Posted on 10/17/2006 12:46:30 PM PDT by Righty_McRight
LONDON (Reuters) - British Airways launched a long-awaited competition on Tuesday to replace its fleet of 114 long-haul Boeing aircraft, a move that could generate crucial orders for Boeing's rival Airbus.
Europe's third-biggest airline, which wants to take delivery of the first new planes by early 2009, said it was too soon to say how many planes it would acquire, although analysts said the bill would be at least $7 billion.
An early order date could benefit Boeing, since Airbus is struggling to launch its proposed new mid-sized A350 model -- now set for 2012 deliveries at the earliest -- and will still be working through a series of delayed orders for the first of its A380 superjumbos.
BA Chief Executive Willie Walsh did not dismiss the possibility of including A380s in the requirements and said he was confident that production problems with that aircraft could be resolved.
But analysts expected BA's requirements would be allotted on a winner-take-all basis.
"We believe it is unlikely the order will be split between the two aircraft manufacturers, given the operating and maintenance simplicity of operating a single fleet," UBS analysts said in a client note.
Walsh said BA had issued invitation to tender documents to both Airbus and Boeing, as well as engine makers General Electric and Rolls-Royce. He expected proposals from the planemakers by the end of the year.
At 1020 GMT British Airways shares were down 2 percent at 441 pence, the biggest faller on the UK's benchmark FTSE-100 index.
PENSION DEAL
Analysts expect that BA, already stretched as it tries to resolve a 2.1 billion-pound ($3.91 billion) pension deficit, will go further into debt to fund the acquisitions.
"Their debt is obviously going to go up quite significantly," said Exane BNP analyst Nick van den Brul, who added that $7 billion was probably a minimum estimate for the cost of the order.
BA said it expected to place the orders next year and that the aircraft it was considering were Airbus's A330, A350 and A380s and Boeing's 787, 777 and 747-8s. List prices for the aircraft range from $160 million to $316 million.
A BA spokesman said it would not consider the four-engine A340 model because it did not suit its needs.
Boeing expects to begin deliveries of the 787 in 2008 but heavy demand could make it tough for BA to find aircraft for several years unless other carriers are willing to swap their delivery slots with BA.
BA announced earlier this year it had secured delivery slots for 10 777s by 2010.
BA is expected to negotiate discounts of at least 20 percent to list prices, analysts said.
Walsh told reporters it was vital for BA to tackle the pension issue before it started ordering new aircraft. The airline wants a deal with staff by November.
Walsh expected a response from manufacturers to the tender invitation toward the end of this year and first deliveries of new aircraft to BA in late 2008 or early 2009. He did not say how BA would fund the acquisitions.
BA has long flagged its intention to upgrade its fleet but said it would not take delivery of any planes until it moves into a new terminal at London's Heathrow airport in 2008.
BA currently has 284 aircraft in its fleet, of which 114 are long-haul planes. The long-haul fleet includes 57 Boeing 747-400s, 43 B777s and 14 B767-300s.
BA said the first aircraft to be replaced would be 20 Boeing 747s and 14 Boeing 767s, which will be around 25 years old.
(Additional reporting by Mark Potter and Jason Neely)
Ping
BA is dreaming if they expect that early of a delivery date from either Boeing or Airbus.
Then expect a 20% discount from list on top of that? Maybe Airbus is desparate enough to bid that low, promise delivery that early, then plan on paying the penalties later.
Of course, I'd have to park the A330 next to my Citroen...
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