Around 12 months ago, Aeroflot pulled the pin on an order for 22 Boeing 787-8 and -9 Dreamliners worth about US$5.5 billion. That in itself is not unusual – airlines cancel orders. What made this cancelation unusual was that it dragged out over five years. Aeroflot first announced the cancelation of the order in 2015. But it took them five years to finally cut the cord.
A long and drawn out saga
The saga stemmed from an order made with Boeing in 2007. Aeroflot wanted the planes to upgrade its existing widebody fleet, as well as provide for fleet growth to meet the anticipated increased demand for air travel.
“The 787 is an excellent match for many of our requirements thanks to its efficiency, operational performance, and passenger comfort. The 787 will open new market opportunities as we further modernize our fleet and expand our international reach,” said Valery Okulov, Aeroflot general director at the time.
When first ordered, the 787s were due to start arriving in Moscow in 2017. At the time, Aeroflot was also negotiating an order with Airbus. There was speculation Aeroflot was trying to play off Boeing against Airbus. Aeroflot went on to sign an MOU with Airbus to take 22 A350XWBs the same year.
Skip forward to 2015 and Aeroflot canceled the Boeing order during the Paris Air Show. Over the years, Aeroflot reportedly made several attempts to revise the terms and introduce amendments to the original deal with Boeing.
“We have exercised our option to terminate the contract on the 787,” Giorgio Callegari, Aeroflot’s deputy general director for strategy and alliances, told FlightGlobal . Mr Callegari attributed the decision to;
“Sustainability of the fleet development, sustainability in terms of the right mix of widebodies and narrowbodies and network development”.
Wheeling and dealing as Aeroflot cedes 787 order to a state-owned leasing business
From this point in time, things are somewhat complicated. It seems the order did not get canceled per se. Rather, Aeroflot ceded the purchase rights for the planes to Avia Capital Services. This outfit is wholly owned by Rostec, a Russian state corporation. They deal in the leasing, financing, organization of purchase and sale of civil aircraft and equipment. Aeroflot has extensive ties with Rostec and its subsidiaries.
Boeing has had problems with the production of its Dreamliners, causing delays. But it seemed that problem had been shifted off Aeroflot’s hands into Rostec’s. Amid the wheeling and dealing, delivery dates for the Dreamliners got pushed back to at least 2020. There was also a call for Boeing to pay back Aeroflot’s pre-payment.
Was a formal contract ever signed between the lessor and Aeroflot?
There are reports there may never have been a binding contract in 2015 between Aeroflot and Rostec regarding the Dreamliners. There are also reports that in the absence of a signed contract by January 1, 2017, Aeroflot could walk away from the lease agreement.
All while, Aeroflot was busy talking too and modifying its deal with Airbus. Its initial order for 22 A350XWBs grew in size.
Last year, Aeroflot did finally walked away from the Boeing 787-9. That saw Avia Capital Services cancel the order. Officially, the order was no longer Aeroflot’s to cancel, but that didn’t stop reports linking the cancelation to the airline. With the Dreamliners falling by the wayside, Aeroflot has aligned its future long-haul flying with Airbus and the A350.
