Airbus Says Emirates Cancels Order For 70 A350 Planes

Airbus lost a major order on Wednesday when Dubai’s Emirates airline cancelled its entire requirement for 70 A350 jets, dealing an unexpected blow to the European planemaker and engine maker Rolls-Royce.

Shares in Airbus fell more than three per cent on the loss of some nine per cent of the order book for its newest passenger jet, which is now only months away from entering service after eight years in development at a cost of some $15 billion.

Airbus acknowledged it was disappointed with the loss of the joint second-largest customer for the new twin-engined wide-body aircraft, but said it was confident of filling the spare production slots and did not see any financial impact from the cancellation.

“It is not good news commmercially but not bad news financially,” Airbus sales chief John Leahy told reporters in Toulouse, adding Boeing has had more cancellations for its 787 Dreamliner.

“There is certainly going to be no hole in production,” Leahy said. Emirates was due to receive its first A350 in 2019.

Rolls-Royce, which is the sole engine maker for the A350, said the Emirates decision would result in a 2.6 billion-pound ($4.4 billion) hit to its order book.

“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.

Airbus shares were down 3.7 per cent at 51.85 euros by 0847 GMT, while Rolls-Royce was down 1.7 per cent at 1057 pence.

Airbus said the cencellation followed a “fleet requirement review” as Emirates shifts towards the large A380 superjumbo, for which it is the biggest customer.

Emirates was among the first buyers for the A350 when it placed the order for 50 A350-900 and 20 A350-1000 jets in 2007.

The deal was worth around $16 billion according to 2007 list prices, or close to $22 billion based on the current catalogue, although launch customers typically negotiate large discounts.

The first A350 is due to be delivered to Qatar Airways in the fourth quarter of this year.

“We are confident that we will sell the (production) slots in the coming months,” an Airbus spokesman said. “There’s no impact on the programme as deliveries were scheduled to start at the end of the decade.”

Emirates said the original A350 order had lapsed and that it was reviewing its fleet requirements.

“Emirates was one of the original customers interested in the programme, but always seemed rather critical of the aircraft specifications,” Cantor Fitzgerald Europe said in a note.

Aerospace industry analyst Nick Cunningham, managing partner at UK-base Agency Partners, said the move also posed questions over whether Middle Eastern carriers have over-expanded or are expecting lower growth than before.

Airbus and Boeing have dismissed warnings of a ‘bubble’ in commercial aircraft orders, which remained robust throughout the financial crisis, but some industry bankers say airlines have ordered too many aircraft despite growth in emerging markets.

The A350 decision meanwhile increases the chances that Airbus will revamp its largest models, analysts said.

Emirates has been pushing for Airbus to upgrade the A380 superjumbo with a more efficient engine, after increasing its total orders for the world’s biggest passenger jet by 50 in November to 140 planes.

The carrier’s chief executive, Tim Clark, said earlier this month that a revamped A380 could have a 10-12 percent performance improvement and that “we are hoping to move on that pretty soon”.

Emirates is also in the process of firming up an order worth $76 billion for 150 of Boeing’s latest jetliner, the 777X mini-jumbo powered by engines from General Electric.