Emirates stands by Airbus despite delays

Emirates is confident about its A380 order, despite the latest delays announced by aircraft manufacturer Airbus

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Emirates is confident about its A380 order, despite the latest delays announced by aircraft manufacturer Airbus.

The airline, which has ordered 45 of the superjumbos in a deal worth US$13 billion, was expecting its first delivery by the end of this year. However, despite a potential delay of approximately two years, Emirates has decided not to cancel its order and should now receive its first A380 in 2008.

European Aeronautic Defence and Space (EADS), the parent company of Airbus, said in a statement last month that it expected the A380 programme to cut expected cash flow by $8 billion from the previously estimated figure for the period 2006-2010. Part of this was an increase of $1.9 billion in the working capital needed to run the business.

However, due to industrial problems, the aircraft is facing a further two-year delay. Emirates is sending a team of technicians from its engineering department to the Airbus factory in Toulouse, France, to assess whether the revised timings the manufacturer had given for the delayed delivery of its A380s are achievable.

Habib Fekih, Airbus Middle East president, told Aviation Business that the delays andproblems associated with the 550-seater airplane had “brought bad news for Airbus”.

Airbus and EADS looked at the financial and management crisis facing the planemaker and launched a solution, Power Eight, as an “ambitious” cost cutting exercise. Additionally, it appointed Louis Gallois as the third chief executive for Airbus since July 2005.

However, Fekih said that the problems to do with the A380 were not political or technical, but lay with the industrial process to put the wiring in the aircraft for each individual customer.

The Power Eight programme is an ambitious global restructure to cut costs and streamline the business. The exercise will affect engineering, industrial and communications departments between the different sites scattered all over Europe.

The purpose, assures Fekih, is for Airbus to become more competitive.

“We’re here to stay and we need to do whatever it takes to be leader in the field. We are
streamlining to be competitive.” Tim Clark, Emirates president, said the airline would look into plugging the two-year gap by leasing five to seven.

Boeing 777-300ERs (extended range), although the actual type of aircraft has not yet been decided. “We believe the Airbus A380-800 is a great product, as evidenced by our order for 45 aircraft. Airbus has informed us that they will deliver our first aircraft in August 2008,” he said.

Singapore-based Richard Pinkham, an analyst at the Centre for Asia Pacific Aviation, a specialist aviation consultancy, said the current problem that Airbus is going through would certainly have put a “crimp” in Emirates’ growth plans.

“This will have industry-wide ramifications. When Emirates has 45 A380s zipping around, it’s going to have an effect on everyone’s pricing. The airline was hoping to have 18 in revenue service by August 2008, but now they’re not and that’s going to have a short-term impact on their forward-looking growth,” he said. “As an added headache, Emirates has installed a lot of infrastructure – both human and physical – to accommodate the aircraft that they’re getting much later than they had wanted.”

Pinkham also suggested that Airbus’s troubles would not affect the sales of further A380 or even the redesigned A350 XWB. “The A380 probably wasn’t going to have too many sales before service entry anyway, with Airbus already having reached 150 orders. Airbus wasn’t going to offer bargain pricing, so airlines would probably have waited to see how the aircraft performed before hopping aboard,” he said.

Fekih also scotched rumours that the A350XWB would be ditched, saying: “Announcing the A350 in the midst of the delays doesn’t make sense and it will have no impact.”

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