Why Air France-KLM selected the A350 over the 787

Sometimes you win, sometimes you lose. Airbus and Boeing know this all too well when clinching aircraft orders. But the announcement from Air France-KLM that it intends to order up to ninety Airbus A350s must be tough for Boeing. Once confirmed, the order means another shift away from Boeing toward Airbus for the French-Dutch airline group. Here's why Air France-KLM selected the A350 over the 787. Boeing was dealt a similar blow in December 2021, when KLM and leisure airlines Transavia and Transavia France announced an order for 100 A320neos and A321neos plus purchase rights for another sixty. Long-time 737 operators, the airlines will phase out the Boeing narrowbodies over the next seven years. Dutch Transavia is set to welcome the first A321neo in Q4, while Transavia France is also expecting their first A320neo this year. KLM will introduce the first A321neo in 2024. The order for sixty Airbus A220-300s for Air France in July 2019 didn’t hurt Boeing as much as Embraer, which had hoped to open a door at the French carrier. With the MAX 7, Boeing was never in contention, but Embraer had hopes after securing an order from KLM Cityhopper for the E195-E2. Boeing was dealt a blow in December 2021 when KLM, Transavia, and Transavia France opted for the Airbus A320neo and A321neo. (Airbus) Widebody fleet The widebody fleet is different. Both Air France and KLM operate a mixed Airbus/Boeing fleet, but the French always seem to favor the European jets with A330s, A340s, A380s, and more recently, A350s, although 61 777s play a major role within the airline. While KLM has a sub-fleet of eleven A330s, its long-haul fleet has been built around 31 777s and, more recently, around 23 787s, of which Air France only operates ten. But that is going to change. Boeing data shows that KLM has five 787-10s in the backlog. When the fifth is delivered sometime in the next couple of years, this will most likely be the last Boeing to join Air France-KLM for a long time. It marks the end of a relationship dating back to 1960 when Air France introduced the 707 into the fleet. KLM became a Boeing operator in 1971 with the 747. The French airline has been an Airbus operator since introducing the first A300B2 in 1974. KLM had a small fleet of A310s from 1983 but didn’t have Airbus aircraft since the arrival of the A330s. Dutch Transavia used a leased A300 in its livery for a few months in 1976/1977, as did Transavia France with four A321ceos in 2014-2015. Airbus or Boeing? While some will say that the preference for the Airbus A350 is politically motivated to support European jobs, the down-selection has been more complex than that. Bloomberg reported on Monday that it has come down to a combination of factors, including the range of the aircraft, price, and availability. In the end, Airbus made the best offer. While buying more A350s for Air France was a no-brainer, the difficult choice was what to choose for KLM. As Group CEO Ben Smith said in May, there were four options: more A350-900s, more 787s, the A350-1000, or the 777-9. More 787-10s for KLM would have made sense from a synergy point of view, as it would simplify maintenance and training costs. This is what Ben Smith said in May: “The 777 and 787 have a lot of synergies, like the dual cockpit qualification. There isn’t another airline in Europe that is positioned to have a fleet of aircraft that have that much commonality. More 787s would position us to have the most efficient widebody fleet in Europe. It saves on maintenance; it saves on training; it is a massive simplification.” More Boeing 787-10s would have made perfect sense for KLM from a synergy perspective. (Richard Schuurman) Although attractive, these synergy effects have not played a determining role in the down-selection of the A350. And it is probably why Air France would not have benefitted from introducing more 787s. So, let’s look at what Smith reportedly told Bloomberg. 1 – Range: while offering an 11.370-kilometer range, the 336-seater Boeing 787-10 falls short by 3.333 kilometers compared to the 300-350-seater Airbus A350-900 if Airbus’ claim is correct. Operating costs per seat of the Dreamliner are said to be thirteen percent higher over this distance. Boeing contradicts this and claims unmatched economics for the largest Dreamliner. While the range is adequate for most of KLM’s network, and the 787-10 operates from Amsterdam to San Francisco, Las Vegas, or Nairobi, it could fall short in South America, South Africa, and East Asia. That’s where KLM deploys its current 777-200ERs and –300ERs, but the smaller model is up for replacement, as is the A330. The Air Current pointed out earlier this month that range is also an issue as long as the airspace over Russia continues to be closed for Western airlines. With a prolonged war in Ukraine and sanctions on Russia continuing, some earlier projections from Eurocontrol could be right that this situation could extend until 2028. That means a continuation of longer routes to Eastern Asia with double crews. The A350 has a range advantage. 2 – Price: Boeing and Airbus no longer publicly share list prices of their aircraft. Based on unofficial sources, a 787-10 was listed in 2022 at $338.4 million and an A350-900 at $317 million, whereas the A350-1000 should cost you $366.5 million. Even if they are correct, the A350-900 would offer Air France-KLM a price advantage over the 787-10, offset by the higher price of the A350-1000. But we don’t know yet how the split between the -900 and -1000 pans out. And more importantly, we don’t know what discount the airline has for placing a firm order for fifty aircraft plus forty options. According to Bloomberg, Airbus has gone aggressive to get this deal and ensure it doesn’t lose this important customer to the competition. 3 – Availability: As we shared yesterday in the story about Air Canada’s 787-10 order, Boeing has 686 unfilled orders for all Dreamliner models. If ASC 606 Adjustments are included, 604 orders remain in the net backlog. Airbus has 39 A350Fs, 297 A350-900s, and 148 A350-1000s in the backlog, or 484. Boeing builds Dreamliners at a rate of four per month and is ramping up toward five per month by the end of this year before progressively jumping to ten a month in 2025-2026. Airbus is currently at a rate of six per month for the A350 and intends to ramp up to nine at the end of 2025. Airbus is believed to have production slots for the A350 earlier than Boeing can offer for the 787. This is the first A350-900 for Air France in final assembly in July 2019. (Airbus) With Air France-KLM planning to introduce the new widebodies between 2026 and 2030, Airbus, with its lower backlog, should have production slots available sooner than Boeing. Let’s assume Boeing will simultaneously be at rate ten in early 2026 and Airbus at rate nine. Air France and KLM will have a shorter line in front of them for A350s than if they had waited for the 787s. There is another factor that favored Airbus. It must also be seen in the context of the sustainability targets of the airline group. Air France-KLM wants to reduce CO2 emissions per passenger by thirty percent in 2030. This might be feasible more easily – or maybe even only - with the Airbus delivery schedule than with Boeing’s. Strategy completed With the A350 decision, Air France-KLM has almost completed its fleet renewal strategy. The most important one that is still up is the replacement of 38 Airbus A320-200s, four A321-100s, and twelve A321-200s at Air France. A220s might replace some, but there is still a need for new-technology aircraft in this segment. Availability is an issue here, with Airbus and Boeing sold out of narrowbodies for the next six to four years. A stretched A220 could solve this problem, but Airbus still has to decide when to launch this version. The airframer recently said again that a stretch has no priority right now. KLM Cityhopper and Air France HOP! have some Embraers around fifteen years old. (Richard Schuurman) KLM has a young Embraer E1 and E2 fleet at Cityhopper, although eight out of thirty E190s are fourteen to fifteen years old and need to be replaced later this decade. It’s the same for Air France HOP!, so a regional aircraft order is another one to look out for. The 737 replacement will start next year, with the last of 42 Boeings expected to leave around 2030. The eleven A330s will have left in 2028, as will have the fifteen Boeing 777-200ERs. That leaves fifteen 777-300ERs that A350-1000s will eventually replace, although KLM might keep the youngest Triple Sevens until well into the next decade. By then, Boeing will have a minority role within the Dutch airline.

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