Monday, January 18, 2016

British Airways Eyes Leasing Secondhand Jets Rather Than Buying New Ones: Parent company IAG mulls leasing Airbus A380s, Boeing 777s

Willie Walsh, Chief Executive of International Consolidated Airlines Group.

The Wall Street Journal
By Robert Wall
Updated Jan. 18, 2016 5:03 p.m. ET

DUBLIN— British Airways is warming to the idea of flying leased, secondhand jetliners rather than buying new ones as parent company International Consolidated Airlines Group looks at how to save money in expanding its long-haul fleets.

Willie Walsh, IAG’s Chief Executive, said on Monday that the group is considering leasing used Airbus Group SE A380 superjumbos as well as Boeing Co. 777-300ER long-range jets, marking a new commitment to the secondhand plane market.

British Airways used to focus principally on buying new long-range planes, but is taking a different approach to introducing extra aircraft, Mr. Walsh said on Monday. “We are quite happy to consider secondhand widebody aircraft,” he said.

Mr. Walsh said the airline operator could take around five or six A380s for the British carrier while sister Spanish carrier Iberia might also operate some of the jets. The leased Airbus aircraft would be equipped with engines made by Rolls-Royce Holdings PLC, he said. British Airways’s existing A380s planes are already Rolls-Royce powered.

The leasing plan comes at good time for IAG. The group last November raised its earnings outlook, its results buoyed by improving traffic, low fuel prices and the benefits of Mr. Walsh’s aggressive remaking of the business after the 2011 merger of British Airways and Iberia, involving thousands of job cuts and other acquisitions.

Mr. Walsh said the company also could lease used Boeing 777 planes to add to those already operated by British Aiirways. Mr. Walsh said one of his regrets has been not buying more of the Boeing planes.

The potential plane rentals come after Delta Air Lines Inc. Chief Executive Richard Anderson last year said secondhand prices for some long-range jets had fallen sharply.

British Airways, which operates 10 A380 planes and plans to introduce its final two already ordered this year, has options with the European plane maker to buy more of the double-decker aircraft. But the options are too expensive, so the airline is looking at the second hand market, Mr. Walsh said at the annual Airline Economics conference in Dublin.

Airbus has a $432.6 million list price on new A380 planes, though buyers typically get often big discounts.

Malaysia Airlines has said it is looking to shed some of its A380 planes which it considers surplus to current requirements. The airline’s six A380s are also Rolls-Royce powered.

An Airbus A380 on display at last year’s Paris Air Show. 

Though some airlines have struggled to fill the A380 which seats more than 450 passengers, Mr. Walsh said the plane has been a success for British Airways.

Airbus has been struggling to find new buyers for the A380, though it last year signed an agreement for three more of the planes. The Toulouse-based plane maker also faced a risk that in coming years planes coming off lease could weigh on demand for new models.

Mr. Walsh also said he expected IAG to focus primarily on cost-cutting at British Airways, Iberia and budget carrier Vueling this year. Despite a slowdown in Asian economies, he said China and the region remained a focus for expansion, not just by British Airways but also by Iberia, amid growing demand for air travel. Chinese bookings have remained good despite economic turmoil in the country, he said.

British Airways is also considering adding Tehran as a destination to its network after the removal of international sanctions over Iran’s nuclear program, Mr. Walsh said.

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