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Wednesday, June 25, 2014

Behind Emirates Airbus A350 Order Cancellation

Airbus is to get a second chance to sell its new A350 aircraft to Emirates Airline after the fast-growing Gulf carrier revealed it would take a fresh look at the case for buying the long-range passenger jet in a head to head contest with Boeing’s 787 Dreamliner.

Airbus suffered a serious blow earlier this month when Emirates cancelled an order for 70 A350 jets, worth $16 billion (Dh58.75 billion) at catalogue prices when the deal was announced in 2007.

Emirates was supposed to be a launch customer for the A350, due to enter service later this year, and the airline’s decision not to proceed with its order was the Toulouse-based aircraft maker’s largest ever cancellation. Airbus’ shares were hit, as were those of Rolls-Royce, which makes the jet’s engines.

Tim Clark, Emirates’ president, told the Financial Times that the airline would hold discussions with Airbus and Boeing either late this year or next year about the merits of buying the A350 or the Dreamliner.

He said the Dubai-based carrier was interested in purchasing between 50 and 70 wide-body, twin-engined jets capable of flying on regional routes in the Middle East, plus to cities in Africa. The order — which could be worth at least $18 billion at catalogue prices — looks set to be a fiercely contested battle between Airbus and Boeing.

Emirates’ planned move is a boost for Boeing, because the carrier has never placed an order for the Dreamliner.

Two people familiar with the situation said Emirates decided to drop its A350 order made in 2007 because it had concerns about the jet’s specification and performance.

Clark, who declined to comment on the reasons for the cancellation, said: “At the end of this year, beginning of next year, we will re-engage with Airbus on this aeroplane [the A350]. We will also engage [with Boeing about the Dreamliner].”

He stressed Emirates had not intended to damage Airbus or Rolls-Royce with its A350 order cancellation, but said the airline wanted to buy a “mature” aircraft.

The risks associated with being early airline customers for the Dreamliner, which entered service in 2011, were highlighted last year when the entire fleet was temporarily grounded after batteries burnt on two aircraft. Modifications were subsequently agreed with regulators.

Both the A350 and the Dreamliner have involved step changes in aircraft technology, partly because they are mainly made from lightweight carbon composites rather than traditional aluminium, to reduce fuel burn.

Emirates is the world’s largest operator of the Airbus A380 superjumbo, and Boeing’s 777 wide-body jet, which carry about 500 and 400 passengers respectively on long-haul routes.

Clark said these two aircraft would be the principal jets in Emirates’ fleet, but said there was room for another carrying between 250 and 300 passengers on regional routes — hence the carrier’s plan to consider the Dreamliner and re-examine the A350.

“When the aircraft [the A350 and 787] are mature, they will be better defined in terms of performance, fuel burn,” he added.

Clark stressed that, whatever Emirates’ decision between the A350 and the Dreamliner, the carrier would remain an important Airbus customer because of its purchases of A380s. It has agreed to buy 140 A380s, and Clark said more could be purchased, partly because Emirates is considering moving to a new airport in Dubai that would enable it to expand its fleet further.

Emirates had 217 aircraft as of March 31, and Shaikh Ahmad Bin Saeed Al Maktoum, President of Dubai Civil Aviation and Chairman and Chief Executive of Emirates airline and Group, said last November the fleet could eventually consist of 450 jets.

Clark rejected some analysts’ suggestions that Emirates had dropped its A350 order made in 2007 because it was having to rein in expansion plans because of the economic slowdown in emerging markets.

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Live to love and love to live. The motto that I held on my entire life. Just a regular guy who loves what I am passionate in life. A song writer and producer. Living life on the move. From Malaysia to The States, New Zealand to Singapore. With the companion of great people in life. In and out from the music industry. Taking everything one step at a time. 
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