British Airways parent IAG said it will buy 18 additional 787 Dreamliners, a vote of confidence for Boeing’s troubled wide-body jet, with a chance for more purchases by IAG’s Iberia unit that has favored Airbus.
British Airways is exercising existing options for 787s for delivery from 2017 through 2021 to phase out Boeing 747-400s, IAG said late Tuesday. The company has already ordered 24 Dreamliners, and IAG also secured delivery slots for future Iberia needs, saying the creation of the parent company has resulted in greater buying power for the two airlines.
The order is valued at more than $3.7 billion at list price. Its estimated actual value based on standard industry discounts is about $2 billion, according to data from aircraft-valuation firm Avitas.
Firming up the order, with a value of more than $3.7 billion at list price, sets off a fleet renewal for IAG that will eventually see it also retire 46 Boeing 777-200s at British Airways and Airbus A330s and A340s at Iberia.
Chief Executive Officer Willie Walsh said an Iberia deal is conditional on a revamp at the unprofitable subsidiary, raising the stakes in a battle with employees who are facing more than 3,000 job cuts.
“The aircraft offers a step change in fuel-burn efficiency versus our existing aircraft, with improvements in fuel cost per seat of more than 20 percent,” Walsh said in a statement.
International Consolidated Airlines Group, as London-based IAG is formally known, will need to replace about 105 aircraft in the next 10 to 15 years, said Damian Brewer, an analyst at RBC Capital Markets in London. The company is also talking to Airbus about the purchase of A350 long-range aircraft, The Wall Street Journal reported earlier this week.
Iberia now operates only Airbus wide-bodies for its intercontinental flights. The Dreamliners for British Airways will be powered by Rolls-Royce Holdings Plc Trent 1000 engines, IAG said. British Airways is due to start taking deliveries this year once Boeing begins handing over aircraft again after Dreamliner operations were halted on Jan. 16.
Under the previous order, agreed to in December 2007, British Airways is buying a mix of 16 787-8s and eight of the larger 787-9 Boeing plans to start delivering from next year.
The company didn’t say which models would be purchased under the expanded deal.
Boeing this year has booked only one 787 order, for 42 aircraft from American Airlines, in a deal announced before the Dreamliner was grounded.
Oman Air and Norwegian Air Shuttle AS, both existing 787 customers, have said since the suspension of flights that they would consider buying additional planes.