Toulouse, France // Airbus yesterday attempted to downplay the impact of the cancellation by Emirates Airline of an order for 70 A350 airplanes.
The order had been valued at US$16 billion, according to book prices in 2007, and its cancellation is the biggest ever for Airbus.
Yesterday, as Airbus squired hundreds of journalists from around the world at its annual innovation days in the French city of Toulouse, the aviation giant revealed that Emirates had allowed its contract for the A350s, signed in 2007, to lapse.
Airbus said it did not expect further cancellations, and that its order book remains strong with 742 of the wide-body planes on order.
One Airbus executive even suggested that the Emirates chief executive, Tim Clark, might well change his mind down the road.
“We rarely have cancellations of our A350. If you look at our order book, we now have around 150 cancellations – that’s including the 70. We had few cancellations on this programme and I am not anticipating any more,” said John Leahy, the chief operating officer for customers at Airbus.
While conceding that “it’s never good news when someone cancels an order”, he emphasised that the cancellation was not because of performance. (In an email, an Emirates spokesman said: “We are reviewing our fleet requirements”.)
Mr Leahy said the cancellation would not affect production of the A350.
“There will certainly be no hole on the production or anything on that. I remember Tim’s first delivery was five years from now, so a way out and who knows from here until then, he could change his mind.”
Delivery of the planes had been scheduled to begin in 2019 and run through 2023.
Mr Leahy said Airbus’s “finance department and production people would be worried if we had airplane delivery next year or the year after” – but the farther horizon of the Emirates order dampens its impact.
Saj Ahmad, the chief analyst at StrategicAero Research, took a less sanguine view.
“There’s no denying that this is a huge blow to Airbus, and especially so for the slow selling A350-1000, which Airbus had hoped would dent demand for the [Boeing] 777X,” he said.
“That said, the A350 has a very strong backlog and it’s not the first time Emirates has cancelled a major Airbus order – the last time it cancelled a deal for A340-600s in favour of more 777-300ERs.”
Airbus share swere down 3.2 per cent at €52.11 in Paris late yesterday.
Depending on its layout, the A350 has 280 to 370 seats.
Analysts had said there was a possibility that the A350 would not fit into Emirates' new fleet strategy – and the cancellation seems to reflect a strategic shift to concentrate on Airbus's A380 and Boeing's 777-300ER and 777X.
At the Dubai Airshow in November, Emirates ordered 50 A380 super jumbos, making it the world’s biggest customer for this model.“Tim [Clark] has made it very clearly that the A380 is his best airplane, the most profitable airplane. He is talking about buying more of them and he is talking to us about re-engining the aircraft,” Mr Leahy said.
Emirates has previously asked Airbus to work with Rolls-Royce on the engine to make it more fuel-efficient.
Indeed, Rolls could be the big loser in all this.
Rolls-Royce said the cancellation could result in a £2.6 billion (Dh16.03bn) hit to its order book.
The company’s shares were trading down 2.3 per cent in London yesterday afternoon at 1,051 pence.
Rolls-Royce makes engines for the A350 and provides some customers with an ongoing maintenance service for the engines. It said the £2.6bn reduction in its order book was equivalent to around a 3.5 per cent decline.
Emirates cancelled the 70 A350 order following “ongoing discussions with the airline in light of their fleet requirement review”, the European planemaker said.
“While disappointed with this decision, we are confident that the delivery slots which start towards the end of this decade vacated by Emirates will be taken up by other airlines,” Rolls-Royce said in a statement.
* with additional reporting by Reuters
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