Less than a year ago, Airbus SAS was struggling to secure orders for its biggest A350 variant as airlines decried the plane as flawed. Now the company is trying to figure out how to meet resurgent demand.
British Airways parent IAG SA yesterday committed to buying 18 A350-1000s, more than doubling the European aircraft maker’s backlog for the model in less than a year. The London-based carrier took options for 18 more of the same jet, along with an undisclosed number for Spanish unit Iberia.
The turnaround comes after Etihad Airways PJSC last May canceled six A350-1000s, shrinking Airbus’s backlog to 62 orders on a plane that had failed to pick up a new customer for four years. Airbus staged a comeback two months later following a redesign, with Cathay Pacific Airways Ltd. adding 26 jets to its fleet, a move followed by Qatar Airways, previously among the most vocal critics of the plane, which seats 350 passengers.
“I could sell many more if I had the production slots,” Airbus sales chief John Leahy said in a telephone interview. “I’m lobbying internally to increase -1000 production.”
Demand is being driven by airlines looking at long-term replacement of Boeing Co. 777-300ERs, Leahy said. Boeing’s bestselling wide-body aircraft, which seats 365 passengers, has been in service for nine years, and Boeing executives are weighing a revamped version by the end of the decade, dubbed the 777X, that would be capable of rebuffing the A350 threat.
British Airways is the first European customer for the A350-1000 and Leahy said there is more demand in the region. The U.K. flag carrier has a fleet of 52 777s, and the purchase announced yesterday would replace a stable of 747-400 jumbo.
“The engineering data is now becoming available that is giving carriers some comfort the Airbus airplane is there,” said Howard Rubel, a New York-based analyst at Jefferies Group Inc. “British Airways took some of the early planes and Boeing’s solution is a couple of years beyond that.”
Boeing is studying how best to map out its 777 strategy. The Chicago-based aircraft maker recently selected General Electric Corp. to power the 777X, holding to a partnership that has proved successful on the current 777, whose engines are the world’s largest. The A350-1000s are exclusively powered by Trent XWB engines from Rolls-Royce Holdings Plc.
Airbus plans to begin delivery of the A350-1000 in 2017 after it altered the design to add payload and range to help compete more directly with the 777-300ER. Even so, Qatar Chief Executive Officer Akbar Al Baker and Emirates President Tim Clark remained critics of the largest variant, saying its design required additional work. Leahy disagreed, and today he has almost sold out for the first three years of production.
Among recent new customers is Air Lease Corp., run by Steven Udvar-Hazy, who remains a powerful barometer for market trends as the self-proclaimed godfather of the aircraft leasing industry. The purchase, announced in February, consisted of 20 A350-900s and five A350-1000s.
Although Airbus heavily markets the A350-1000 as a 777 replacement, British Airways said the $6 billion worth of Airbus planes, along with Boeing 787s on order, are part of a plan to phase out aging 747 jumbos.
“The A350-1000 will bring many benefits to our fleet,” IAG Chief Executive Officer Willie Walsh said in a statement. “Its size and range will be an excellent fit for our existing network and, with lower unit costs, there is an opportunity to operate a new range of destinations profitably.”
IAG, whose full name is International Consolidated Airlines Group SA, this month also said it would buy 18 additional 787s on top of 24 already ordered as it moves to phase out 30 of BA’s 50-plus 747s as part of a fleet-renewal plan for the U.K. carrier’s wide-bodies that will eventually also see the retirement of 46 Boeing 777-200s.
British Airways will be among the first A350-1000 operators, with deliveries due from 2017 through 2023, according to IAG. Qatar Air, the inaugural operator of the A350-900 due next year, will also be the first to fly the -1000.
Airbus parent European Aeronautic, Defence & Space Co. closed 1.34 percent lower in Paris trading yesterday ahead of the IAG announcement. The stock has advanced 34 percent this year. Boeing, which is close to overcoming a three-month grounding of its 787 Dreamliner fleet, has gained 15 percent this year. The Dreamliner is smaller than the A350-1000.
The A350 and 787 orders for Madrid-based Iberia, which needs new long-haul jets to replace Airbus A330s and A340s, will be firmed up when the carrier “is in a position to grow profitably, having restructured and reduced its cost base,” according to IAG, which is seeking more than 3,000 job cuts at the unprofitable business.