Emirates airline has cancelled its order for 70 A350s, wiping billions off Airbus’ books and putting its programme under the microscope.
The aircraft were first ordered in 2007 when the total list price stood at $16bn, however they are currently listed at a collective $22bn.
The decision will also cut the A350’s order book by 9 per cent. Yet, Airbus’ chief operating officer of customers, John Leahy, was bullish when he spoke at the Airbus Innovation event in Toulouse.
“We rarely have cancellations on the A350. If you look at our order book, I think we now have around 150 cancellations, and that’s including this 70. We’ve had very few cancellations on that programme. I’m not anticipating any more – any imminent – cancellations,” he said.
Accepting the opportunity to joust rival, Boeing, Leahy said he ‘congratulated’ those in Seattle “who have had about 50 per cent more cancellations than I’ve got – even with this cancellation – and that doesn’t seem to be slowing down the 787. So, I’m not particularly worried about it.”
The aircraft will enter into service with its first delivery in about six months, but Airbus has said it is confident it can substitute the orders before Emirates’ planned deliveries start in 2019.
“I think our finance department and our production people would be worried if we had planes delivering next year, or the year after. But five years out to 2020? No, that won’t have any impact,” he said.
Indeed, just hours after the announcement, he boasted that he’d received interest from prospective customers. “In terms of those order positions, especially those early ones, there’s already a queue of people expressing interest.
“There are some people who would like to have 2019/2020 slots who we can talk to. There’s certainly going to be no hold up on production. And remember Tim’s [Tim Clark, Emirates’ CEO] first delivery is five years from now, so that’s quite a way out. And who knows, between now and then he might change his mind.”
Rolls-Royce, the A350’s engine maker, will also take a $4.4bn (or 3.5 per cent) hit to its programme, yet it echoed Airbus’ resilience.
“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.
The airline cancelled the order following a fleet review. It sees a greater need for the larger A380 and has been pushing Airbus for an upgrade of the aircraft.
When asked whether the cancellation was the price for saving the A380 programme, Leahy replied: “I think Tim [Clark] has made it very clear that the A380 is his best airplane, his most profitable airplane. He’s talking about buying more of them. He’s encouraging us to re-engine the aircraft.”
“It’s never good news when someone cancels an order, but if he’s [Clark] doing it because his fleet planning needs have changed and he’s looking for aircraft of different size categories, I don’t think that it will have any impact at all.”
Leahy said the company is not currently planning to re-engine the A380 but admitted: “When your largest customer is encouraging you to study it, we, of course, will study it.”
Leahy also discussed the proposed A330 Neo programme, for which it has seen demand from customers including the leasing company, CIT.
“It’s an interesting idea, we go back and forth on it. We have to look at the money we are going to invest,” he explained. “I don’t mind cannibalising my competitor’s programmes but we have to be careful about cannibalising our own.
“We know it would be an interesting thing to do, but we’re publically traded. We’ve got to look at the rate of return on all of our projects. We’ve got to look at whether we have the resources to get it done – remember we’ve got several versions of the A350 yet to finish and there are other alternative projects to look at. So all of this is being discussed and debated internally, studies are being done. Our board will be involved and [will] decide the way forward.
Despite conjecture that Airbus would time its decision to meet next month’s Farnborough Air Show, a major event in the aviation calendar, he responded: “I know a lot of people are predicting it will happen at Farnborough, it may not happen by Farnborough. There’s nothing magic about deciding by then.”