Airline All But Cancels Big Airbus Order

05/08/2012 4:12 pm EST

Focus: STOCKS

The airline cannot afford to wait for the new jet after a major redesign pushed back delivery dates, putting more pressure on the European airplane maker, writes David Black of The National.

Etihad Airways, the UAE flag carrier, has cancelled orders for another tranche of the new Airbus A350-1000 long-range jet, as other Gulf carriers express concerns over production delays.

The A350, which has yet to fly, has been touted by Airbus (Euronext: EAD) as its answer to the massively successful Boeing 777, but a decision last year to carry out a major redesign put deliveries back three years.

Etihad ordered 25 of the airliners in 2008, to be delivered in 2014. However, after Airbus confirmed roll-out would not be until 2017, the Abu Dhabi airline pulled the plug last January on six aircraft from the original order.

Yesterday, an Airbus monthly sales report showed Etihad had cancelled a further seven, worth $2.3 billion at list prices.

"Etihad Airways has a great deal of confidence in the A350 program and we retain attractive delivery positions for the 1000 derivative," said an Etihad spokesman on Monday. "While we have reduced our firm orders, our 25 options and purchase rights for this fleet remain in place and will no doubt play a crucial role in the airline's growth.

"Although not intrinsically linked, the recent delay to the A350 program provided an appropriate opportunity for Etihad to revisit its projected fleet mix in the latter part of the decade."

The airline still has orders in place for 12 A350-1000s, and analysts said yesterday that these orders were "on borrowed time".

Etihad has so far not criticized Airbus openly. After canceling the six in January, an Etihad spokesman said it still had "a great deal of confidence" in the A350-1000 program.

The A350's other Gulf customers—Emirates Airline and Qatar Airways—have been more vocal in their complaints.

Qatar, the aircraft's launch customer, has already threatened to cancel its order for 20 of the 1000 variant in favor of the smaller 900 model, which is scheduled for deliveries from the first half of 2014.

"It never makes me happy when one of the programs we are so dependent upon is being delayed. This will dent our expansion and fleet-replacement program," Qatar Airways CEO Akbar Al Baker told Aviation Business magazine. "The aircraft is not meeting performance targets and I have voiced my opinion on this matter several times."

Airbus has targeted the A350's three carbon fiber-constructed variants, the 800, 900, and 1000, at both the Boeing 777-300ER and the new 787 Dreamliner, also constructed from carbon fiber. Airbus told customers the A350-1000 would be, "consistently more capable than the [Boeing] 777-300ER. It will cover the world with 25% less fuel burn."

But the decision to beef up the 1000's engines and add about 250 miles to its range and an improved take-off weight has resulted in $99 million being added to the list price of each aircraft—and the delays.

"My understanding is that [Etihad's] remaining A350s will be dumped before the year is out. The last 12 are on borrowed time," said Saj Ahmad, an aviation analyst.

"Etihad needs confirmed delivery dates and Airbus just can't do that with this airplane—and with the carrier expanding and looking to launch more routes, they can't afford to wait for an airplane based on promises when they can have the 777-300ER, which has proven credentials and is the most sought-after wide-body airplane today."

Yesterday's announcement means overall orders for the A350-1000 have fallen to 62. The 1000 has not landed any orders since the jet's redesign last June.

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