Leeham News and Analysis
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Leeham News and Analysis
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IAG (British Air) gives huge boost to MAX
June 18, 2019, © Leeham News: In a major vote of confidence for the embattled 
Boeing 737 MAX, International Airline Group (IAG), parent of British Airways, Vueling, Iberia, LEVEL and Aer Lingus, signed a letter of intent late today for 200 737-8/10s.
This is a huge shot in the arm Boeing, which until the Paris Air Show, hadn’t booked an order in two months following the March 13 grounding of the MAX.
Deliveries begin in 2022
Deliveries are from 2022, a timeframe in which the MAX positions were sold out, according to data reviewed by LNA. This means Boeing had to adjust its skyline to accommodate IAG.
With no end in sight to MAX grounding and Boeing under siege by legal, Congressional, regulatory and criminal investigations, the LOI couldn’t come at a better time.
While it will take a while for a firm contact to be signed, the endorsement by IAG—the first MAX commitment since grounding—demonstrates solid confidence from one of the world’s Blue Chip airlines.
Additionally, IAG’s single aisle aircraft have been exclusively from Airbus with the A320 family. This is a huge customer flip.
Airbus’ A320neo line is sold out well into the next decade.
Wow, what a shot in the arm. Hope Boeing takes this message with all humility and swear never to tread the way it did to put out the MAX.
It is hard to judge how much ‘BriExit’ has to do with this order
Mr.T visited the UK not so long ago?!
Greetings from BREXIT
And they got a great deal and the beat goes on.
And an order of 30 x 787 is pretty nice as well.
Wow! Does anyone know just how much of a “yuuuuuuggge” (“fire sale?) discount IAG got in exchange for offering its “vote of confidence”/stamp of approval for Boeing’s problem-plagued 737 MAX?
Just wondering.
I figure that BAC will net USD5.00/plane.
Huge boost in exchange of a huge discount I guess.
Willie Walsh is the first to take advantage of the situation but his fellow Irish citizen O’Leary should follow shortly, no reason for him to be less cynical and opportunistic.
Is there any example in the aviation history of a big deal in a such “special” situation ?
This is not all that surprising considering what Willie Walsh has been saying lately.
https://www.aerotelegraph.com/vueling-might-switch-from-airbus-to-boeing
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Where Mr. Walsh may be mistaken, though, is when he said that he was not concerned about customer acceptance as it will be 2022-23 before they (IAG group) will take delivery of the first aircraft.
If a significant number of customers (i.e. passengers) would still be reluctant to board/fly 737 MAX aircraft operated by the IAG group in 2022/2023, would Mr. Walsh still be so cocksure that ordering the “infallible” MAX would still be a great decision by the IAG group?
It’s interesting to note that Avolon Chief Executive Dómhnal Slattery seems to have a different opinion on the matter:
https://www.seattletimes.com/business/boeing-aerospace/a-question-at-the-paris-air-show-will-boeing-ceo-muilenburg-survive/
Well it also falls off the radar faster to.
Short attention span these days.
737 MAX got to be cheap, really cheap.
200 cancelations by Lionair, not official but they stopped taking deliveries at the start of the year. BA needed to shift these ones quickly and IAG jumped. A repeat of ET’s 777 slot sales.
There is another package of 67 MAX ordered by Jet Airways available soon.
Just my view:
This is a horrendous decision by IAG. Shortsighted and absent of logic it goes against the trend of a more capable A320neo family that’s already deeply integrated at IAG airlines.
The Max brand is damaged beyond repair, IAG should have been sharper here…
*shakes head*
Maybe IAG is a lot sharper than you think?
Not on the basis of this order.
In fairness, these appear mainly slotted for LEVEL and Vueling. I don’t think there are any brands to damage there. If anything it bolsters their low-cost credentials — we’re willing to potentially compromise safety to get you the lowest fare possible!
Sounds like the Brits are trying to curry favor with the Yanks, with Brexit looming; this type of symbolism tends to be noticed and appreciated by Mr. Trump. On the other hand, it’s only an LOI…so the opera won’t be over ’til the fat lady sings (or flies)…
I wonder what type of conditional clauses they have in the contract. I’m sure that lifting of the grounding is one.
Boeing needed a big name and got one. But at what price.
The same applies to the sale of 777X to IAG. Airbus couldn’t even flog A380s cheap enough even though Willie Walsh was on record as saying IAG would buy secomdhand A380s. So the 777X came as a price IAG couldn’t refuse. Not surprising Emirates are renegotiating their own 777X deal. Etihad, Qatar and others will follow.
Boeing are known to be selling cheaply. Will it work? Can they afford it? Time will tell. It’s not hurting Airbus.
The 777X deal is a firm deal. The 737 MAX isn’t. Don’t expect any firming of the deal until it is proven that the 737 MAX is safe. IAG won’t be the first in line to try. It will be US operators. IAG will watch.
It’s almost unthinkable, but what if major changes are needed for the MAX?The grounding has already gone on for longer than the expert’s were predicting.IAG will have plenty of get out clauses given the circumstances, but what will they be able to buy instead?
IAG orders are for delivery from 2022, if IAG haven’t seen it in service by then BA will be ancient history. Lion and Spice slots will go to SW, and, I imagine, UA, or anyone else with a history of co-operating with BA in delivery issues in return for later slots for IAG.
I’ve been thinking about Bjorn’s recent post saying that MAX’s problem will be forgotten, so long as it gets through 12-18 months of trouble free service after the grounding gets lifted.
Every month or so an NG makes the news for one reason or another, it is the white noise generated by having so many in service.
If BA stick with their plans by the end of this year there will be over 700 MAXs in service, presumably. End 2020 there will be over 1400 and well over 2000 by the end of 2021. The number of aircraft in operation should ensure a few newsworthy events, all reporting will start with the words ‘a Boeing 737 MAX, the same model as was involved in two fatal accidents….’
The Murdoch press in UK, Aus and USA aren’t going to let this one rest for quite a while, I suspect it will take more than a year or two for this to go away, asuming BA don’t want to sell themseves to the Murdoch family!
MartinA – how many Max deliveries are you calculating for this year, and for what period do you expect the rate to reach 700/year (presumably including catch-ups)?
Production is still 42, so even if they don’t try returning to 52 they will still produce about 350, plus the ones grounded makes over 700.
At rate 52 they’ll have 620 per year and 57, their anounced aim, which they should have been in a month or two, that’s nearly 684. Should also note that it was over 350 which were grounded and rate 42 didn’t start immediatly. All up the fleet should top 2000 by end 2021
MartinA – Thank you. Obviously, if some choose to walk away, it would have to be many to even dent those numbers.
Doesn’t sound like the LOI is for the MAX model specifically – more likely for the Next Gen or Neo series.
Bit of a gamble this, by IAG. If the MAX doesn’t fly again, they’ve not got slots booked on Airbus’s production line.
Also a bit of a gamble by Boeing. If they turn out to have been overly optimistic over the MAX’s likelihood of ever flying again, IAG may never trust them again.
While IAG’s current single-aisle aircraft might “have been exclusively from Airbus with the A320 family,” don’t forget that BA operated 737-200s from about 1980 onwards. They discovered A320 operating performance several years later, and then only by accident after inheriting ten (was it?) aircraft in their acquisition of BCal (a deal rooted, interestingly enough, in a casual conversation between respective senior executives meeting in Seattle for a 1986 Boeing product briefings; funny, that…).
The A320 was only ‘launched’ around 1984 , a bit late to compete against British Airways 737-200s in service since late 1970s. They werent replaced by A320s from 2002.
Those BCal A320s , delivered from middle 90s, never went into service with British Airways either.
Duke… – disposal of the seven ex-BCal A320-100s: sale or scrap? Why did BA subsequently switched horses from 737?
A good recent example of a plane recovering from bad publicity is the Dreamliner being grounded due to battery issues. The potential for the battery to catch fire in the air was seen at the time as a serious blow to the revolutionary new aircraft, and the popular press was full of predictions that passengers would stay away in their droves. It didn’t happen; the problem was fixed and more than 800 are flying today with no problems. Boeing will fix the MCAS issues and the Max will sell thousands. Two years after the grounding is lifted no one will avoid the plane, just as no one avoids the Dreamliner today.
– Nobody died in the Dreamliner battery events, and there weren’t any crashes / hull losses.
– Boeing wasn’t subject to criminal and Congressional proceedings as a result of the Dreamliner problems.
– The FAA wasn’t severely embarrassed by the Dreamliner events.
– The Dreamliner battery fires didn’t cause outcry over an old design that was pushed one step too far in an attempt to remain relevant.
What a difference a day makes. Monday the discussion was about how the 737MAX is a fundamentally unstable, dangerous, and unfixable airplane that would require at minimum a new horizontal stabilizer and control system, that Boeing would have to scrap the MAX and restart the NSA program, and as a result would file for bankruptcy, convert to Chapter 7, turn in its production certificates to the FAA and be dismantled.
On Tuesday one of the world’s largest airlines, with a full technical department, access to the top-ranked aerospace consultants, and in a position to grill Boeing mercilessly on the actual situation with the MAX… indicated it would order 200 more frames.
Perhaps, just perhaps, the Boeing criticism on this forum has gone a bit over the top? Only suggesting…
Good comment.Thats what struck me.IAG will have been 110% informed on everything.Clearly this aircraft is not going to get any structural changes or this ‘order’ would never have happened.
Note we all marvel ( well I do) at the extraordinary next generation designs of BWB’s and ‘V’ wing aircraft.But I would bet the farm that both require very active computer flight software to enable full stability across the standard flight envelope.Perhaps its simply something that passengers and pilots will have to get used to in the future.
Well at least you are admitting that the 737 MAX will need sofware to stay in the air. Now all we need is Boeing to admit it!
Really, Boeing open with their customers. When did that start happening! If memory serves me correctly, the 737 MAX was to return to service by the end of April, then May, then June … Now we are bring told that Boeing haven’t given the regulators the heads up, never mind customers.
IAG does have orders and options for 220 A320s. Walsh got a price he couldn’t refuse. My guess, less than $40 million, a lot less. And he’s done it without making a commitment. But he needs to get it past his shareholders.
This comes to IAG’s/BA fleet of 777s. They are getting old and their replacement is pressing. I wonder what Boeing will offer IAG!.
Walsh is rolling the dice. Expect O’Leary to do the same!
This is hard nose business. Boeing are desperate. They are giving desperate numbers. The likes of Walsh and O’Leary will take advantage.
The sky hasn’t suddenly cleared for Boeing. Not in a day.
End of the day its an LOI only. Not sure if the AIG board and pilots are so keen on this?
The price must be “stupidly” low, maybe Mr. Walsh is trying to create an “AIG-Ryanair” with Vueling and Level operating 737′.
It looks like level is going to be long haul low cost so their probably going to get a321xlr’s and vueling will be short range probably with most of the max’s
Looks like Boeing wanted this deal at any cost to produce the “shock” value it did! What was the discount offered? 80% instead of the usual 30-50%? It is important to remember that it is not the number of aircraft you sell, but the profit you make selling them. I am quite sure both Boeing and Airbus could rack up huge orders if they gave their planes away free! But what does it do to the bottom line and survivability in the long run?
Nevertheless, I must admit it is a PR coup for Boeing, especially since Airbus was kept in the dark and appears to have been blindsided by the deal. Whether the gain is short-term or a long one remains to be seen and impossible to predict because of the uncertainties involved in getting the MAX flying again and regaining credibility and public confidence.
Perhaps “Caveat emptor” is in order?
Seems that the deal was a ‘private’ one between the CFO and Boeing – speculation of course. However it is confirmed that Airbus was not informed of the request and therefore made no bid. Some questions being raised on the legality of this (seems IAG rules specify competitive bids?). No doubt lots more to come.