FLEET - Thai Airways eyes B787 order, Airbus out of race - report

 Thai Airways International (TG, Bangkok Suvarnabhumi) is close to finalising a deal with Boeing to buy up to 100 aircraft in a mixture of firm orders, options, and purchase rights, according to Reuters. Talks concerning the multi-billion dollar acquisition are reportedly in the advanced stage, with Airbus out of the race because of disputes with its engine supplier.

The airline is negotiating for around eight B787 types and 15 narrowbodies. Airbus had offered Thai their A350 model as an alternative to the Boeing widebody. Thai Airways is keen to modernise and grow its fleet to exploit strong passenger demand for travel to and from Thailand and capitalise on Bangkok's role as a transit hub.

Since downsizing its fleet while working its way through a court-supervising restructuring and rehabilitation process, the airline is now adding capacity by leasing aircraft, but ahead of this impending order, currently does not have any commitments placed with either OEM.

Airbus reportedly fell out of favour because Rolls-Royce is the sole engine manufacturer for the A350 and Thai Airways, like other carriers, has some issues with the engine manufacturer's pricing. In early November, Bloomberg reported that Thai Airways CEO Chai Eamsiri said he would take his business elsewhere because Rolls Royce declined to offer the carrier more favourable pricing terms.

“If you play hard, you may win in the short term but lose in the long term,” Eamsiri said about the engine maker. British Airways (BA, London Heathrow) recently decided to order B787s over A350s, in part because of Rolls Royce's position on pricing. New Rolls Royce CEO Tufan Erginbilgic has said he is prepared to forego deals if they erode profitability and that the company is seeking win-win outcomes and "long-term sustainable" relationships with suppliers.

In addition to the cost of the Rolls Royce engines, renegotiations between Thai Airways and the engine manufacturer over an existing service agreement are at a stalemate, with Erginbilgic's hard-line policy seeing Rolls Royce refuse to do deep discounts. This refusal is believed to have played a role in Thai swinging towards Boeing and a B787 order.

In addition to 20 International Aero Engines V2500 powered A320-200s that Thai Airways is acquiring as a result of its merger with Thai Smile, Rolls Royce Trent 700 engines power Thai's three A330-300s, and Trent XWB engines power its seventeen A350-900s. The remainder of Thai's fleet comprises Boeing types, including six B777-200ERs, seventeen B777-300ERs, six B787-8s, and two B787-9s.