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Big IAG aircraft orders: 200 Boeing 737 MAX and (more interestingly) 14 Airbus A321LR

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This week is the Paris Air Show, which is traditionally the place where Airbus and Boeing like to announce big new aircraft orders.

First up was the surprise ‘order’ (which it isn’t) by IAG for 200 Boeing 737 MAX aircraft.

The genesis of this order, I believe, goes back to 2002.  You need to remember that Ryanair’s Michael O’Leary and IAG CEO Willie Walsh are both Irish and know each other well.

In January 2002, Ryanair placed an order for 150 Boeing 737-800.  The airline has since described it as ‘the deal of the century’ and it has underpinned its ability to offer low fares ever since.

It was just four months since the 9/11 attacks.  Boeing had announced plans to fire 30,000 workers and was predicting that future deliveries would be just half of their historic levels for the medium term.  And then Michael O’Leary turned up.

We have no idea how much IAG has agreed to pay for the Boeing 737 MAX aircraft.  It is presumably next to nothing, in aviation terms – Boeing is likely to be losing money on the deal.

Why else would British Airways want to voluntarily let itself take all of the PR flack that has come its way in the last 24 hours?  More strategically, why would BA want to give up on its long term strategy of focusing on Airbus for its short haul fleet?

Importantly, this is not a firm order.   It is a ‘letter of intent’ with an agreed price should the order be confirmed.  It is possible that Willie Walsh will be popping over to Airbus soon and saying that they can have the order if they match the price.

In total, IAG has fixed a price for 200 Boeing 737 MAX.  These will be used at London Gatwick for British Airways and across Europe for LEVEL and Vueling.

Delivery is expected between 2023 and 2027, with a mix of MAX 8 and the larger MAX 10.

Boeing 737 MAX

And 14 Airbus 321XLR aircraft too ….

More interesting, from a strategic point of view, is the decision by IAG to purchase 14 Airbus A321XLR aircraft.

Six of these will go to Aer Lingus with the remaining eight to Iberia.

If the aircraft are a success, IAG has an option for a further 14 aircraft.

We have covered, quite extensively, the plans by Aer Lingus to hugely expand its ‘single aisle’ flights to the Eastern coast of the United States.  This will use a new fleet of eight Airbus A321neo LR aircraft, the first of which is due for delivery any time now.

The XLR is a further development of the LR.  It has an astonishing range for a single-aisle aircraft of 4,700 nautical miles.  This means that the US West Coast is now within reach.

From 2023, when the first of these aircraft arrive, Aer Lingus will be able to fly to a huge number of cities in North America.  As these aircraft have a relatively small – and so easier to fill – passenger capacity compared to an Airbus A350 or similar, they will make many more routes financially viable.

It is less clear what Iberia will do with its fleet, but there are many major gaps in its long haul network which can hopefully now be filled.

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Comments

  1. BrightonReader says:

    It’s not an order so why use the word ‘order’ in the title?

    (You’re not the only blogger to do this despite also recognising it’s not an order)

    • David says:

      Because recreational readers wouldn’t know what an LOI is, and explaining it would make the headline a bit long…

      • Callum says:

        I have an incredibly low view of the intelligence of the general public, but I’m fairly sure most of them know what an expression of interest means!

        Completely agree just using “order” makes a much snappier headline though.

      • BrightonReader says:

        As Rob makes clear on a regular basis the demographic of the vast majority of his readership have higher education qualifications and income than the general population.

        I’m sure most regular readers would know the meaning of ‘letter of intent’

        But that does not get away from the fact that the use of the word ‘order’ is still incorrect as there is no order for the 737s

  2. They may have got the 737 Max for next to nothing at a time when even American carriers Southwest and AA are shedding commitments but I imagine there might be a high cost in terms of flight crew retention. Unless this aircrafts problems are demonstratively resolved in the near future I doubt the order will ever be firmed up. There also seems to be little happening with Level, I wouldn’t bet against its disappearance by 2023. For me the interesting news from the Air Show is Air Asia, looks like it is well on the way to becoming the world’s largest airline by passenger volume, network and fleet in the not too distant future.

    • Mr. AC says:

      I think with the level of scrutiny the unfortunate events with B737 Max has brought to the aircraft, it is now probably the safest of the newer ones. I definitely won’t feel any extra trepidation boarding one.

      • Patrick says:

        The 737 max is jist simply an inferior design nowadays to the a320. It’s main and only argument is cheap training. That is now out the window.

        Given the cosyness of the FAA, I would avoid the plane fir a long time…

        They have to sell below cost now

      • RIccatti says:

        There is a structural deficiency with 737 MAX, compensated by a quick software fix.

  3. Callum says:

    I really don’t follow your arguments here…

    Firstly, what does him being Irish have to do with anything whatsoever? And I highly doubt Ryanair are giving BA special advice on how to get cheap Boeing planes… (You didn’t specifically state that, but them knowing each other is completely irrelevant otherwise).

    Secondly, both Airbus and Boeing have large order backlogs. If lots of airlines suddenly switched to Airbus, they would have to delay their fleet plans given there’s already an over 3 year wait for new A320s. Despite bad PR, I’m not aware of Boeing losing any major order, so why would they suddenly sell 200 for “next to nothing” given they already have orders (4659 of them apparently) lined up for years to come? A decent price to encourage a switch yes, but “next to nothing”?

    Finally, the “bad PR” BA gets over this will be completely forgotten in the near future and won’t affect them at all. In fact, I highly doubt most BA customers even know about this order – let alone care.

    • Jake Mc says:

      1: Obviously their nationality hasn’t actually influenced their choice of plane. Stupid question. Rob is providing context and background.

      2. Boeing are in a quandary. In all likelihood the plane will be safe when it is allowed to fly again. Airlines know this and therefore will keep the orders (financial penalties for backing out can be harsh). Passengers however do not (or will not necessarily believe the authorities when they do ‘un-ground’ it) so to ensure that passengers think it’s safe a marquee airline like IAG potentially committing to 200 will help to settle passengers nerves. This will boost confidence in the plane (and process) meaning that airlines have no reason to consider backing out – because if people won’t fly it at all the financial penalties of cancelling an order are worth it. Thus- offer it to IAG for peanuts and it’s probably the most expensive loss leader in history!

      3- Granted bad PR can get forgotten but it also can affect the share price which will be IAGs bigger concern right now

      • Callum says:

        1. If it’s completely irrelevant, how does that pit anything in context?

        2. That also makes no sense… The argument put forward was the exact opposite – that BAs passengers would be against it as they deem it unsafe. If its going to be settling nerves then it won’t impact BA at all. I’d also say the 6000 existing orders hold much more weight than an expression of interest for 200 for those who care about this kind of thing.

        3. If it was going to affect the share price I doubt they’d announce it. Given most analysts seem to think this will blow over (and the majority of those orders will stay – which makes it even more unlikely to my uneducated mind that they’ll make this order the “most expensive loss leader in history”), I’m sure it won’t affect IAGs share price.

        I’m not saying the whole article is a load of rubbish or anything, just that a lot of leaps seem to be being made with not much justification.

        • Share price went up noticeably on the announcement.

          • Callum says:

            It bounces up and down all the time. It’s not significantly different to what it has been numerous times since the crash happened.

            The share price will recover properly once the Max is flying again. It’s surprisingly naïve of you to think Boeing will throw away hundreds of millions of dollars (I see in another reply you assume an extra four billion dollar discount!?) in future orders for a small temporary increase in the share price.

            They (still) have thousands and thousands of orders, they seem to think it’s already fixed and Airbus cannot supply enough planes to fulfill any meaningful numbers of those. Nothing you’ve said has remotely convinced me.

    • Willie Walsh popped up in one of his local – Dublin – papers last month, explaining that he’d been using a simulator to “fly” 737 MAX, thought it was a great pilot experience, and would have no qualms about using the aircraft as a passenger for real.

      Aer Lingus and Ryanair HQs are adjacent and people talk, socially. Different business models though.

      • Callum says:

        I don’t doubt they talk. I talk to people who work at Apple, doesn’t mean I have any influence whatsoever on what they do!

        Walsh isn’t a moron and is perfectly capable of realising that buying while a manufacturer is facing the prospect of a sharp fall in demand can make the product cheaper all by himself and doesn’t need O’Leary to tell/show him that.

    • I think O’Leary and Willie have a bit of a oneupmanship bromance. Each trying to out do the other.

  4. Roberto says:

    Cant see the crew loving a single aisle aircraft for 10 hours or so with no real escape from passengers and little (if any) rest areas.

    • flyforfun says:

      Can’t see the passengers loving a single aisle aircraft for 10 hours either! Quite a few pax get up and stretch their leg on the longer flights. There will be a lot of jostling in the aisles as they try to pass each other and the food carts if at that time. On the A380 I’d do several laps of the plane, both upstairs and down to stretch and pass the time, so I can see this being a problem for some.

      • It depends on the seat on board. A flatbed with direct aisle access would be the same whether it’s a narrow body or a wide body aircraft.

        My concern in that case would be the noise levels on board (see Rob’s article ‘re A318 BA1 review).

        But if you’re stuck at the back in economy, I think I’d be more concerned about comfort.

        • The A320neo and its derivatives have a 50% lower noise footprint from the ground, so I expect this translates to a quieter cabin too.

  5. Not this one says:

    737 Max not if I can help it, if its over complicated to fly then it only takes a lapse of judgement/forget some training and there is potential for problems

  6. The 737 Max is inherently unstable and does not ‘fail safe’. It is not a fly-by-wire plane unlike all Airbus craft but a modified 1964 design with mechanical linkages to all control surfaces. The short-cut Boeing made to compete with the neos was to change to more efficient (larger and repositioned) engines and then use a software hack to constantly modify the trim – the easiest control to automate – to compensate for the unbalancing that the repositioned engines resulted in.

    As a software engineering student in the 90’s, the 1988 A320 crash at the Habsheim Air Show was a case study for us. The A320 crash was a result of the pilot telling the plane to land then attempting to abort in order to do a ‘fly-by’ for the show. The plane decided it was too late to safely abort and ‘landed’ in the trees. The software was modified to allow full manual control. The difference is that the A320 is inherently stable as an aircraft and can glide without software intervention. The Max is not and cannot. Without MCAS, the Max would be impractical to fly.

    The Max is a doomed design. When the next crash occurs, the 737 Max will be unsellable to the flying public, quite rightly.

    • Shoestring says:

      yep but for me the point is that 2023 is 4 years off…LOI ≠ order…so IAG is not exactly risking much, and as noted it allows them to get a much better price for those 200 aircraft from Airbus (or switch to a different Boeing model on similar advantageous terms)

      • David says:

        Are you arguing fly-by-wire is inherently safer? AF447 would never have crashed if it hadn’t been fly-by-wire…

        • I’d say there’s a lot of argument behind that.

          AF447 wouldn’t have crashed, no (possibly – though cause included loss of situational awareness which steel cables do not help with)

          On the other side how many accidents dont happen because of the flight protection in FBW?

          Atlas air in Texas just this year, for example, directly controlled airplane, perfect working order, flown into the ground at high G

      • Rooster says:

        Hope they don’t get them don’t want to fly on that plane ever

  7. Boeing Hater says:

    I for one as a BA Customer will NOT FEEL SAFE flying the Boeing 737 Max due to the two accidents. I’m afraid this plane is going the same way as the DC-10 in that customers will have already lost confidence in the aircraft.

    As from a business standpoint, I just don’t get it?? Why buy:
    – A plane designed in the 1960’s with inherent design faults caused by the mounting of the LEAP engines, the low ground clearance which triggered the need for MCAS in the first place
    – A plane which BA/IAG has limited flight crew trained in the 737-Max and therefore the cost of cross training the flight crew will be immense
    – The bad publicity caused from a ‘Safe’ airline buying a ‘flawed’ product

    I’m not going to even mention the possible loss of jobs within the European supply chain. Ooops, I just did : )

    • It’s cheap.

      Let’s assume IAG got $20m off the rock bottom final offer usually offered. That is $4 billion saved.

      • Michael Jennings says:

        Also, its only competitor (the A320s) has production fully booked for the next five years, it’s very expensive and time consuming to open new production lines, and Airbus doesn’t have any money. (The A380 debacle was *very* expensive). Many of Airbus’ suppliers are also struggling to meet demands from Airbus. If you are an airline with a 737MAX order, your choice is the 737MAX or nothing, in the short term at least. There’s a huge number on order, and these will be delivered. Most airlines will say things like “Welcome to this 737 aircraft” and nothing more when you board. If Boeing has genuinely fixed the problem and there are no more crashes, people will barely remember this in five years time.

        If there are more crashes, well that would be different.

    • Thomas Howard says:

      Where would you stand if you made a booking on an A320 and it was later changed to a 737MAX, would you have any right to cancel or should you just avoid booking any destinations within the flying coffins range?

  8. I am not happy to fly in the 737Max. I think it’s doomed. I would choose an alternative aircraft if given the option.

    The only good thing is this is a Letter of Intent, not a firm order. It is also for potential deliveries starting 4 years from now. As others have noted i think it won’t actually be delivered. It will be replaced by firm orders for another Boeing aircraft. Perhaps fewer 787s or the new 777x.?

  9. OT but related to the BA 500 avios statement credit, does anyone know if this is done on a cumulative basis?

    I booked some reward flights with a companion voucher but the taxes have come through as two lots of £450 so just below the threshold, usually the amex offers seem cumulative but I can’t see on the T&C’s if this is the case for this one.

    • Usually are.

      • Hi Rob, how exactly would that work with the offer as it states “Spend £500 & get 500 Avios up to 3x”, would a cumulative £1,500 get you the 1,500 avios or if it was in <£500 chunks would you get zero?

  10. If WWW (Wee Willie Walsh, as he is known) got his way with Boeing, then he also got a further discount on the price for the B777X on order for British Airways.

  11. the_real_a says:

    Well it wasn’t long ago that the 787 was “spontaneously combusting”, now nobody gives a second thought…

    Airbus aircraft have 3 angle of attack sensors, with the computers taking the “best of three” when one disagrees. The facts about the MAX issues are staggering – it has a single sensor that would plough the aircraft into the ground when it was faulty in certain situations. More over crew were not even informed of its existence. The solution being worked on as i understand it is to install a second sensor and then “disengage” the protection if one disagrees. I’m perplexed how it ever got certified in the original state. Its as if they haven’t learnt any lessons from Airbus automation issues over the last 30 years.

    • Shoestring says:

      No need to be perplexed, Boeing has the FAA eating out of its hand, simple

    • Thomas Howard says:

      The pilots are still thinking about them bursting into flames: https://www.theguardian.com/business/2019/jun/15/boeing-dreamliner-b787-safety-fears
      However, I’d still fly a 787 but would sooner walk than get on a 737MAX.

      • Charlieface says:

        I always worried that since the batteries are in the tail they might explode in a tailstrike. But then you rarely hear of the tail being punctured in a tailstrike so maybe it’s not such a risk. Either way, lithium ion batteries are scary, they are unstable and usually explode at high temperature or pressure or in the case of puncture.

    • There are two sensors infact, but they didn’t feel the need to verify the data from the sensor being used with the second sensor!

      • It isn’t that simple, they would never agree , even in straight and level flight let alone in a climb and bank which is a part of the envelope for which MCAS was intended. So you need some intelligent data processing- a computer- and thus more complexity

        Plus don’t forget the Airbus a320 that crashed since two aoa sensors failed and so the inertial reference unit decided to vote out the only good data…

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