BA’s sneaky bailout
The UK left the EU completely, in all sense, at 2300hrs 31st December 2020. Just before 2355hrs that same night BA, when virtually nobody would have been paying any attention, and the government posted the fact that the airline had just received £2 billion in partially government backed bailout money.
Using the Export Credit Guarantee system as a way of bolstering the airline is now OK because, just minutes before, the UK left behind EU rules that would have complicated such a move.
Yet it’s way more than that. The timing was genius because almost nobody noticed, and nobody is much talking about it. The next day was new years day and then a whole weekend, so it slipped quietly past all but the most vigilant and by Monday it seems nobody has much to say.
The irony of British Airways even getting a government supported bailout, which amounts to about a third of the total – is simply galling in the extreme. IAG, its parent has just taken on debt of €1 billion (£900m/US$1.1 billion) to buy Spanish airline Air Europa. On top of that BA actively campaigned for airlines like Flybe and Virgin Atlantic to collapse rather than see them get a bailout. When they asked for government support they were both told to, in effect get lost, which saw Flybe collapse. And, former IAG chairman and CEO of BA, Willie Walsh was remorselessly campaigning to make sure they never got one.
Despite the hostile approach, the cynicism and the deliberate aim of reducing competition at Heathrow even further, which will always be BA’s main mission on behalf of IAG, (via Vueling, Aer Lingus, Iberia, British Airways, they control some 65% of Heathrow’s slots, add if you add American as their Join Venture Partner it’s nearer 67%), the UK government quickly gave into the pressure.
Let’s not forget either the appalling way BA behaved in the way it dumped staff at the start of the crisis, it was ruthless and it turned out unnecessary in the way it went about it, even if the end result would have been the same.
Most of the general public are pretty much unaware of BA’s behaviour and its cynical business practice. yet for me, as a potential customer, its often the deciding factor in avoiding them. No business is perfect, but BA go a long way in the wrong direction and its cynicism, its lack of a moral centre, even the pretence of one, is too much too swallow.
Widebody woes…will there ever be another 1000+ widebody?
If you’re as old as me, you can look back and remember when aircraft like the 777-200/300 and their variants, the 747, 767, and more recently the 787 reached the dizzying highs of order books that stretched well past the 1,000 aircraft mark.
Their competitors like the A340’s never got anywhere like that far, largely because they had two engines too many. Early forecasts that the A380 might ever reach that height soon vanished as reality hit home.
The fact is the widebody market has been in decline for years, not because demand has been sated, it clearly hadn’t before the pandemic, but because the way airlines chose to market flights in a certain way, and the positive response they found from customers.
This was in many ways a direct response to the low cost market, which pioneered, often unsuccessfully, using smaller aircraft to fly longer distances to more remote destinations, especially in the trans-Atlantic market. However it was proving particularly successful in the Far East and South East Asia. Even inside the US, the 757 and the A321 proved trans-continental flights of 6-7 hours were best handled as low to mid volumes flying multiple frequencies.
Both United and American regularly used 757’s on routes from hubs and some larger spokes to Europe, from Belfast to Edinburgh, Birmingham UK, and Heathrow, Porto and Brussels. The advent of the A321LR and XLR is about to bring such routes back to life and airlines like JetBlue are lining up to make them viable in the coming years.
The new A321neo variants are going to make sub-200 seat sub-7 hour flights to the US East Coast and to Western Europe a new world of opportunity, and the need for widebodies on many routes is fast declining.
And it’s not just Europe-N.America. Already airlines like Wizz in Europe are starting long range flights on A320neo’s to Dubai – right inside the very airport Emirates is flying A380’s and 773ER’s from, to destinations in Europe Wizz and others, may soon serve.
With these smaller mid-range aircraft flying what was once the preserve of much larger aircraft, the inevitable impact on widebodies is growing. Just look at the demand on the 787-8 – it should really, have been based on the old business model, a perfect 767 replacement. Yet demand for it has been minimal. Take a look at the A330neo variants and the demand for those is frankly awful, the -800 is woeful.
The fact is that the only reason the 787-9 is a success is it strikes the right balance, of range and passenger numbers with economics, and that makes it the current darling of long haul operations. The same has to be said of the A359, for exactly the same reason.
As soon as you get to the 787-10 and A350-1000, demand drops, because they are inevitably, specialist aircraft for a specific and relatively small niche. However they’re viable as derivatives for the manufacturers. The same cannot be said of the A380, which was designed for a market that was already sick and has in reality deteriorated even faster than the worst predictions. Covid 19 just stuck the knife into an already dying patient.
The success of the 777-300ER was its relatively low price, as an expanded derivative of an existing model, its capacity, economics and range. Yet even now, older versions, especially the -200 and -300 are being dropped from airline inventories because they just aren’t economical enough. Even older -300ER’s have been retired or stored long term, unlikely to see the light of day again. Just 16 are left to be delivered.
And now the fate of the Boeing 777-9 is that it will almost certainly never get its development costs back. I can’t tell you how many times I’ve had conversations with those who believed that Boeing would cut it, and how close they came to doing so last year. In the end it was seen as likely to do so much reputation damage and to the share price, it was considered too late to stop it.
Yet its entry into service is going to be long, slow and painful. Production levels are unlikely to ever reach more than 5 a month at peak, and that peak is now unlikely to be before 2026. The first deliveries are only just going to be in mid to late 2022, and Emirates revealed in its end of year bulletin last week it won’t be taking a single one until the end of 2023. Its also put off its last A380’s until mid-late 2022, having taken delivery of one on December 31st.
And both Airbus and Boeing are wondering, and worried that the order books they have got for the bigger aircraft, especially the 777-9 and A350-1000, may never be fully realised. Both Airbus and Boeing are looking at the A380 as a stark warning. If their biggest aircraft are going to follow that fate, Boeing especially need to keep their sensors on full. Any dithering by airlines, long term deferment will end up being like Virgin Atlantic’s order for the A380 – a 17 year deferment that led to nothing.
So the first question, will there ever be a 1000+ widebody? No, not as we know them. Will there ever be a mid-body twin aisle playing the role of a large widebody? Almost certainly. the mere existence of the ‘NMA’ 797-X concept tells you its the future, but it might not be quite how we imagined it.