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Defeat for Airbus jumbo jet
British Airways endorses Boeing view that smaller airliners are the future
Thursday, February 22, 2001
By JAMES WALLACE
SEATTLE POST-INTELLIGENCER REPORTER
In what amounts to an important endorsement of The Boeing Co.'s
commercial market outlook and strategy, British Airways has decided it is not
interested in the Airbus A380 superjumbo.
An executive with the airline said yesterday that its studies over the past
several months concluded the 555-passenger jet does not make economic
sense, at least for the British Airways fleet.
"There are very few routes that suit large aircraft and we believe markets will
continue to fragment," Dick Wyatt, head of fleet planning for British Airways,
said in a speech to aircraft finance bankers in Geneva.
That's the same argument Boeing has been making in defending why it decided
not to develop its own all-new superjumbo to compete with the A380.
"This has got to represent a huge moral victory for Boeing," said Peter Jacobs,
a financial analyst who closely follows Boeing for Ragen MacKenzie.
"I'm sure there is some high-fiveing going on over at Boeing's commercial
Even though Airbus has officially launched the development of the A380 with
60 firm orders from some very important blue-chip airlines, including
Singapore and Qantas, the announcement that British Airways will not join in
the rush to buy the A380 is an important development, Jacobs said.
"This represents an endorsement of Boeing's market outlook in the face of
what has been a lot of fanfare and publicity over the recent Airbus order wins
for the A380," he said.
Boeing has long argued that in an era of deregulation and open-sky
agreements between countries, market fragmentation over the next 20 years
means airlines will need more planes the size of the 777 or smaller -- not the
A380 or even a bigger 747.
As routes fragment, airlines are flying their passengers directly to cities
previously served from large hub airports. Typically, the world's biggest
jetliner, Boeing's 747, carried passengers to these hub airports, where they
changed to smaller planes to fly to the city of their choice. Now, those
passengers can bypass the big hub airports.
This is known in the industry as point-to-point service.
As a result of this fragmentation, Boeing believes that even though there is a
market for the 555-passenger A380, it is too limited to justify the jet's
development cost. Airbus, which has said the A380 will cost $12 billion to
build, believes the market for its plane is substantially bigger than Boeing has
In his speech at the aircraft finance conference, Wyatt said "point-to-point
frequency is what the customer wants, particularly business customers."
His comments indicated British Airways agrees more with Boeing about the
size of the market for a superjumbo.
"We don't believe there will be a market for second-hand sale of A380s,"
Wyatt was quoted by Bloomberg News as saying in his speech.
"It's going to be a very small market, very limited market. It's not a plane you
can buy and then say 'Oops, we shouldn't have done that, let's sell them.'
We'd be stuck with them."
British Airways announced a couple of years ago that it would gradually phase
out its fleet of 747s in favor of the 777.
"If we could have a dozen less 747s than we currently have and a dozen more
777s, we'd like to," Wyatt told several hundred aircraft finance bankers at the
conference. "That's the base line we ought to be at."
Boeing does plan to introduce new models of its 747 to counter the A380
Known as the 747X, these derivatives would cost about $4 billion to develop.
But Boeing has yet to land any orders for the 747X. Given the 60 firm orders
that Airbus already has for the A380, questions have been raised by aviation
experts whether Boeing made the right decision in not building an all-new
"The key for Boeing is (to) land some orders for the 747X sometime this
year," Jacobs, the industry analyst, said.
Boeing has been shopping both passenger and freighter versions of the 747X
to potential customers, and program executives have said they could develop
the freighter version first since that is where most of the early customer interest
Korean Air Lines may order as many as 16 of the 747X freighters, according
to the latest issue of the respected trade magazine Flight International. The
magazine reported the airline is in advanced talks with Boeing on the deal,
which would include about $200 million in financing from Boeing.
Boeing declined comment on the report.
The company has said before that it is talking to Lufthansa, Atlas Air and other
cargo carriers about the 747X freighter.