Company Of the Week

BRITISH AIRWAYS shares fell 39 pence, or 8 per cent, last week, during which it announced that it will buy as many as 220 planes worth $13bn (pounds 7.8bn) from Europe's Airbus Industrie and from Boeing, in a sweeping revamp of its fleet. It was the airline's biggest order ever and its first from Airbus.

BA placed a firm order for only 16 of Boeing's 777 long-range planes, with an option for 16 more. Airbus will supply 188 of its A320 short-haul jets, replacing older Boeing 737s in the UK. airline's European network. It got 59 orders.

BA said it won't buy any more Boeing 747s for its long-range routes for at least a decade, focusing instead on smaller aircraft such as the 777 and the 767. Airline stocks have dropped in recent weeks, on concern that recessions in Asia could end the industry's four-year boom. Airlines are slashing services there and using planes elsewhere, leading to capacity growth that outpaces demand.

In an indication of the scale of discounts offered to British Airways, the airline said its net cost for the 75 firm orders will be about pounds 1.4bn, compared with a list price of pounds 3bn.

BA will use the Airbus aircraft to replace older, larger Boeing 737s in Europe, where it needs smaller planes to cope with deregulation of routes. The deregulation is bringing a crop of low-cost start-ups, and BA plans to counter them by attracting lucrative business passengers who need frequent flights. "We don't want to carry as many low-paying passengers," said Bob Ayling, BA's chief executive.

The move toward 777s fits with BA's plans to unite its flights and fares across the Atlantic with American Airlines, another big 777 user. The US will only approve the alliance this autumn if UK authorities open London's Heathrow airport to new competitors and drop the current strict limits on the number of flights for each carrier.

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