Does British Airways’ 787 option conversion signal a return to a more expansionist capex policy?

IAG recently announced the conversion of 18 options to buy Boeing 787 aircraft for delivery to its UK subsidiary British Airways between 2017 and 2021. These new orders, which need confirmation by IAG shareholders, are in addition to 24 firm orders already in the pipeline and leave BA with a further 10 options. IAG also secured an undisclosed number of 787 delivery positions for Iberia, demonstrating the improved purchasing power of the merged entity.

The conversion of the 18 options will mean BA has a total of 60 firm aircraft orders in place with Boeing and Airbus, more than at any time since the 1990s. In the early 2000s, the global economic downturn, Iraq War and SARS all led to a seemingly permanent cut in BA's level of capital expenditure. BA's average fleet age has crept above the world airline average as it has focused smaller capital sums on product improvements, rather than new aircraft, but demand does not seem to have suffered. Will the fuel savings offered by new generation aircraft force it to change direction once again?