British Airways parent inks $13bn Boeing deal after US-UK trade breakthrough: why it matters

International Airlines Group, the owner of British Airways, has placed a landmark order for 32 long-haul jets from Boeing worth nearly $13bn (£9.8bn), a day after a trade agreement between the UK and US led to the scrapping of tariffs on jet engines.

The announcement, made on Friday, comes just a day after the United Kingdom and the United States reached an agreement to eliminate tariffs on aerospace components, in a move welcomed by the aviation sector.

IAG is purchasing 32 Boeing 787-10 Dreamliners, which will be deployed in the British Airways fleet. The deal, based on Boeing’s January 2025 list prices of $397m per aircraft, amounts to $12.8bn.

The airline group has also secured an option to purchase 10 additional jets of the same type in the future.

In a separate agreement with European aircraft manufacturer Airbus, IAG will acquire 21 A330-900neo aircraft, which will be used across its Iberia and Aer Lingus operations.

That deal, valued at approximately $8bn at Airbus’s listed price of $374m per aircraft, includes options for up to 13 more aircraft.

IAG stated that it had negotiated “substantial discounts” on both deals, in line with standard industry practice.

New Boeing aircraft not powered by Rolls-Royce engines

The timing of the orders coincides with a new trade understanding between the US and UK, which has resulted in the removal of tariffs on Rolls-Royce jet engines.

Shares in Rolls-Royce rose nearly 4% on Thursday following the announcement of the tariff reduction.

However, the new Boeing aircraft ordered by IAG will not be powered by Rolls-Royce engines.

Instead, they will use engines manufactured by US-based General Electric, which would have been unaffected by the earlier tariffs.

The Airbus aircraft will be powered by Rolls-Royce, and their procurement is expected to benefit directly from the improved trade terms.

Howard Lutnick, the US commerce secretary, hinted at the Boeing order in comments made on Thursday, saying that a UK-based company was preparing to make a $10bn purchase.

The full extent of the deal was confirmed in IAG’s statement the following day.

Deal with IAG could pave the way for more international deals for Boeing

“This order marks another milestone in our strategy and transformation programme and underlines our commitment to strengthening our airline brands and enhancing our customer proposition,” said Luis Gallego, IAG’s chief executive.

Separately, IAG said it had seen “some recent softness” in economy ticket sales by US holidaymakers in recent months.

However, it said it there was “strength” in premium tickets such as business class, which mitigated those effects.

Boeing shares had risen on Thursday when the announcement of the US-UK deal featured a big-ticket sale of the aircraft manufacturer's planes.

However, while fresh aircraft orders are generally positive for the aerospace giant, Boeing is already managing a substantial commercial backlog valued at $435 billion — enough to keep production lines busy for nearly a decade at projected 2025 output levels.

The more significant driver of the stock's rally was investor optimism that the UK deal could pave the way for additional international agreements.

Boeing relies heavily on global sales, with nearly half of its 2024 revenue coming from markets outside the US.

Trade barriers, including tariffs and retaliatory measures, pose a threat to Boeing’s global competitiveness by potentially dampening demand and redirecting orders toward Airbus, which often avoids such restrictions.

In one recent example, Chinese carriers facing tariffs of more than 100% opted to cancel or delay some Boeing deliveries.