Virgin Australia Signs On As Latest Boeing Max 10 Customer

 - August 29, 2018, 11:24 AM
Plans call for Virgin Australia's first Boeing Max 10 to arrive in 2022.

Boeing’s firm order total for the largest of its 737 Max line rose to 417 on Wednesday, as Virgin Australia said it would convert delivery positions reserved for 10 of 40 Max 8s on order to Max 10 positions. Australia’s second largest airline expects to take delivery of its first Max 10 in 2022, some three years after it takes the continent’s first Max 8 in November 2019.

The Max 10 reached firm configuration this past February, ushering in the program’s detailed design phase on its way to first deliveries in 2020. Virgin Australia hasn’t offered detailed specifics on its plans to deploy the Max 10 in 2022, suggesting only that it would offer more capacity flexibility once it resumes adding new airplanes to its fleet. Current plans call for no fleet additions until Virgin Australia takes its first Max 8.

The airline on Wednesday reported its first underlying annual profit in 10 years, as the group generated A$109.6 million ($80.5 million) before tax despite encountering a A$45 million fuel cost “headwind.” Although it recorded a statutory loss of A$653.3 on de-recognition of deferred tax assets and impairment of international business assets, the losses do not involve cash and will not affect the fundamentals of the company’s underlying business, Virgin Australia said in its Fiscal Year 2018 presentation.   

The airline added that it expects positive momentum to continue into Fiscal Year 2019, as projected first-quarter revenues increase by at least 7 percent over the corresponding period a year earlier. It also said it again expects to generate underlying profits in the first half despite an expected fuel price increase of A$85 million.

Brisbane-based Virgin Australia Group operates more than 130 aircraft, including more than 80 Boeing 737NGs. The addition of the Max jets forms part of a fleet modernization program expected to further boost prospects for a recovering domestic network.

For Boeing, the latest conversion reflects continuing movement toward larger narrowbodies. Addressing the demand mix for the Max family, Boeing vice president of marketing Randy Tinseth estimates that between 60 and 65 percent of orders will go to the baseline Max 8; 20 to 25 percent to the Max 9 and 10; and roughly 10 percent “on the lower end of that market,” namely the Max 7.

Tinseth has noted that although a small proportion of new Max 10 orders and commitments represent transfers from another Max derivative, most notably the Max 9, most have been completely new, suggesting that the Max 10 has not significantly cannibalized demand for the smaller variant.

“We see a place for both the 9 and the 10, depending on the customer,” said Tinseth. “The 10 plugged a hole that we had, and that hole was we didn’t have as many seats as the [Airbus] A321.”  

The Max 10 incorporates a pair of fuselage plugs to extend the Max 9’s length by 66 inches. Other changes include a levered main landing gear, minor wing changes to accommodate the 777-style landing gear and a four-inch-wider mid-exit door to allow for the extra 12 passengers, bringing maximum capacity to 230. Boeing claims it delivers 5 percent better trip cost and 5 percent lower seat-mile cost than the A321LR.