British Airways Chooses Boeing 777 to Replace 747s

(Bloomberg) -- Boeing Co. ended a two-year sales drought for its 777X aircraft, as the owner of British Airways struck a deal for as many as 42 of the planes to replace an aging fleet of 747 jumbo jets.

IAG SA will order 18 of the 777-9, the largest version of the wide-body jet, the planemaker said in a statement Thursday. British Airways' parent company took options on an additional 24 of the planes, which, if exercised, would push the deal's value to $18.6 billion before customary discounts.

The order gives a lift to the 777X program weeks before the upgraded jet's factory rollout, the first milestone ahead of its planned 2020 debut. Boeing has sought to position the twin-engine behemoth as the heir to its iconic, hump-backed 747 jetliner. The 777-9, the first of a two-plane family, will feature Boeing's widest-ever wingspan and a distinctive look of its own, with wingtips that flip up when the plane is on the ground for maneuvering near airport terminals.

“It really does lend credibility for the program,” John Strickland, an aerospace consultant in London, said of the IAG order. “Other airlines will look at their successful results today and say, ‘If it's good enough for them, we ought to look at this seriously.”'

Boeing advanced 1.2 percent to $440.84 at 1:59 p.m. in New York. IAG fell less than 1 percent to close at 599 pence in London after reporting earnings.

British Airways will use the planes to replace its fleet of 34 aging 747s, which are due be retired by early 2024. Airbus SE had pitched the A350-1000, which the airline has already bought to meet an earlier requirement, to fulfill part of the order.

Bloomberg News reported earlier that IAG directors yesterday selected Boeing over Airbus.

Order Boost

Sales of the new Boeing planes, which seat upwards of 400 people, had sputtered after an initial order flurry around the 777X's launch at the 2013 Dubai Airshow. Even so, Boeing has amassed 358 orders and commitments from a blue-chip customer roster that includes Lufthansa, Cathay Pacific, All Nippon Airways and the three largest Persian Gulf carriers.

British Airways also has committed to lease four more Boeing 777-300ER aircraft, Boeing said Thursday. The planes will probably replace the airline's oldest 777-200 aircraft and, like the 777-9, may improve profits on long routes because of their large cargo bays, Strickland said.

The order was announced as IAG reported that adjusted operating profit advanced 9.5 percent to 3.23 billion euros ($3.7 billion) last year, ahead of the 3.15 billion-euro average estimates of analysts. Revenue rose 6.7 percent to 24.4 billion euros.

“This was a very good performance despite three significant challenges: fuel prices increasing 30 percent, considerable air-traffic control disruption and an adverse foreign exchange impact of 129 million euros,” Chief Executive Officer Willie Walsh said in a statement.

Flat Forecast

Earnings this year are forecast to be flat, as long as fuel prices and exchange rates stay steady, the company said.

IAG said in January it would walk away from bidding for Norwegian Air ASA after the low-cost carrier declined two informal offers. Walsh said Thursday that the company completed the disposal of its Norwegian stake by mid-February.

Asked about potential interest in Thomas Cook Group Plc airline unit, Walsh said IAG hadn't looked into it at all and wasn't actively looking at anybody.

--With assistance from Richard Clough.

To contact the reporters on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net;Benjamin Katz in London at bkatz38@bloomberg.net;Irene García Pérez in London at igarciaperez@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson