British Airways parent IAG confirms massive Boeing 737 MAX order

Three years ago, IAG, the parent of British Airways, Iberia and Aer Lingus, and Boeing agreed a huge order for the 737 MAX which, at the time, was still grounded following the loss of two Lion Air and Ethiopian Airlines flights.

It was widely assumed that the order was one of opportunism. With the aircraft’s reputation at rock bottom the prices that IAG negotiated were expected to be significantly lower than you would otherwise find.

This was the same opportunism that led Ryanair to order 150 Boeing 737-800s in 2002. Ryanair called it the ‘deal of the century’.

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, Ryanair’s CEO turned up.

Deal or no deal?

Back to IAG. The order, announced at the Paris Air Show, was only a Letter of Intent. In other words, both parties could walk away from the deal with little or no penalty.

This was especially prescient given the collapse in air traffic that followed in 2020 as a result of Covid-19. It was unclear whether IAG was serious about taking deliveries of 737s or just using it as a tool to negotiate a better deal with Airbus for its A320s, which has become the backbone of the short haul fleet across all the IAG airlines. British Airways retired its last 737 in 2015, after a slow phase out in favour of A320s.

Once covid took hold it seemed even more likely that IAG would ditch the order. This will not be the case, however, as Boeing and IAG have just announced they are firming the order for 50 aircraft plus 100 options.

This is slightly less than the original 200 aircraft proposed in the letter of intent, but it is still substantial. IAG will be giving up all the efficiency savings of a unified short haul fleet which will include training a separate fleet of pilots and cabin crew to operate the type as well as all the parts and spares it needs to maintain two narrow body types.

We have no idea how much IAG has agreed to pay for the Boeing 737 MAX aircraft. The list price is between $120 million and $130 million per aircraft, but as with all airline orders the exact figures are not publicly available. IAG says it has “negotiated a substantial discount from the list price” so we can probably assume it is paying around half that figure.

Fundamentally, it needs to be cheap enough for BA, Iberia and the other airlines to give up on their long term strategy of focusing on Airbus for the short haul fleet to make it worthwhile.

Will we see 737s at British Airways again?

Of the firm order, 25 aircraft will be the largest 737 type, the 737 MAX 10 whilst the remaining 25 are for the smaller 737-8-200. IAG has not specified which airlines will take the aircraft, only that they “can be used by any airline in the Group for fleet replacement.”

This is intriguing because the 737-8-200 is the special ‘Ryanair variant’. This is a version of the mid-size 737-8 configured for high density. It features an extra pair of exit doors to satisfy evacuation rules and enable airlines to fit it out with 197 seats.

It is unlikely that we see this ultra-high density aircraft at British Airways, even as part of its Euroflyer fleet from Gatwick. They are likely to be destined for Vueling, the Spanish low-cost carrier.

Whether British Airways takes delivery of any of the 737-10s remains to be seen. Its A319 fleet has an average age of over 20 years and will need replacing soon. The 737-10 could be a good fit – British Airways, like most airlines, is gradually up-gauging its fleet as air traffic grows, and the A319neo is the least popular aircraft in the A320 family, with just 72 out of a total 8,078.

From a customer experience perspective, I would prefer it if BA did not take any 737 MAXs. Whilst I have yet to fly a MAX, the fundamental geometry of the fuselage means it will always be narrower than an A320, leading to slightly narrower seats and aisle. It may be a small difference but it’s one I can’t help but notice when I board a 737.

The aircraft will be delivered between 2023 and 2027.

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