PARIS — In a dramatic move Tuesday at the Paris Air Show, Willie Walsh, chief executive of International Airlines Group (IAG), parent company of British Airways and several smaller European airlines, delivered Boeing a tremendous boost when he signed a deal to buy 200 Boeing 737 MAX planes.
Walsh’s stunning vote of confidence comes at a pivotal moment for Boeing, after two deadly crashes of the airplane. The MAX remains grounded, unable to fly in commercial service, and subject to continuing safety investigations and reviews that have shaken public confidence in the plane maker.
“I’ve no doubt that in time, people will come to see it as a great aircraft,” Walsh said in an interview in Paris.
He said he’s certain the 737 will be safe once Boeing’s fix is installed. “I fully expect this aircraft to get a re-entry into service that will have been very rigorous, with all of the regulators looking at it,” he said.
Walsh, 57, a former airline pilot, said that four weeks ago he tested the MAX out in a Boeing simulator at its facility in Gatwick, London, flying alternately with the original faulty flight-control software implicated in both crashes — known as Maneuvering Characteristics Augmentation System (MCAS) — and then with the updated fix.
He said he went into the simulator with the original MCAS knowing to expect the repeated pushing of the jet’s nose down when it activated. Though that made it different from a real-life emergency, he said, “it was easy for me to understand what it felt like.”
In contrast, with the software modification installed, “there’s nothing to see,” he said. “Nothing happens.”
“Knowing the aircraft as I do from a technical point of view and from my experience as a pilot, I’m very comfortable this will be approved by regulators in due course,” he said.
“Personally, I wouldn’t hesitate to get on a MAX aircraft,” Walsh added.
Boeing Commercial Airplanes chief Kevin McAllister said his team is “truly honored and humbled by the leadership at International Airlines Group for placing their trust and confidence in the 737 MAX and, ultimately, in the people of Boeing and our deep commitment to quality and safety above all else.”
A long relationship
The deal announced in Paris would have been a coup for Boeing even under normal circumstances, because IAG’s current single-aisle fleet is almost exclusively Airbus A320 family aircraft and the MAX order marks a strategic decision to split that fleet in future between the two big manufacturers.
Besides British Airways, IAG includes Irish carrier Aer Lingus, Spanish carriers Iberia and Vueling, and low-cost startup LEVEL. It has been a longtime operator of the bigger Boeing twin-aisle airplanes such as the 747 and 777. But years ago it abandoned the 737 in favor of the rival A320.
Walsh, an Irishman, began his career 40 years ago as young cadet pilot at Aer Lingus, flying the 737-200 and later flew all the older “classic” 737 variants. Walsh ascended the ranks from pilot to CEO and proved so successful he was hired to be CEO of the much bigger British Airways. In 2011, British and Iberia merged, with Walsh at the head, to form IAG, which he has since expanded rapidly.
He recalls his first visit to Seattle in 1992 as CEO of the Irish carrier, when he came to accept delivery and fly back to Dublin a 737-500, which turned out to be Aer Lingus’ last Boeing aircraft.
“I’ve had dealings with many senior people at Boeing going back years,” said Walsh. “It’s a brand I respect, a brand I trust. Boeing make great airplanes.”
In February, he gave a much-needed boost to the forthcoming 777X when British Airways ordered 18 of them, with options to buy 24 more.
Why did he choose now to place this massive MAX order?
Walsh said he’s made it known for some years that he was interested in buying MAXs in order to diversify his fleet, give him complete flexibility and spur competitive pricing by rivals Airbus and Boeing.
“As an airline, it’s very important for us to have solid competition between the two major aircraft manufacturers,” he said.
With a fleet of 582 airplanes, IAG is big enough to have the option of ordering from both. A MAX deal was under serious consideration in 2012 and 2013, but the timing didn’t work out.
“It shouldn’t come as a surprise to people. … I’ve been very clear that looking at the MAX was something we needed to do from a strategic point of view,” he said. “Maybe the timing is a bit of a surprise.”
Walsh said detailed talks on buying the MAX started some months ago, though the deal was agreed only shortly before the signing ceremony late Tuesday afternoon.
The agreement is not a finalized order, but a letter of intent to buy a mix of 737 MAX 8s and the biggest variant the 737 MAX 10s, the first of which hasn’t flown yet.
Walsh said he anticipates deploying the MAXs at Vueling and LEVEL, as well as on British Airways flights out of Gatwick. The first delivery is scheduled for 2023, but Boeing has promised to try to open up some delivery slots for IAG in 2022.
Boeing said the deal is worth just over $24 billion at list prices. The real value of the planes after standard discounts in the industry, according to data from aircraft-valuation firm Avitas, is about $11 billion.
However, such a large order — struck when the MAX badly needs support — might merit a discount much larger than standard. Walsh demurred on the suggestion that he must have got a fire-sale price.
“I’d like to think we have a deal that’s good for Boeing and good for ourselves,” he said. “If you are going to be in the business long term, you have to ensure you’ve got a relationship that both sides value.”
At this pivotal point, with the strain of the MAX crashes weighing so heavily on Boeing, it’s difficult to imagine better news for the company coming out of this year’s Paris Air Show.