Virgin Australia, the only Australian airline to have the 737 MAX series on order, has decided to delay deliveries until July 2021. This comes at a time when the aircraft is grounded, and still under review by CASA to determine if its even flight worthy.
What was Virgin Australia’s order?
Previously, Virgin Australia had the following aircraft on its order books:
- Boeing 737 MAX 8 – 38 on order, with the first to be delivered in November this year.
- Boeing 737 MAX 10 – 10 on order, with the first to be delivered in 2020.
According to AustraliaAviation.com, one of the first orders from the new CEO of Virgin Australia, Paul Scurrah, was to restructure the delivery times of their new MAX fleet.
“Coming in and getting a better commercial outcome for the group on the MAX order… was one of my biggest single priorities here, which is why we jumped on it quickly,” Surrah said to Sydney Morning Herald.
The new order book looks something like this:
- Boeing 737 MAX 8 – Now only 23 on order (upgraded MAX 8’s to MAX 10s), with deliveries delayed until 2025.
- Boeing 737 MAX 10 – Now 25 on order, with the first to be in service July 2021.
Naturally, pushing the MAX 8 back by almost six years means that the aircraft will likely be flying and, hopefully, back in the customer’s trust.
“You will see it return to service long before you see them in Australia, and I think that’s a good outcome for everyone,”
Why have they deferred order?
At first, it may look as if they have deferred their order due to the horrific tragedies of the two MAX 8 disasters that killed over 300 passengers. However, looking through their financial statements, even back in February they were “working with Boeing to further optimize the delivery timing of Boeing 737 MAX”.
The CEO did not explicitly mention the disaster when announcing this news but did reiterate that safety was the number one priority of the airline.
“As we have previously stated, we will not introduce any new aircraft to the fleet unless we are completely satisfied with its safety,”
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It is also rumored that they considered canceling the order outright, but they would have incurred significant fees and been back in the same boat with an old fleet that has to be replaced.
Why upgrade to the 737 MAX 10?
By ‘upgrading’ to the MAX 10, Virgin will now have more capacity than rival Qantas on popular routes such as Melbourne to Sydney, and thus may be able to offer a better deal for customers. The Boeing 737 MAX 10 can carry 230 passengers to a range of 3,300nm.
“The innovative interior of the MAX 10 aircraft has a larger cabin and number of seats and an extended range, offering flexibility to our network and greater efficiency for slot-constrained airports,”
Plus, with the order value in the range of $2.5 billion AUD ($1.75 billion AUD), pushing back a delivery date means pushing back the final payment. Virgin Australia has effectively pushed back a billion dollar bill by five years.
“This includes a significant deferral of capital expenditure by extending the use of existing aircraft given the relatively young age of our fleet along with providing the group earlier access to the superior operational economics of the MAX 10 aircraft,” Scurrah said to Australian Aviation.
In the meantime, the airline will be extending its current 737-800 leases.
As for rival Qantas, they are still deciding between the 737 MAX or the Airbus A320neo for their next fleet upgrade. They will make a decision by next year.
What do you think? Should Virgin Australia fly the 737 MAX aircraft?