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Bankers fret over IAG’s 777X order. What they could learn from Asia-Pac
March 1st 2019
There is concern the 777-9 is too big, but Heathrow is constrained. Read More »
It’s a tough crowd in London before even talking about Brexit. Bankers were displeased with the 777X order from IAG, the darling of Europe’s big airline groups. The City deemed the 777X too big, never mind the fact that a few weeks ago IAG CEO Willie Walsh wanted more A380s but at a lower price, although any A380 deal would have been for a handful.
IAG ordered 18 777-9s with options for 24. Bankers would have preferred IAG to increase its order for A350-1000s. So too, would have Airbus, arguing the 777-9’s larger payload is not worth the additional 35 tons of empty weight.
Asia-Pacific is home to the only in-service A350-1000s, from launch customer Qatar Airways and Cathay Pacific Airways. Both have sizeable 777-300ER fleets and have ordered 777-9s. Their operation may provide reflection for IAG’s detractors.
In-service experience has found the A350-1000 has a comparable CASK to a 10-abreast 777-300ER. So on markets with larger passenger or cargo demand, the 777 has a current advantage expected to be maintained with the -9.
Qatar and Cathay are in markets with larger cargo demand than other regions. But IAG’s British Airways (BA) is in London Heathrow, the world’s most yield-premium hub and an airport with operating constraints. BA’s latest 747 retrofit has only 275 seats after swapping some economy seats for business class. Some BA 747s seat up to 345. The tentative BA 777-9 configuration is 325 seats.
Even if Heathrow receives a timely third runway, there will be greater demand than slots created. The 777-9 has a slightly smaller cabin floor area than the 747-400s it will replace at BA, which precludes growth even before considering the significant traffic spill over to other airlines. The firm order is smaller than initial rumours, and IAG stressed it still has more wide body decisions to make.
