Why IAG splits its narrowbody orders between Airbus and Boeing

International Airlines Group (IAG) shareholders have approved previously announced aircraft orders with Airbus and Boeing. These are all narrowbody aircraft purchased for growth and fleet renewal of its airlines. But what is the ratio of this order? Why IAG splits its narrowbody orders between Airbus and Boeing. The Boeing order is for 25 of the high-density MAX 8-200 and for 25 MAX 10s, plus 100 options. Deliveries are planned between 2023 and 2027, with only one -8200 scheduled for delivery next year, eleven in 2024, and thirteen in 2025. The first MAX 10 join in 2026, with ten to be delivered that same year and 25 in 2027. The options are split as follows: ten aircraft in 2025, twenty in 2026, forty in 2027, and thirty in 2028. Boeing will include the firm order in its October backlog. The order was announced in May subject to shareholder approval, which happened on October 26. The resolutions of the extraordinary shareholders meeting in Madrid state that the fifty MAX will be for IAG’s Spanish low-cost subsidiary Vueling. Vueling is now an Airbus-only operator with a fleet of 125 aircraft, including 25 A320neo’s and four A321neo’s on the backlog. The airline also has 76 A320ceo’s and six A319ceo’s aged between eleven and 15.5 years. The fifty MAX aircraft now confirmed by IAG will not be enough to replace all A320ceo family aircraft, so the group would need to exercise options to meet requirements. Airbus order IAG’s shareholders also approved orders for 37 Airbus aircraft. This is a mix of A320neo’s and A321neo’s. Twelve aircraft were A320neo options as part of an August 2013 order and have now been confirmed. The other 25 aircraft are part of a new order for neo-family aircraft. IAG also holds option on another fifty aircraft. Deliveries are scheduled from 2025 through 2028. The exact split of sub-types and which airlines will get what aircraft will be decided closer to the delivery dates, but British Airways, Iberia, and Aer Lingus have all grown and replaced their neo fleets. IAG already converted options on eight A320neo family aircraft on March 30 into six A320neo’s and two A321neo’s. This was followed on June 30 by exercising options on eleven A320neo’s and three A321neo’s. The order that has now been confirmed was announced on July 28. A slide from the IAG shareholder document shows the split of aircraft deliveries from the latest orders. (IAG) In a background document for shareholders, IAG explains why it has ordered the aircraft: “By early 2022, IAG had either replaced or had firm commitments to replace 106 of its fleet of 340 short-haul Airbus A320 family aircraft with newer generation Airbus A320neo Family Aircraft. However, at this stage, IAG still identified a requirement for a minimum of around 170 additional replacement aircraft by 2030 in order to maintain its fleet size and to benefit from the improved operating economics and environmental performance of new-generation aircraft. The case for earlier replacement has also become stronger as fuel prices have increased, and the impact of charges relating to European and UK greenhouse gas regulatory schemes (including but not limited to the EU ETS) has increased the benefits of the lower fuel burn and resulting lower CO2 emissions of new generation aircraft.” Why the MAX? The reason to opt for the Boeing MAX is motivated as follows: “When considering the need to maintain healthy competition between suppliers and given the constrained availability of short-haul aircraft in the period to 2028, the Board considers it necessary to move its Airbus short-haul fleet to a mix of Airbus and Boeing aircraft. The Group is taking various actions to ensure the transition to a mixed Airbus and Boeing short-haul fleet is delivered as efficiently as possible and to mitigate the associated costs, including those relating to crew re-training, maintenance and spare parts.” Including the Airbus and Boeing orders, IAG has now 217 aircraft on order. “This will meet IAG’s short-haul fleet replacement requirements until 2027-2028. Also, the ability to purchase a total of up to 150 additional Boeing 737 Family Aircraft and Airbus A320neo Family Aircraft will provide access to sufficient new generation aircraft to ensure replacement of aircraft reaching the end of their economic lives (including meeting IAG’s minimum replacement requirement to 2030), early replacement for economic and environmental reasons, and some capacity to fund growth. This flexibility is considered an important strategic asset in a constrained supply market.” The combined order is valued at $11.1 billion in list prices, but IAG says in the document it has negotiated a substantial discount from both Airbus and Boeing.

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