Aircraft

British Airways is to defer replacing by at least three years its 19 Boeing 737-400s, as the carrier tries to reduce capital expenditures to offset the impact of the economic downturn.

BA chief Willie Walsh told analysts at a 26 May luncheon in New York that the carrier's 737-400 fleet, which is based at London Gatwick, will no longer be replaced in 2012 as previously planned. He says BA has removed this acquisition from its current capital expenditure plan and intends to acquire replacements in 2015 or 2016.

"We had planned to replace them in 2012," Walsh says. "However, we're satisfied that we can just barely stay with these aircraft for another three, possibly four years, based on performance of aircraft and analysis of maintenance activities. Although the aircraft are 16 years old they are relatively young in terms of cycles."

BA opted late last year to prolong the life of some of its 737 'Classic' aircraft by acquiring 20 upgrade kits for CFM International CFM56-3 engines.

Walsh says that BA, which last week reported a £220 million ($349 million) operating loss for fiscal 2008-09, has just completed "a very comprehensive review" of its capital expenditure. This included reviewing all its fleet plans as well as non-fleet capital expenditure projects.

While BA already has financing in place for all new aircraft deliveries through 2013, Walsh says the carrier is discussing with manufacturers to see where capital expenditure can be delayed.

He explains there is a "mismatch" between capital expenditure and financing because new aircraft financing does not "kick in" until the aircraft are delivered. BA hopes to eliminate this mismatch by delaying capital expenditure for new aircraft but this will require the support of Airbus, Boeing and Embraer.

Walsh also expects to save on capital expenditure by adapting one of its hangars at London Heathrow for the A380. "We're fortunate we don't have to build a new hangar at Heathrow. We have satisfied ourselves that one of our existing hangars can be modified to take the aircraft," he says.