777X]

http://news.independent.co.uk/busine...icle327108.ece

By Michael Harrison, Business Editor in Bangalore
Published: 15 November 2005

Willie Walsh, the chief executive of British Airways, delivered a snub to Airbus yesterday by saying there were "big question marks" over its A380 superjumbo and indicating the airline was potentially interested in buying the stretched Boeing 747 about to be launched by its rival.

BA is reviewing its long-haul fleet requirements and is expected to reach decisions on replacement aircraft by Easter. But speaking en route to India, where BA has just begun serving its fifth city, Bangalore, Mr Walsh appeared to rule out a purchase of the A380 for the foreseeable future. "We are pleased we haven't got one on order at the moment," he said. "It is too big an aircraft. There is a big question mark beside it."

Sales of the A380 so far stand at about 139 but Airbus needs orders for 250 and possibly 300 if the dollar remains weak, to break even on the programme and pay back the £2bn in launch aid received from its four partner governments.

BA has 57 Boeing 747-400s in its fleet, the oldest of which is 16 years. They seat 413 passengers in a standard three-class configuration. It is considering exchanging some for the new 747 Advanced, which will have an extra 30-40 seats.

Boeing is expected to launch the aircraft this month. Initially, most orders will be for the freighter version. The Luxembourg carrier Cargolux has said it wants to buy 10 and Qantas and Singapore Airlines are also thought to be likely customers.

BA is serving Bangalore in southern India five times a week using Boeing 777s. India is BA's fastest-growing market and its biggest intercontinental destination after the US. By summer, BA will operate 42 flights a week to Delhi, Mumbai, Chennai and Kolkata, carrying about one million passengers a year.

Mr Walsh said BA was keen to go to daily flights to Bangalore and was aiming to launch services to Hyderabad and Cochin as the Indian airline market was further liberalised.

BA has also agreed a tie-up with the domestic Indian carrier Air Sahara covering code-sharing, pricing, lounge access and frequent flyer programmes to help feed traffic on to its routes to London. Air Sahara is part of the privately owned Sahara Group, a diversified industrial company whose interests span retailing, construction and IT. It may become one of BA's partners in the oneworld alliance.

Mr Walsh also played down the prospects of BA merging with Spain's Iberia, in which it holds a 9 per cent stake.

[DTVAirport]

It would be great if us Brits could be the launch customer for the pax version of this new 747!

[avro_arrow_25206]

No surprise there. There never seems to be any interest from BA in the first place.

[FlyingPhotog]

He's a smart man, maybe he really wants the A380 and if he threatens to go with the 747, Airbus will cut him a good deal. I'd hate to see all the Speedbird 747s go bye-bye.

[beyond 1000]

I would still like to see the A380 in BA colours. It seems that will be a little ways off. I don't see the 747adv selling like hotcakes to airlines. It isn't the large plane of the future. That title still belongs to the superjumbo.

[sturla]

I would still like to see the A380 in BA colours. It seems that will be a little ways off. I don't see the 747adv selling like hotcakes to airlines. It isn't the large plane of the future. That title still belongs to the superjumbo.

I strongly disagree. The large plane of the future is the most profitable large plane. In the world of business, size doesn't matter as much as you might think. Gone are the days when certain airlines want only the biggest to show off. In an economy with no protection, no government subsidies, no price controls etc, they have to opt for the most revenue-efficient aircraft. This usually, but not always, correspond to the most cost-efficient aircraft. And the 748 (prefer 748 to 747Adv) is more cost effective than the A380. I do expect to see the 748 outsell the A380 by a huge margin. In addition to profits, it is not a big gamble to replace ones 742s or 744 with the 748. Adding yet another a/c type to its inventory by buying the A380 isn't something too many airlines will want to do initially, at least not until the plane has thoroughly proved itself.

-Sturla

[BOEING777X]

I would still like to see the A380 in BA colours. It seems that will be a little ways off. I don't see the 747adv selling like hotcakes to airlines. It isn't the large plane of the future. That title still belongs to the superjumbo.

The 747-8 doesnt need to sell like hotcakes to break even. A mere 70 frames would do the business for Boeing. Unlike AB, which has spent upward of $12bn for the A380, the 747 line is paid for.

If you take the launch deal of approx $5bn for the 747-8, that in itself covers the cost Boeing incurs for developing these 2 stretched airplanes. Every sale on top is a profit- and thats just after 18 airframes!

Between the 744 and A380- AB has nothing to offer- Boeing does. AB cant "shrink" the A380, it would be too heavy and drastically inefficient. The 747 has never had an opportunity to grow- but now it has, and its within the limits of the design being too long without a new wing etc, as was proposed with the defunct 747-500X/-600X of 1996.

The ease of integration of the 747-8 into 744 operators fleets like BA will be way easier than the A380, and lest we forget, even the 747-8 will have access to existing airports serving the 747, which the A380 cant- another bonus for 747 customers.

Moreover, many of the A380 customers are configuring their planes to 500pax or less- so the dead weight carrier on the same sectors as a 747-8, like LHR/HKG would mean a higher fuel burn-

So in many respects, the A380 isnt all its cracked up to be- the birth of the 747-8 proves that- and every 747-8 sale is one less for the A380.

And dont forget, the 747-8F will still have higher density per sq ft freight capacity than the A380F- so this new two-pronged 747-8 strategy is a double blow for AB intended "monopolisation" of the 400+ market.

[beyond 1000]

Boeing777x you do make some good points here. The economics to build the 748 are definitely better than developing an aircraft from scratch. The A380 has to go into passenger service before we really see how the rest of the sales go. There is room for a huge aircraft like that but only for the future. That is.. the A380s sales will really show in about five to eight years from now. That is when travel will increase throughout the world. This monster plane is really for the next decade.

Sturla, I'm not sure how you feel the 748 will outsell the A380 by a huge margin, as you so pointed out, but I have serious doubts about your statement. The 748 will sell but it is a derivative of older technology. It is the 777 that will be the future cash cow for Boeing along with the 787. Boeing is just adding a few more years to the old champion.

I don't think that Airbus developed the A380 just so it will flop. Boeing developed the 748 because they still feel that aircraft can give them sales as Boeing777x stated in that only 70 frames are needed to break even.

I just don't feel that Boeing will sell hundreds. The A350, 787, 777, and possibly a new aircraft by either Boeing or Airbus will close the doors of the 747 assembly. Still the 748 will enjoy marginal sales. Not poor, not great, just marginal.

[BOEING777X]

Although the 747-8 will have lower sales than the A380, it will cost less to develop, hence making profitability higher. Same cant be said of the A380, which needs almost 300 sales just to break even. COuld be higher if the Euro keeps falling against the dollar....

Moreover, after a few sales of the 747-8, Boeing will be making a profit on ever single one it sells tehreafter- even selling for $1 is profitable because the 747 programme has been paid for almost 2 decades ago.....

The A380 has a long way to go, and I dont see how it will ever be "profitable", considering the high discounts already given, and new customer reluctance to pay more than their rivals for the same airplane....

[seahawk]

I would not bet on the A380 having more sales the the 747-8. the 747 is a proven and very well liked product, the A380 in unknown.. Just imagine the A380 as unrealiable and unliked by the passengers. Just let it miss its desgin goals by 5% and the 747-8 exceed its and you have a very different situation, one that imho is not unlikely given the history of Airbus and Boeing.

[sturla]

Sturla, I'm not sure how you feel the 748 will outsell the A380 by a huge margin, as you so pointed out, but I have serious doubts about your statement. The 748 will sell but it is a derivative of older technology. It is the 777 that will be the future cash cow for Boeing along with the 787. Boeing is just adding a few more years to the old champion.

First of all, the 748 is not a derivative of older technology. It is primarily the spilloff of the 787 technology.

Anyway, my logic is this: Quite a few airlines will be looking to replace their 742s and 744s over the next 10-15 years. They essentially have three options: 777, 748 and A380. The natural choice is the 748. Moreover, very few airlines will be willing to replace their 744s with A380, with all the extra costs they incur by doing so. Moving from 744 to 748 is a lot cheaper, easier and natural. There are houndreds of 742s and 744s to be replaced over the next 15-20 years, and I see the 748s as their most natural replacement. This, in my mind, means it will outsell the A380.

I don't think that Airbus developed the A380 just so it will flop. Boeing developed the 748 because they still feel that aircraft can give them sales as Boeing777x stated in that only 70 frames are needed to break even.

Out of curiosity, does anybody have a link to where Boeing stated 70 was break-even? I'm not really doubting that the number is below 100, though, also because quite a bit of the 748 advancements are "spilloffs" from the 787 development and as such, already paid for.

The A350, 787, 777, and possibly a new aircraft by either Boeing or Airbus will close the doors of the 747 assembly. Still the 748 will enjoy marginal sales. Not poor, not great, just marginal.

Neither Airbus nor Boeing has any plans for yet another a/c type in this range and I don't expect to see anything substantially new in this category for at least 10 years now. And I do think the 748, for the reasons outlined above, that it will sell quite well over a 15 year period.


-Sturla

[BOEING777X]

70 was a figure I randonly chose-

All i know is that the 747-8 will not need many orders to break even- as you rightly stated, much of the spilloffs from the 787 have been paid for, and the 747 programme itself is also paid for too.

[AC_A340-500]

It's the same old game: pretend you're not interested until they drop the price enough - and then comes the surprise announcement. On the other hand, ordering 747-800's makes sense too, considering their current fleet and the moderate compatibility that goes with it.

@Boeing777x: still attempting to "will" Airbus into oblivion, are you? Some things never change

[BOEING777X]

Not really

As fine a competitor it is, I still think that every 747-8 sale is one less for the A380- primarily because most, if not all A380 customers are equipping or going to equip them with marginally more seats that a 747-400 3class capacity and nowhere the AB advsertised 3class of 555 pax.

In the case of BA, integrating the 747-8 is easier, and will be able to serve airports that the A380 cant yet fly to...so the A380 isnt yet having it all its own way.

The 747-8 will be a formidable substitute for those airlines who dont really need the unnecessary dead weight that the A380 carries, especially when its not gonna fly with 555 pax aboard...

[TheMightyM]

In the case of BA, you have to consider their business model. They aren't EK (say), they aren't aiming to be a mass transporter of Y-class passengers. Rather British Airways aims to capture more of the F, C and premium Y markets. Adding too many seats just doesn't fit in with this. I would expect that BA will eventually go with a mix of 773ERs and 748s to replace their 744s though I expect the replacement process to be drawn out.

MPL