BA has one of the biggest fleets of Boeing 747, and the fleet is aging having an estimated average age of 17 years. The airline has an older fleet than Lufthansa and Air France. To address this, in 2007 BA made its largest order in 10 years by buying 12 A380 superjumbo, and 24 787 Dreamliners, in deals a multibillon dollar deal. The first of these aircraft should join the fleet next year.
But BA has some significant cost problems hanging over it relating to the airline’s ageing fleet, funding the acquisition of a new fleet and large pension schemes. Investors are concerned about these issues and the worries are fueled in part because asset-backed loans are now more pricey because European banks withdrew from this activity follwing the banking crisis.
BA’s parent company IAG is working on plans to find new funding sources for its aircraft and some news sources have reported novel funding approaches such as enhanced equipment trust certificates – a kind of odd hybrid between a corporate bond and an asset backed security.
With such novel approaches, the long term pensions deficit will be reduced and hopefully it will be back to paying dividends in 2015!