Emirates order for 43 A380s still stands

Airbus remains positive after revealing a six month delivery delay.

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By  Barbara Cockburn Published  July 1, 2006

Airbus hit back at reports last month that its largest A380 customer, Emirates Airlines, was to pull out of ordering 43 superjumbos after a further six-month delivery delay. Habib Faqeeh, chairman of Airbus Middle East, told Aviation Business: “The order still stands. Emirates have not pulled out of the deal and have no intention to cancel. We understand the problems due to the delay, such as opening of certain routes and shortfall in seat capacity, but we now have a compensation scheme in place to help Emirates overcome this transition period.” According to several publications, the airline was close to canceling the order after Airbus revealed that Emirates’ first delivery of its A380 would take place in October 2007, instead of April. An Emirates spokesman said: “The issue is out of the question. We never considered it." The company is committed to the deal and still depends on the A380 for its expansion. We will re-schedule our expansion plans according to the delays in deliveries of the superjumbo,” said the official. Habib said the delay in deliveries was caused by manufacturing difficulties. “The superjumbo does not have any technical failures or problems.” Faqeeh added that other Middle East airlines, such as Qatar and Etihad, which have made A380 orders, are also receiving compensation. “We have showed total transparency with each company involved. In each contract there includes penalties for delays and we are upholding these,” said Habib. However the news, coupled with a profit warning, sparked huge losses with Airbus’s parent company EADS, which saw more than a quarter of its market value disappear. Last month, investors withdrew seven billion euros from the European aerospace group’s shares, driving them down as much as 27% to 18.77 euros. Noel Forgeard, the co-CEO of EADS, is now under mounting pressure to resign as a result of the plunge in share prices, which wiped out more than $4 billion of the manufacturer’s capitalisation. Several Middle East airlines are also re-evaluating their orders for Airbus’s A350 after similar problems with the A380, including a timely re-design. Qatar Airways, Airbus’s largest A350 customer, announced in May that it might swap its order for 60 aircraft to Boeing’s 787 Dreamliner. Habib said: “Qatar came to see us recently. We are extremely positive about the outcome. We have been showing the airline our new developments and research into the A350. We are fairly confident the order will still stand. Time will tell.” Emirates is also evaluating the A350 against the 787. Habib remained tight lipped as to current negotiations but said a decision would be made within the next few months and Qatar’s outcome even sooner. However the International Lease Finance Corp, signaled last month it may cancel its order for 10 A380s and could do so without penalty because of the delays. Steven Udvar-Hazy, chairman and CEO of ILFC, said: “We could cancel and are considering canceling. We are not happy and are on safe ground to cancel the order.” This is the second delivery delay for the A380. ILFC said its first A380 will now be delayed by 12-14 months. Hazy added that the order contract allows the leasing company to cancel without penalty if the aircraft are delivered more than six months late.

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