Lufthansa has announced that it is pulling back from part of its Boeing 777X order. Originally the airline placed a firm order for 34, but as of yesterday, it switched 14 of these aircraft to options. That leaves the German airline with just 20 firm orders for the type. For Boeing, this represents a loss of firm orders to the tune of $6.2bn.
It seems Lufthansa is banking on slowing its fleet growth in a bid to trim operational costs. As of yesterday, a large portion of its 34 strong firm order for the forthcoming 777-9 has been switched to ‘options’ instead. In total, 14 aircraft have been moved from firm orders, as was revealed in Lufthansa’s third-quarter earnings briefing yesterday. In the briefing, it said,
“In the third quarter of 2019, as part of new aircraft orders, the 14 B777 orders were contractually converted into options for which it is no longer sufficiently certain whether they will be exercised in the future.”
According to AeroTelegraph, these 14 jets were never confirmed by the Lufthansa supervisory board, and thus had never really been entered onto Boeing’s books. However, by pulling back from any chance of an order, Lufthansa is bringing into doubt its need for those aircraft at all.
While not a classic cancellation, the transfer of the orders into options is not good news for Boeing.
Will Lufthansa take the 14 options?
Lufthansa was one of the first customers to order the 777-9 way back in 2012. As such, it was expected to become the launch customer of the type. The airline had planned a refreshed cabin with a good looing business class product. Although it will still likely be the launch customer and is set to take 20 of the type, that may well be all it takes.
Overall, Lufthansa is undertaking something of a review of its fleet. It has been forming up plans to get rid of some of its biggest jets, the A380s, and in March this year placed an order for the 787 Dreamliner to give it more fleet flexibility.
Alongside the 787, Lufthansa has also ordered 20 A350-900s to be deployed across the group. These slightly smaller, highly efficient aircraft will allow the airline to consolidate its strategy and be more responsive to the market demands going forward.
Not expecting deliveries in 2020
As part of the Lufthansa Group’s analyst call following the earnings release, Group CFO Ulrik Svensson noted that there is no expectation of aircraft being delivered in 2020. Previously, it had been expecting four to be delivered by the end of next year. CAPA reports that the airline is now reconsidering the spacing of future aircraft deliveries given the current “muted market growth compared with historic levels”.
The 777X has been hit with delay after delay, from issues with the GE9X engines to a door blowing off during a pressure test. As such, the first flight, which should have happened this summer, is now expected in the early part of 2020. As such, airlines are no longer expecting deliveries until 2021.