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Originally published June 11, 2014 at 2:48 PM | Page modified June 12, 2014 at 6:56 AM

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Emirates cancels order for 70 Airbus A350s

The cancellation prompted some analysts to wonder whether the decision by Emirates could presage a slowdown in aircraft orders from Persian Gulf carriers.


The New York Times

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PARIS — Airbus suffered a major blow to its latest commercial-jet program on Wednesday 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 widebody planes from both Airbus and Boeing.

In a statement, Airbus said that Emirates would not take the planes — 50 of a 300-seat model, the A350-900, and 20 of the larger A350-1000 jets — which had been scheduled 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,” he 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,” 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 widebody 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 widebody planes between them.

For Airbus, the cancellation represents a major blow to future revenues, but it would not have an immediate financial effect since the planes were not to be delivered until 2019, analysts said.

The A350, a twin-engine widebody jet, is Airbus’ first all-new plane in more than six years. It is designed to compete directly with Boeing’s 787 Dreamliner, as well as with the Boeing 777.

The stock of United Continental Holdings fell 5.2 percent and Delta Air Lines dropped 2.9 percent Wednesday, the biggest declines in about two months.

A prediction by the World Bank that the global economy would grow by 2.8 percent this year, instead of a previous forecast of 3.2 percent, weighed on stocks, said Kevin Crissey, an analyst with Skyline Research. Adding to the concern, investors probably were spooked by Lufthansa’s warning that operating profit for the next two years will come in sharply lower than previously forecast.

Boeing stock also sank 2.3 percent Wednesday as U.S. House Majority Leader Eric Cantor’s defeat in a primary election threatens congressional reauthorization of low-cost lending through the Export-Import Bank, which helps finance foreign airlines’ jet purchases. Boeing was the “biggest loser” besides Cantor in the Virginia Republican’s surprise loss, said Chris Krueger, a senior policy analyst for Guggenheim Securities.

Bloomberg News



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