One of the biggest shockers at the Paris Air Show as IAG’s letter of intent for 200 Boeing 737 MAX aircraft. This order was unanticipated and represented a major lift for Boeing’s beleaguered 737 MAX. However, more details have come out as to why IAG ordered the 737 MAX. It seems now IAG is getting fed up with Airbus.
IAG’s 737 MAX order
IAG hasn’t officially released many details regarding their 737 MAX order. All we know, as of now, is that IAG has signed a letter of intent for 200 737 MAX aircraft, including both the MAX 8 and the MAX 10. However, it is unclear how many of each variant will be ordered. Furthermore, details regarding where the aircraft may be sent are still unknown. Vueling and LEVEL have been mentioned as potential recipients for the 737 MAX.
Airlines do not buy bulk aircraft at list price. Manufacturers offer substantial discounts. On an order like this, it seems that IAG would get a significant deduction – perhaps more than 50% off the list price. Of course, this data is not made public.
For Boeing, it makes sense that they would offer these aircraft at a lower cost to IAG than before. Firstly, the 737 MAX needed a huge boost of confidence. Several flaws have left airlines, pilots, and passengers concerned about the safety of the aircraft. Second, IAG selected the A320 for narrowbody operations. Boeing’s 737 MAX competes directly with this aircraft, so, it is very likely that Boeing wanted to beat Airbus for this order and thus offered even more attractive pricing. This pricing would have to be low enough to outweigh the costs IAG will incur by introducing a new fleet type.
IAG and Airbus
Bloomberg reports that IAG is now starting to get fed up with Airbus. Previously, Willie Walsh, CEO of IAG, indicated that they were concerned about being too reliant on Airbus. Now, there is another reason: delivery delays. IAG is a major A320 and A320neo customer. Unfortunately, Airbus has faced several production delays with their narrowbody aircraft. Consequently, IAG has received its Airbus narrowbody aircraft quite late.
Airbus still intends to compete against the 737 MAX order. However, barring any major changes to their delivery schedule and aircraft manufacturing program, IAG will likely stick with the MAX aircraft order.
IAG primarily uses the A320 family for shorthaul operations. As a result, this order for 200 737 MAX aircraft came as a bit of a shock. Especially as IAG also ordered A321XLR aircraft. Ultimately, it seems that IAG is trying to send Airbus a message with this order. The question now is how Airbus will respond and if, perhaps at the eleventh hour, IAG will switch their order to A320neo aircraft.
Do you think IAG should stick with the 737 MAX? How do you think Airbus will respond? Let us know in the comments!