British government tells British Airways to buy Airbus planes with Rolls-Royce engines
Our Corporate Bureau
13 September 2007
BA is to announce within a few weeks whether its £2.95 billion ($6 billion) fleet renewal programme will opt for new aircraft from America's Boeing or Europe's Airbus. It will spend about $1.5 billion on engines, either from Britain's Rolls-Royce or America's General Electric.
Airbus employs about 13,000 people in Britain at its wing-assembly factory in Broughton, North Wales, and at its wing-design centre at Filton, near Bristol. Rolls-Royce employs 12,500 people at its engine factory in Derby.
Not surprisingly, government ministers and officials are urging BA CEO Willie Walsh to "buy British" by supporting Rolls and Airbus. Traditionally, BA has been a Boeing customer for long-haul aircraft, but the airline is considering proposals from both manufacturers this time.
As an autonomous, publicly owned company, BA is under no obligation to consider national interest when buying new aircraft. But the aviation sector is heavily regulated and BA's future growth depends on government support for new infrastructure such as additional runways at Heathrow, Stansted and Gatwick.
BA has denied that the government is putting pressure on the company over the fleet renewal programme. He said that no government representations had been made. However, inside sources said it was something the government was concerned about and was taking an active interest in.
BA's ongoing fleet acquisition is the largest ever by the airline. However, even more ambitious plans to spend $1 billion a year for the next dozen years have been dropped. BA will now buy 14 new aircraft to replace ageing 767s, and a further 20 to replace 747-400s.
Boeing is offering BA its popular 787 and 747-8 in the two categories, while Airbus is proposing the A350 - still on the drawing board - and the double-decker A380. BA bought four Boeing 777s and took options on a further four earlier this year. Walsh has emphasised that their acquisition should not been seen as an indicator for the larger fleet renewal programme.
Aviation analysts seem to think that BA will remain a loyal Boeing customer, but competitive pressures could force it to add the Airbus A380 superjumbo to its fleet. Airlines generally try to keep maintenance and pilot training costs down by buying from only one aircraft manufacturer. But the unique capabilities of the A380 mean that a number of Boeing-affiliated airlines are adding the Airbus superjumbo to their fleets.
The A380 is so large that airlines like Singapore and Emirates plan to devote an entire deck to business and first-class passengers. These premium passengers are the most profitable for an airline. Airlines that have the A380 could make substantially more money than those that don't. If BA buys A380s, it is likely to deploy them on the Hong Kong and Johannesburg routes, with Sydney and Dubai as likely candidates.
Aviation sources said that Airbus was offering BA an "extremely attractive" package to entice it into buying the A380. The aircraft manufacturer knows that if BA buys the superjumbo, it will force other airlines to follow suit in order to compete.