British Airways Places $6 Billion Order for 18 Airbus A350s

British Airways parent IAG SA said it will buy 18 Airbus SAS A350 wide-body planes with a list price of almost $6 billion for the U.K. carrier.

The A350-1000 jetliners will be delivered from 2017 through 2023, according to IAG, which also secured options for 18 more A350s for BA, together with an undisclosed number for Spanish unit Iberia, pending an earnings turnaround there.

The contract secures a position for Airbus’s newest wide-body at IAG after the London-based company said this month it would exercise options to add 18 of Boeing Co.’s competing 787 Dreamliners in addition to 24 already on order. British Airways needs both models to replace a fleet of aging Boeing 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, as International Consolidated Airlines Group SA is known, closed 1.6 percent higher at 256.40 pence before today’s announcement. The stock has added almost 39 percent this year.

The firm orders for the Airbus and Boeing models will be used to replace 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.

A380s to Come

British Airways will also begin taking delivery of Airbus A380s this year, with commercial service to Los Angeles starting Oct. 15. The unit will operate 12 of the European planemaker’s flagship planes, with deliveries continuing through 2016.

“The A380 and the A350 are perfectly matched for greener long-haul operations,” John Leahy, Airbus’s chief salesman said. “This is an important announcement from one of the world’s most respected and influential airline brands.”

British Airways is the first European carrier to commit to the A350-1000, the largest member of the family. The deal, once finalized, will bring the backlog for the variant to 128 units.

The fleet over-haul plan that Walsh is rolling out effectively cuts capacity while adding frequencies.

Biggest Version

The A350-1000 -- which can seat 350 passengers in a three-class layout -- most closely matches the capacity of a 747 among planes BA is buying, with the carrier operating the jumbo in a four-class setup with as many as 345 seats.

Orders for Madrid-based Iberia, which needs new long-haul jets to replace Airbus A330s and A340s, will be firmed up “when Iberia 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.

The A350s ordered today will be powered by the Trent XWB from Rolls-Royce Holdings Plc, the only engine currently available on the model and one which is guaranteed exclusivity on the -1000 variant. Rolls-Royce said today its part of the contract has a value of $1.6 billion, including maintenance.

The 787s being bought for British Airways will be powered by Trent 1000 engines from the U.K. manufacturer. BA is due to start receiving Dreamliners this year once Boeing finalizes handover plans after the aircraft’s return to service following battery glitches that saw it grounded on Jan. 16.

The Airbus deal announced today still requires shareholder approval, IAG said.

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