Heavyweight bout for BA. The A380 or the 747-8 Intercontinental?

As BA ponders whether to buy the Airbus A380 or Boeing 747-8 Intercontinental, its decision could have far-reaching consequences for other airlines

Lufthansa's 747-8I order was a crucial development in Boeing's efforts to secure BA as a customer

Before this year is out, either Airbus or Boeing will have won one of the industry's most eagerly awaited sales competitions this decade - the battle to sell ultra-large aircraft to British Airways.

The UK flag carrier says it will only buy one of the alternatives - either the Airbus A380 or the smaller Boeing 747-8 Intercontinental - and its selection could have far-reaching consequences for other airlines that have yet to commit to the Airbus double-decker.

These include Hong Kong's Cathay Pacific Airways, China Airlines, EVA Air of Taiwan, South Korea's Asiana Airlines and Japan's two major 747 operators All Nippon Airways and Japan Airlines. There is also a potentially huge untapped market in mainland China, where only China Southern Airlines has so far committed to an ultra-large airliner, with an order for five A380s.

BA has its hub at London Heathrow - the world's most slot-constrained international airport and one that is top of the list of destinations for all the early A380 operators. With 57 747-400s in its fleet, BA is also the world's largest operator of the type and so surely it must be implausible for the airline to ignore what many believe is the 747's spiritual successor, the A380?

BA is in the final throes of the A380/747-8I evaluation, which will lead to an order for one or the other in the second half of this year. Due to a combination of circumstances, the airline opted out of the A380's launch party, leaving it to others including Emirates, Lufthansa and Singapore Airlines. While this decision was greeted with amazement in some quarters, BA's abstinence now appears to have been a smart move given the service-entry rescheduling headaches the early A380 operators have suffered.

Viable competitor

The UK airline's patience has also given Boeing time to get its house in order and step up to the table with a truly viable competitor in the form of the 747-8I. The 400- to 467-seat Boeing may be an order of magnitude smaller than the 525-seat A380, but the aircraft is still a genuine 747-400 replacement candidate - as attested by Lufthansa with its order for 20 of the aircraft last year.

"When Boeing began talking about the 747-8 it was initially viewed as one last desperate roll of the dice that wouldn't sell in great numbers," says HSBC analyst Ed Stacey. "However, the aircraft's sales success has surprised us a bit, and BA, with its large fleet of 747-400s, could go for it."

The Lufthansa order last December was a crucial development, with BA's commercial director Robert Boyle acknowledging that the interjection of a launch operator for the airliner version of the 747-8 helped its chances at the airline.

"BA never likes to be first with a new aircraft, so that development was positive," Boyle told Flight International late last year.

It is likely that the BA order tops a list of sales campaigns currently under way for the 747-8I. "About 15 airlines are engaged now for the 747-8I and 747-8F," says Boeing's vice-president of marketing, Randy Tinseth, with the latter referring to the more popular freighter version of the aircraft. Interest is split evenly between the two versions.

"It may be about half and half in the number of airlines we're talking to," Tinseth adds, noting that the total number of aircraft being discussed could be divided more widely.

Airbus plays down the competitiveness of the 747-8I, pointing out that there is a size delta in the order of 30% when the two aircraft are configured with similar seating layouts. "With today's comfort standards - 60in [152cm] business-class seat pitch - the A380 typically seats 525 passengers and the 747-8I around 405 passengers," says A380 director of product marketing Richard Carcaillet. "You can see that the 747-8I brings no growth and no comfort standard improvement whatsoever."

At 467 seats, Boeing's official three-class seat count for the 747-8I is much higher than Airbus's calculation, but Carcaillet says that these are "dream numbers" and unrealistic by today's seat pitch standards.

For its part, Boeing counters that Airbus is making too great a fuss over an essentially arbitrary statistic. The seat numbers vary widely depending on the customer and even the route, so Boeing has opted to define the seat count by a direct comparison with the previous generation.

"The [seat] numbers are just trying to give you a basis for comparison," says Kevin Roundhill, a regional director for product marketing at Boeing. He adds that Airbus's data on Boeing seat counts is meaningless unless a seat chart is provided.

Seat counts

While Carcaillet acknowledges that the 525-seat count quoted for the A380 is a "little bit more dense" than the seat counts already declared by launch airlines, which are "averaging around 500 seats", his calculations for the 747-8I are backed by Lufthansa, which says its aircraft will seat around 400 passengers.

Despite Airbus's claimed 120-seat size differential, there is no doubt Boeing is already diluting the A380's potential orderbook with the 747-8I. Airbus's chief operating officer customers John Leahy expressed his disappointment last year that Lufthansa chose the Boeing aircraft instead of topping up its A380 orderbook, implying that Airbus was prepared to negotiate a deal that would have allowed the airline to "misuse" the larger A380 on routes where, initially at least, it might be too big.

The situation at BA is even more intriguing, where the influence of its large 747-400 fleet and infrastructure could come into play. If it decides that the size-step alone is not enough to justify a move to the A380, Stacey says that switchover costs to an all-new aircraft could prove to be a barrier.

"The A380's fuel burn per seat advantage over the 747-8 may not be decisive. And with the A380's size meaning that it will have higher landing fees than a 747, the differential on a per-seat basis is probably very small as a proportion of overall costs and may not be enough to offset the cost of switching over from the 747," Stacey says.

Pricing is likely to be a key element of the BA campaign, with both sides pushing each other to offer generous discounts on the list prices, which in 2006 were around $278 million for the 747-8I and $305 million for the A380.

As with any new programme, Airbus offered significant discounts for early A380 customers, but Stacey wonders whether in light of the production delays it may have bitten off more than it could chew. "Were the first 100 A380s sold at completely the wrong price?" he asks.

"The production delay has pushed the schedule out for those early delivery shots, and the size of the Power8 restructuring has turned out to be much larger than we thought it would be a year ago," Stacey adds.

Airbus chief executive Louis Gallois has referred to the fact that there are "unfavourably priced aircraft" in the Airbus backlog, and although it is not known whether these include A380s, Stacey says Airbus may find "that it costs a bit more than it calculated to build the A380 and therefore may have to rethink the pricing of the aircraft".

He says that with A380 orders exceeding 150 units and equating to several years of sold-out production "maybe Airbus will be less aggressive in the marketplace and won't view every A380 competition as a 'must win' order, which could allow Boeing to gain some market.

Related links:

Flight's commercial aircraft directory
Airbus A380 v Boeing 747: how they stack up

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Source: Flight International