Virgin Australia is converting orders it holds for 17 Boeing 737-800 aircraft into 737 MAX 8 orders.
Virgin already has 23 737 MAX 8s on order, so this conversion will take its total order book for the type to 40. The airline’s first MAX delivery remains on track for 2018.
The 17 737-800s that have been converted to MAX orders were due to be delivered across the 2015, 2016 and 2017 financial years. Virgin still expects to take delivery of four new 737-800s in FY16, but will also return three 737s to lessors during the year. Further, three Virgin 737-800 will be used by its low-cost carrier subsidiary Tigerair to operate international service to Bali from March 2016.
Virgin chief executive John Borghetti described the conversion of 737-800 orders to MAX aircraft in terms of fuel efficiency.
“Our desire has always been to have the most fuel-efficient, modern aircraft possible and clearly the opportunities that we see in front of us with the MAX and converting some orders to the MAX is very important,” Borghetti told reporters during the company’s full year results presentation in Sydney on Friday.
Meanwhile, Virgin chief financial officer Sankar Narayan said the company was looking to “generate more capacity with the assets we have” as part of its overall cost reduction program.
“We also have a strong focus on utilisation and actually getting more out of the planes we have,” Narayan said.
“That actually plays into the whole discussion.”
Virgin said improved asset utilisation was expected to “free up two aircraft for disposal”.
Those disposals and lease returns appear to have started, with Virgin Boeing 737-800 VH-VUM withdrawn from the fleet on August 2 when the aircraft was ferried from Melbourne to Jakarta, according to The VA Source website.
The revised fleet order for 737s, which fly both domestically within Australia and on short-haul international destinations in New Zealand, the Pacific and Asia, comes after Virgin reported falling passenger numbers and load factors in its core domestic market in 2014/15.
Total passengers declined 1.3 per cent to 17.13 million in the 12 months to June 30, compared with the prior corresponding period, while load factors dipped 1.3 percentage points to 75.6 per cent.
Capacity, measured by available seats rose 0.3 per cent in 2014/15.
“The Group continues to invest in the latest generation of aircraft to support fuel efficiency, operational performance and customer satisfaction,” a Virgin Australia statement detailing the airline’s annual results reads. “During the 2015 financial year, the Group converted four Boeing 737-800 deliveries for 2016 into Boeing 737-MAX aircraft. Consequently the Virgin Australia Group will now receive 40 deliveries of Boeing 737-MAX aircraft from 2018 onwards.”