$1 billion headache for Airbus as Qatar cancels four jets

Reuters Business News
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Posted: Jul 06, 2017 11:08 AM

By Tim Hepher

PARIS (Reuters) - 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 $1.2 billion at list prices as it tries to close a sales gap with rival Boeing.

The Gulf carrier's decision means Airbus will have to try to resell 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. Airbus has been wrestling with interior issues on the A350, including problems with the toilets.

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

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

After a slow start to the year, Airbus said it had almost tripled its cumulative 2017 orders in June thanks to the Paris Airshow. But it ended the first half well behind Boeing, which grabbed most show headlines with a new version of its 737.

Airbus took 248 orders between January and June, or 203 after cancellations. It delivered 306 aircraft over the same period including 30 A350s. As of June 27, Boeing had notched up 407 orders so far this year, or 361 after cancellations.

(Reporting by Tim Hepher and Alexander Cornwell; Editing by Michel Rose and Mark Potter)