Qatar Airways cancels $1bn worth of A350 aircraft orders

Analyst says Gulf dispute may give airline incentive to slow more deliveries

Qatar Airways has axed orders for four A350s, citing delivery delays. Michael Probst / AP Photo
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Qatar Airways has axed orders for four A350s because of delivery delays, Airbus said on Thursday, handing the European planemaker a new headache over what to do with jets worth US$1.2 billion at list prices as it tries to close a sales gap with rival Boeing.

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

"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 follows concerns about delays and quality problems on cabin equipment for the A350, but also 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.

Qatar Airways chief executive Akbar Al Baker said earlier any delays were the planemaker's responsibility.

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

An Airbus spokesman said the cancellations were related to "known supply chain issues". Asked what would happen to the undelivered A350-900 jets, he said: "They will be reallocated".

Qatar Airways has a reputation for being demanding when reviewing aircraft for quality defects before delivery.

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

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

Mr Al Baker last month denied the Gulf spat would interfere with Qatar Airways' growth or aircraft deliveries.

The Qatar setback extends a torrid week for Airbus as it tries to bounce back against a resurgent Boeing and shake off an internal row over a shake-up in its sales organisation.

The surprise decision to have the sales team report to Chief Executive Tom Enders and by-pass airplanes boss Fabrice Bregier, first reported by Reuters, raised hackles internally and prompted concerns about a power battle.

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

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

Sales chief John Leahy, who plans to retire this year, has also warned staff that Airbus faces a stronger and "much more aggressive" competitor, people familiar with the matter said.

Airbus took 248 orders between January and June, or 203 after cancellations. As of June 27, Boeing had notched up 407 orders this year, or 361 after cancellations.

On Wednesday, China signed a deal to buy 140 Airbus jets.

Mr Leahy, who will report to Enders for a few months before handing to his designated successor Kiran Rao, also delivered an internal tribute to Mr Bregier, saying "he helped us win".

Mr Bregier, whose reign as head of the planemaking business has coincided with the sale of 5,800 jets, has urged staff to remain focused on customers and pledged to do the same in his new role.