Wow: Airbus Has Had To Renegotiate 1000 Aircraft Deals

Airlines of all shapes and sizes had their operations rocked following the rise of the global health crisis.…

Wow: Airbus Has Had To Renegotiate 1000 Aircraft Deals

Airlines of all shapes and sizes had their operations rocked following the rise of the global health crisis. As a result, they desperately needed to revisit their strategies to ensure that they could cope with the pressures. During the MAKS-2021 airshow in Moscow, Russia, which Simple Flying attended last week, Airbus EVP, Head of Region & Sales Europe Wouter Van Wersch explained that amid the concerns, his company had to renegotiate 1,000 contracts related to aircraft supplies.

Airbus had been in critical talks throughout its supply chain, but it managed to find a balance despite the tough conditions. Photo: Sumit Singh | Simple Flying

A significant change of plane

Carriers across the globe had the bulk if not all of their services suspended for much of the year following the start of the pandemic in early 2020. With the significant passenger downturn, the requirement for new aircraft just wasn’t there. In fact, several airlines took the opportunity to reshuffle their fleets and let go of many existing types in an effort to cut costs.

Therefore, with all the uncertainty surrounding the future of the market, carriers were keen to have another look at their agreements in the hope that manufacturers would empathize with the difficulties. For instance, when it comes to Airbus, Cathay Pacific signed an agreement to defer deliveries of its A350-900s, A350-1000s, and A321neos. The flag carrier of Hong Kong sought to preserve cash with this deal.

A well-publicized renegotiation involved easyJet, which worked out a deal with Airbus for 22 of its jets on order to arrive up to five years behind the intended schedule. Notably, the deal would end up with the airline paying a higher price.

Even though it was long-haul aircraft that had airlines the most worried, narrowbodies weren’t totally exempt. Photo: Airbus

Working things out

Van Wersch expresses that there were more than a handful of renegotiations across the board. However, with productive communication, his firm avoided the worst-case scenario. Moreover, the economics worked out in the long run.

“We had to renegotiate about 1,000 contracts with existing supplies. Using this method to very good form, we have had no cancellations,” Van Wersch shared at MAKS-2021.

“So, we continued to maintain our backlog… From a financial perspective, the value of the aircraft worked out.”

Airbus Delivery Centre
Even though there were setbacks across the industry, Airbus still remained busy throughout 2020. Photo: Getty Images

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Adapting to the climate

Airbus’ sites were affected in following the complications of the pandemic. Production had to be cut down as businesses tried to cope with the new climate.

Nonetheless, Airbus delivered 566 planes in 2020. This figure wasn’t the worst yearly number that the manufacturer recorded in the decade that preceded. Also, the company no longer has any white tail aircraft across its facilities. Therefore, it managed to overcome the hurdles by refining its approach.

What are your thoughts about Airbus having to renegotiate so many contracts amid the pandemic? What do you make of the way the company handled the challenges? Let us know what you think of the overall situation in the comment section.

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British Airways’ United States Network Examined

From Monday, August 2nd, fully vaccinated US citizens will be able to travel to England without needing to…

British Airways’ United States Network Examined

From Monday, August 2nd, fully vaccinated US citizens will be able to travel to England without needing to quarantine on arrival, a significant next step. Currently, they must isolate for 10 days, an enormous hassle. But it is not this straightforward. The USA’s Level Four Health Notice implores “Do Not Travel”, while UK citizens are not permitted entry to the US. The next milestone must be reciprocity, truly vital on the road to recovery. We examine BA’s US network.

British Airways has 26 routes to the US. Photo: Kevin Hackert via Flickr.

Seven airlines from the US to London

Seven airlines have non-stop service between the US and London across the rest of this summer. In order of available seats obtained from OAG, they are British Airways; Virgin Atlantic; American; United; Delta; JetBlue; and TUI.

With 45%, BA is highly dominant, with its share twice as great as Virgin’s. If oneworld and joint venture partner American is included, BA and American have two-thirds of the market. However, under the circumstances, this is perhaps more exposure than anything.

BA B787-9
In normal times, North America is BA’s most profitable market. Photo: Vincenzo Pace | Simple Flying.

BA has 26 routes to the US

Between July 29th and October 30th, the last day of the IATA northern hemisphere summer, BA has 26 routes between London and the US. Some 23 of these are from Heathrow, with the remainder from Gatwick.

Because a good number of services return in September, the following is what BA itself currently has in the week starting September 13th. Note that some flights scheduled by the B777-200ER might change to the larger -300ER and vice-versa.

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While entirely expected due to very different markets and levels of fare performance, the B777-200ERs serving Miami will have 235 seats (four-class with first class) against 332/336 for Orlando (three-class). Miami will have nearly half as many economy seats, the classic case of volume offsetting lower unit revenue.

From…To…Weekly outbound flightsEquipment
HeathrowJFK42B777-200ER; B777-300ER
HeathrowBoston21B787-9; B787-8
HeathrowLos Angeles14B777-300ER
HeathrowMiami14A350-1000; B777-200ER
HeathrowSan Francisco14B787-9; B777-300ER
HeathrowHouston10B787-10; B787-9
HeathrowSeattle10B787-10; B787-9; B787-8
HeathrowLas Vegas7A350-1000
HeathrowSan Diego7B777-200ER
GatwickLas Vegas3B777-200ER
HeathrowNew Orleans3B787-8

24 airports served

BA’s network comprises 24 US airports, down by three versus the same dates in 2019. While Fort Lauderdale, served purely as a defensive measure in response to Norwegian’s long-haul operation, was chopped before winter 2019, Charleston and Pittsburgh may return in 2022.

BA inaugurated Charleston and Pittsburgh in 2019, with the carrier understandably unwilling to develop them in the worst period ever for aviation. Cathay Pacific did the same with new US routes introduced in 2019, although TAP Air Portugal didn’t.

BA B747-400
BA’s US operation used to be ruled by the B747-400. Now, it is served, in order of seats, by the B777-200ER, followed by the B787-9, B787-10, A350-1000, B777-300ER, and B787-8. Photo: Vincenzo Pace | Simple Flying.

How were things in 2019?

While 2019 feels a lifetime ago, BA achieved an average seat load factor (SLF) of 83.7% between London and the US that year, according to the USA’s Department of Transportation’s T-100 dataset. This was virtually the same as BA’s average across its whole network that year.

BA B777-300ER
The airports with the most BA passengers in 2019? JFK (naturally!), Miami, Boston, Los Angeles, and San Francisco. Photo: Vincenzo Pace | Simple Flying.

While the usual caveat of SLF only being one aspect of performance must be given, it is instructive to see that Fort Lauderdale (72.1%; was cut); Charleston (74.4%; was new), Houston (76.3%), Baltimore (78.2%), and Pittsburgh (78.2%; was new) were notably all below-par. No doubt Houston was offset by fairly high average fares, while Baltimore was (and remains) subsidized.

At the other end was Las Vegas (89.2%), followed by San Francisco (88.4%), Seattle (87.0%), San Francisco (86.7%), and JFK (86.1%). Will Los Angeles and San Francisco, along with Miami, see BA’s A380s again?

Will you be flying BA this year? Let us know in the comments.

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