Sunday, August 19, 2007

Bangkok Airways secures savings on A350s due to delays


Bangkok Airways has won a concession from Airbus to maintain the prices of six A350 jetliners at the rates originally agreed last year, even though the prices have since risen sharply because the aircraft are being redesigned.

The agreement could mean a saving of US$240 million for the carrier, which has been seeking to apply the price based on the original version of the mid-sized, long-range aircraft. The redesigned and more expensive planes it will receive have had the suffix XWB (Xtra Wide Body) added to the name.

The ''discount'' is compensation from the European planemaker for the delay of four to five years in deliveries of the fuel-efficient new aircraft, according to an airline insider.

The redesigned aircraft, with a fuselage cross-section wider than the original A350-800 than Bangkok Airways ordered, costs about $200 million.

However, the final agreement between Bangkok Airways and Airbus is pending the former's successful negotiations with the UK-based jet engine maker Rolls Royce on the terms of the turbines that will go with all of the A350 XWB jetliners to be manufactured.

The negotiations are tied with other contracts Bangkok Airways and Rolls Royce are discussing.

Bangkok Airways and Airbus are expected to announce the final A350 XWB accord by the end of this month. The aircraft are now expected to be delivered to Bangkok Airways beginning in 2014.

The development cost of the A350 XWB, the planned rival to the popular B787 Dreamliner from US-based Boeing Co, has surged to $15.3 billion from $5.3 billion for the original version.

Bangkok Airways is also negotiating with leasing companies to lease six A330-200s, the long-range jets that offer nearly the same carrying capacity as the A350 XWB (more than 250 passengers) until it receives the new A350s.

The A330-200s will enable the carrier to start its first long-haul services to European cities including Frankfurt. But the first long-distance flights are likely to be from Bangkok to Dubai.

In another development, Bangkok Airways said it expected to miss the targeted 5% increase in net profit this year due to high operating costs, primarily for jet fuel, and the its inability to raise fares.

It is more likely to achieve 2% growth in profit this year on revenues of about 10 billion baht from its core airline business.

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