Business World

Wednesday 21 August 2019

Plane speaking - IAG chief Walsh says Airbus delays nudged him to Boeing order

Saturday insight

Unhappy: Willie Walsh says that the 737 Max will inspire confidence on its return to service. Below, with Boeing CEO Kevin McAllister at the Paris Air Show
Unhappy: Willie Walsh says that the 737 Max will inspire confidence on its return to service. Below, with Boeing CEO Kevin McAllister at the Paris Air Show

Benjamin Katz and Maria Tadeo

IAG chief executive officer Willie Walsh has revealed that frustration with Airbus over late jetliner deliveries was a factor in his decision to place a $24bn (€21bn) order for Boeing's grounded 737 Max model.

Cost and a desire to have a mixed narrow-body fleet weren't the only considerations in the purchase, with IAG experiencing a 70-day delay on average for handovers of the A320neo aircraft, which competes with the Max, the CEO said in an interview.

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The outline deal for 200 of the 737s, revealed at the Paris Air Show last month, "should be an indication not just to Airbus but to everybody that we're unhappy with their performance," Dubliner Walsh said in Brussels. "I know everybody interprets it as an issue of price, it's not."

Airbus has been battling to recover its A320 delivery schedules after repeated production and design delays with engines, and more recently, the challenge of manufacturing bespoke cabins.

A spokesman said the Toulouse, France-based company is working with customers to agree on revised dates. While Airbus has pledged to compete for IAG's order, announced as a letter of intent and not yet part of Boeing's official backlog, Walsh said he fully intends to sign off on the deal and won't be approaching the European manufacturer, adding that he doesn't want to be "solely dependent" on one company for his group's entire narrow-body fleet.

For Boeing, the purchase by the British Airways and Aer Lingus parent was a surprise show of faith in the Max from a respected buyer after the jet was grounded in March following two fatal crashes in five months.

Walsh, himself a former 737 pilot, said unparalleled scrutiny of the plane before it resumes flying should restore faith in the model among travellers.

"When the Max comes back into service it will have gone the most thorough examination of any aircraft anywhere, anytime," Walsh said. "That's why I think people will have confidence in the aircraft." He told Bloomberg TV that he also has confidence in safety regulators, adding: "This is a good process."

Deliveries of Airbus's wide-body jets are also late, but to a lesser extent, and Walsh said he's still engaging in talks on models including the A330. He also placed orders in Paris for the A321 XLR, the world's longest-range single-aisle plane.

Meanwhile, Boeing announced Thursday that 737 program chief Eric Lindblad is retiring after barely a year in the post. The logistical challenge of returning the Max to flight - once cleared by regulators - will now fall to Mark Jenks, who has been running the company's New Midmarket Airplane program.

Max customers Ryanair and Norwegian Air Shuttle said this week they expect guidance for the lifting of the grounding to slip into October or later.

Boeing and Airbus are also locked in a dispute over subsidies that will resume at the World Trade Organisation next week when both the U.S. government and the European Union will make presentations on the issue.

Earlier this month, the U.S. raised its threat to impose tariffs against the European Union and named a potential 89 product lines that could be hit. Such a move would dramatically escalate an existing, but relatively low-impact set of tariffs.

The prospect of a growing set of trade disputes between the United States and Europe over aircraft, and the pending threat of Washington imposing tariffs on car imports have started to hit business confidence and threaten to pull down global economic growth.

The US Federal Reserve has cited rising trade uncertainty as one of the main reasons for a move to its first interest rate cut in a decade and the European Central Bank is also shifting to looser policy to prop up the anaemic eurozone economy.

Bloomberg

Irish Independent

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