Emirates Cancels Major Order From Airbus
PARIS — Airbus suffered a major blow on Wednesday to its latest commercial jet program after one of its largest customers, Emirates Airlines, said it had decided to cancel a multibillion-dollar order for 70 long-range planes.
The news comes just months before the new jet, the A350-XWB, is due to enter service, prompting some analysts to wonder whether the decision by Emirates could presage a slowdown in aircraft orders from Persian Gulf carriers.
Those airlines have been among the most voracious buyers in recent years of wide-body planes from both Airbus and Boeing.
In a statement, Airbus said that Emirates would not take the planes, which had been slated for delivery beginning in 2019.
The Emirates order was valued at roughly $16 billion when it was placed in 2007; at current list prices, it would be worth more than $21 billion.
The reasons for the decision by Emirates were not immediately clear.
“The contract, which we signed in 2007 for 70 A350 aircraft, has lapsed,” a spokeswoman for the airline said. “We are reviewing our fleet requirements.”
Howard Wheeldon, an independent consultant and a fellow of the Royal Aeronautical Society in London, said: “This is about the industry, not the aircraft.”
“It seems to suggest that Emirates might be realizing that they looked a bit too far forward in terms of their expectations that traffic growth would continue on the same level as the past five years,” Mr. Wheeldon added.
Some analysts were hesitant to view the cancellations solely in the context of a possible regional slowdown. Saj Ahmad, the chief analyst for StrategicAero Research in London, noted that the carrier had expressed disappointment that the A350 did not compare more favorably against rival Boeing jets in terms of range and fuel consumption.
“There’s no escaping the fact that this is a disaster for Airbus to lose a key customer,” Mr. Ahmad said. “If there had been a partial cancellation, that would have been palatable. But to lose the whole order stems to the fact that Emirates has not been impressed with the A350 family.”
Facing intense competition from Qatar Airways and Etihad of Abu Dhabi, Emirates has been engaged in an ever more heated battle in recent years to acquire the latest aircraft from Airbus and Boeing.
Wholly owned by the Dubai government, Emirates turned industry heads in November when it placed orders for 150 of Boeing’s new 777X — a revamped version of the popular wide-body aircraft — with an option for 50 more, and ordered an additional 50 Airbus A380s on top of the 93 it already had on order for delivery by 2019.
Etihad and Qatar Airways have announced orders for roughly 200 wide-body planes between them.
For Airbus, the cancellation of the 70 planes — 50 of a 300-seat model, the A350-900, and 20 of the larger A350-1000 jets — puts a large dent in future revenue, but it will not have an immediate financial impact since the planes were not to be delivered until 2019 through 2023, analysts said.
Some noted that the news would free up slots for smaller carriers that had been discouraged from ordering the A350 because of long lead times for delivery.
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“You could argue that this provides a bit of relief because Airbus order books are so stretched on a number of aircraft,” said Mr. Wheeldon, the consultant. “There could be a silver lining in that, for other airlines that would like a crack at the A350, this might give them better accessibility.”
The A350, a twin-engine wide-body jet, is Airbus’s first all-new plane in more than six years. Designed to compete directly with Boeing’s 787 Dreamliner, as well as with the Boeing 777, it is also the first by Airbus to have more than half its structural components made from lightweight, plastic-based composite materials, rather than from aluminum.
Development and testing of the A350 has been progressing more or less on schedule, with none of the major production problems that faced either Airbus’s twin-deck A380 superjumbo or Boeing’s Dreamliner, both of which entered service around three years late.
The Emirates order was the second-largest in Airbus’s A350 order book, behind Qatar Airways with 80 aircraft and alongside Singapore Airlines with 70. It represented about 9 percent of Airbus’s total outstanding orders for the new plane.
The cancellation could also have significant implications for Rolls-Royce of Britain, which is the sole supplier of engines for the A350 series.
Shares of Airbus Group, the parent company of the plane maker, fell by about 4 percent in early European trading on Wednesday, while Rolls-Royce shares were nearly 4 percent lower in London.
A rethink of traffic growth by Emirates could signal wider consequences for economies in the Persian Gulf.
Air transport is big business in Dubai and in the rest of the United Arab Emirates, representing nearly 15 percent of gross domestic product.
Airlines in the Middle East are expected to register a combined $2.2 billion profit in 2014, a record for the region, according to forecasts by the International Air Transport Association.
That compares with collective losses of $1.2 billion in 2009, during the depths of the global financial crisis. NY TIMES
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