IAG hails merger benefits with $20bn plane order

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BRITISH Airways owner IAG has placed an order worth up to $20 billion (£13bn) with Airbus for the latest stage of its fleet modernisation.

The company plans to acquire up to 220 A320s to renew and expand its short-haul fleet across British Airways, Iberia and newly acquired Spanish budget airline Vueling,

The move is the latest major deal to be agreed between the IAG and Airbus, rather than British Airways’ long-time partner Boeing, and follows the arrival in London last month of its first Airbus A380 superjumbo.

The acquisition of the world’s biggest commercial aircraft was heralded as a centrepiece of the group’s fleet renewal plan, aimed at cutting fuel bills and giving the airline an edge particularly in the lucrative long-haul business travel market.

But equally analysts said the latest deal for the A320s was in line with IAG’s long-envisaged move towards operating a single type of aircraft on its short-haul routes, a normal industry practice which keeps costs down both in the running of the aircraft and the initial procurement.

BA has been running down its Boeing 737 fleet ever since it placed its first major order for a fleet of A320s in 1998 but remains a big operator of Boeing aircraft on its long-haul routes and took delivery of its first new lightweight 787 Dreamliner aircraft in June.

For its short-haul routes, IAG said it currently operates 231 planes from the Airbus A320 family and only 18 Boeing 737s.

“There are big cost benefits for the group of having the same fleet on the short-haul space, particularly now that Vueling, which is an all-Airbus airline is part of the mix,” Goodbody analyst Donal O’Neill said.

“I think it was a function of the price they were able to achieve rather than any particular bias against Boeing.”

IAG has placed firm orders for 62 A320s and taken options on a further 158 aircraft.

IAG chief executive Willie Walsh said: “The benefits that the merger of BA, Iberia and Vueling brings to all our airlines are highlighted once again.”