Qatar Delivers $1 Billion Headache For Airbus As It Cancels 4 Jets

The European planemaker Airbus was handed a new headache over what to do with jets worth $1.2 billion at list prices as it tries to close a sales gap with rival Boeing after Qatar Airways has axed orders for four A350s because of delivery delays, Airbus said.

The decision means that it could cost Airbus $60-80 million to rip out and replace interiors designed to fit the airline’s plush brand and at a time when demand for big planes is softening, Airbus will have to try to resell or reallocate the 283-seat jets.

“Smart players are not going to rush in, because other cancellations or deferrals may come,” said veteran aircraft financier Bertrand Grabowski, former board member at DVB Bank.

The cancellation comes at a time when Qatar is entering the second month of a crisis caused by a ban on Qatar’s use of the airspace of four Arab nations but also follows concerns about delays and quality problems on cabin equipment for the A350.

Any delays were the planemaker’s responsibility, Qatar Airways Chief Executive Akbar Al Baker had said earlier.

“We are asking Airbus to deliver it faster,” he told a Dublin news conference. “The delay is from Airbus.”

“Known supply chain issues” were related to the cancellations, an Airbus spokesman said. “They will be reallocated”, he said when Asked what would happen to the undelivered A350-900 jets.
When reviewing aircraft for quality defects before delivery, Qatar Airways has a reputation for being demanding.

But compounding the impact of relatively weak oil prices, the Gulf political crisis may give the airline a further incentive to slow deliveries, some analysts have said.

“All the Gulf carriers realize they have ordered too many wide-bodied aircraft and don’t have room for them, especially now,” said an aircraft finance industry official.

Denials that the Gulf spat would interfere with Qatar Airways’ growth or aircraft deliveries was made by Al Baker last month.

As Airbus gtries to shake off an internal row over a shake-up in its sales organization and bounce back against a resurgent Boeing, the Qatar setback extends a torrid week for the company.

Hackles were raised internally and concerns about a power battle were prompted by the surprise decision to have the sales team report to Chief Executive Tom Enders and by-pass airplanes boss Fabrice Bregier.

Saying it was about freeing his no.2 to focus on core operations, Enders on Wednesday defended the decision.

The Airbus sales force has been urged to push back “aggressively” against Boeing which won the Paris Airshow for the first time in five years and not to dwell on the reorganization.

Airbus faces a stronger and “much more aggressive” competitor, warned Sales chief John Leahy, who plans to retire this year.

Airbus took 248 orders between January and June, or 203 after cancellations.

Boeing had notched up 407 orders this year, or 361 after cancellations as of June 27.

China signed a deal to buy 140 Airbus jets on Wednesday.

(Adapted from CNBC)


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