GO
Loading...
Live at 2:30p ET
LINDSEY VONN
CNBC.com web-only interview
Downhill skier Lindsay Vonn

BA Ditches Boeing Jumbo for Airbus A380 Superjumbo

British Airways ended decades of loyalty to Boeing's 747 jumbo with a switch to Airbus's new A380 superjumbo on Thursday as it announced a mixed plane order worth up to $8.2 billion.

The order for 12 superjumbos from Airbus and 24 787 Dreamliners from Boeing will replace 34 of the airline's older longhaul planes.

BA Chief Executive Willie Walsh told reporters the airline would use the superjumbo to make best use of its limited take-off slots at London's crowded Heathrow airport.

He denied the company had experienced political pressure to buy the superjumbo, the wings and engines of which will be built in Britain.

"There was absolutely none," he told reporters. "There was no contact, be it formal or informal. The decision was made in the best interest of British Airways. In the engines, the choice of Rolls-Royce was because British is best."

The A380 is the biggest airliner in production, and its first delivery due next month, to Singapore Airlines, comes after wiring troubles triggered a costly two-year delay and management upheaval at Airbus.

The doubledecker has a maximum seating capacity of 853 passengers, though most airlines plan to use configurations of fewer than 650, which is still a jump from Boeing's jumbo, which BA currently flies with a maximum of 351 seats.

BA took delivery of its first jumbo on April 22, 1970, becoming just the fifth airline to get one.

"It's an excellent boost for U.K. manufacturing, with Airbus and Rolls-Royce plants benefiting," said Tony Woodley of Britain's biggest labour union, Unite. "This order will secure many thousands of jobs."

Heavily Discounted

Analysts said BA had probably received significant discounts as Boeing and Airbus battled for the high-profile orders.

"With the A380 likely to have been heavily discounted, and a reasonable discount on 24 787s also applied, we'd estimate the real value of the order at around 3 billion pounds ($6 billion)," said analyst Andrew Fitchie at Collins Stewart.

Walsh declined to discuss discounts, which are common in the industry, but said: "I'm very pleased with the way Boeing and Airbus approached this."

The superjumbo will fly on routes from London to Hong Kong, Singapore, South Africa and the west coast of the United States.

The 24 mid-sized 787 Dreamliners, a model whose rapid sales have revived Boeing's fortunes, will be used to open up new routes and increase the frequency of flights on existing ones.

The Dreamliner breaks new ground with a fuselage made of light-weight carbon composite, and is due to enter service next year.

The two types of new aircraft will be delivered between 2010 and 2014, and BA said it had also taken options for a further seven Airbus superjumbos and 18 of Boeing's Dreamliners.

The airline said both aircraft types would be powered by engines from Rolls-Royce, which said it could make up to $5 billion from the deal if all options become firm orders.

BA said it was considering aircraft to replace a further 37 Boeing 747s and is examining the Boeing 777-300 ER, the Airbus A350XWB, as well as a stretched version of Boeing's 787 Dreamliner, the 787-10, which the planemaker has yet to launch.

"This puts big pressure on Boeing to actually launch the 787-10," said one London-based brokerage analyst.

Another said that while Airbus had scored a major victory in selling the superjumbo to BA, it had missed a key opportunity to secure a deal for its newest plane, the A350 XWB, and selling it to BA would remain a priority for the planemaker.

Shares in BA had climbed 3% to 380 pence, while Rolls-Royce was up 1.3% to 527 pence, and Airbus parent EADS was up 1.3% at 21.4 euros.

BA has arranged for a group of banks to provide $1.5 billion of debt financing to cover its firm orders to the end of 2011.

Symbol
Price
 
Change
%Change
BAB
---
BA
---