British Airways prepares for fleet revamp

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British Airways, one of the top three European airlines, has embarked on a review of its long-haul fleet strategy, which will lead it to start placing orders for new aircraft worth billions of dollars within the next two to three years.

The announcement on Tuesday by Martin Broughton, BA chairman, will fire the starting gun for a race by Boeing and Airbus, the duopoly makers of big commercial jets, to become the leading aircraft supplier to one of the world’s most influential carriers.

Mr Broughton told the group’s annual shareholders meeting that a paper would be presented to the BA board within the next nine months. It will lay the foundations for the airline’s biggest investment decisions of the coming decade.

It will also become one of the big challenges facing Willie Walsh, BA chief executive designate, who takes over control of the airline from Sir Rod Eddington at the end of September.

Boeing is the current supplier of all 110 aircraft in the BA long-haul fleet, which comprises 57 747-400 jumbo jets, 43 777s and 21 767-300s, of which around 10 are used on long-haul services. BA is the world’s biggest single operator of the 747-400 and the second largest operator of the 777 after United Airlines of the US.

The BA review will provide one of the most exhaustive examinations to date of the competitiveness of the new generations of aircraft being developed by Airbus and Boeing.

These include the 555-seat Airbus A380 superjumbo, which is due to enter commercial service with Singapore Airlines at the end of next year.

The options for BA, said Mr Broughton, also included Boeing’s 787 Dreamliner, the US aircraft maker’s long-range, 250-seat mid-market aircraft, which is first due to enter service in 2008 with All Nippon Airways, as well as the 747 Advanced, Boeing’s plan for a stretched version of its existing 747-400 jumbo, and its 777-200LR, which will shortly become the world’s longest range aircraft, when it enters service early next year.

Mr Broughton said “these are all options on the table.” He added that the Airbus A350, which the European group is developing as a rival to the 787 was “unlikely” to be a principal long-haul aircraft at BA.

BA’s long-haul fleet is still relatively young. The oldest 747-400 is 16-years-old, and Mr Broughton said that the airline would be reviewing its fleet strategy for the next 15 years.

The move signals the end within the next couple of years of BA’s virtual holiday for capital expenditure, which has made it possible for the group to more than halve its debt level to £2.9bn ($5bn), the lowest level since 1993, from £6.6bn at the end of 2001.

The group is still trying to repair its balance sheet, however, and Mr Broughton signalled on Tuesday that the airline was unlikely to pay a dividend this year for the fifth year in succession despite the recovery in its profits.

Airbus has previously been successful in breaking into the British Airways short-haul fleet winning big orders for its A320 family of narrow-bodied aircraft in the late 1990s, but it will face a tough battle to break into the long-haul fleet with its main hopes riding on the A380.

On the superjumbo Mr Broughton said, “The jury is still out. None have been delivered yet. We don’t have to make a decision just yet. We want to see them fly first. But they are very much on our radar screen, they are one of the options.”

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