Emirates scraps A350 order in blow to Airbus and Rolls
Shares fall in aircraft maker Airbus and aero-engineer Rolls-Royce as Dubai's Emirates airline scraps purchase of 70 wide-body aircraft
Rolls-Royce said the cancelled order for 70 A350 aircraft would shrink its order book by £2.6bn, roughly 3.5pc of total orders
11:17AM BST 11 Jun 2014
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Emirates has cancelled a $16bn (£13bn) order for 70 Airbus A350 aircraft, in a
major blow for the plane manufacturer and engine supplier Rolls-Royce.
The British aero-engine manufacturer said the cancellation of the wide-body
aircraft would shrink its order book by £2.6bn, roughly 3.5pc of total
orders.
Rolls-Royce, which in February stunned markets with its first profits warning in a decade due to defence cuts, said in a statement on Wednesday: "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."
The order for 70 A350 aircraft was confirmed in 2007 as part of a larger $8.4bn announcement relating to a total of 120 Aircraft, all with TotalCare services, Rolls said.
Rolls-Royce, which in February stunned markets with its first profits warning in a decade due to defence cuts, said in a statement on Wednesday: "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."
The order for 70 A350 aircraft was confirmed in 2007 as part of a larger $8.4bn announcement relating to a total of 120 Aircraft, all with TotalCare services, Rolls said.
"The options for the additional 50 aircraft, and the TotalCare contracts,
were not included in the amount captured in our order book," Rolls
said.
Emirates said it had chosen to cancel the order as part of a review of its
fleet requirements.
“The contract which we signed in 2007 for 70 A350 aircraft has lapsed. We are
reviewing our fleet requirements," an Emirates spokesperson said
“In the near term we have sufficient aircraft, of the right mix of range and capacity, for our operating needs.”
The A350 deal was worth roughly $16bn (£13bn) at 2007 list prices and Emirates was due to start taking deliveries in 2019.
Shares in Rolls fell 1.9pc, while Airbus stocks dropped 4pc in early trading.
John Leahy, chief operating office, customers at Airbus, said Emirates had cancelled the order “recently” and it had been aware that the airline was in the process of reviewing its fleet.
With 70 slots now available for delivery of an A350 between 2019 and 2023, Mr Leahy said the plane manufacturer had already had enquiries from other airlines who were interested in taking those slots.
“It’s not the world’s greatest news, but Tim [Clarke, president of Emirates] does change his mind from time to time,” he said.
“The first planes were not due to be delivered to Emirates for another five years, so the early slots we will have no problem filling. We have already had enquiries from other airlines about these slots.”
When questioned about whether this cancellation would affect future sales of the A350, Mr Leahy said that while it was “not good news commercially, it has no impact financially”, and he did not expect any issues on future sales.
He added that he was also not aware of any imminent cancellations.
The cancellation of 70 A350s just six months before the aircraft is due to enter service will be a major blow for the programme. It is Airbus’ largest cancellation to date.
The decision cuts the order book for Airbus' newest jet by roughly 10pc, with 742 orders still in place for the aircraft.
The aircraft is currently is undergoing flight testing, which Airbus said was "progressing well", and was "on track" for certification in the coming months.
The order of 50 A350-900 and 20 A350-1000 was originally placed by Emirates in 2007 with the first plane due to be delivered in 2019.
But since placing the order, Tim Clark, president of Emirates, has been critical of Airbus and the A350-1000, the biggest version of the model.
In 2011, Airbus revealed a revised specification for the largest model, which centred on a modified, more powerful version of the XWB engine which powers the A350.
Mr Clark reacted angrily to the modification, which he said were implemented without any dialogue. He was quoted at the time as saying that if Airbus had discussed the revisions with him he would have said they were “not good enough”.
Wednesday’s decision to cancel the order by the Dubai-based airline follows the airline’s announcement last November that it would buy 150 wide-body aircraft from Airbus-rival Boeing, known as the 777x.
Emirates would not expand further on the cancellation past saying it was reviewing its fleet, but reiterated that it the airline “continued to have a firm relationship with Airbus” as a major operator of A380s, A330s and A340s.
Robert Stallard, analyst at RBC Capital Markets, said the A350 looked like a “bit of an outlier”, with Emirates talking about additional orders for the A380 and the 150 777x.
However, he said that he did not expect this cancellation to hit Airbus’ bottom line.
“Although a cancellation by a blue chip airline is hardly a positive, when put in perspective versus the remaining A350 backlog and the aggregate Airbus backlog it's not the end of the world,” he said.
“We imagine the Airbus sales team will be out there re-marketing these slots, and that ultimately this cancellation will have no impact on the production plans for the A350 for at least the next five years.”
end quote from:
http://www.telegraph.co.uk/finance/newsbysector/epic/rrdot/10891759/Emirates-scraps-A350-order-in-blow-to-Airbus-and-Rolls.html
“In the near term we have sufficient aircraft, of the right mix of range and capacity, for our operating needs.”
The A350 deal was worth roughly $16bn (£13bn) at 2007 list prices and Emirates was due to start taking deliveries in 2019.
Shares in Rolls fell 1.9pc, while Airbus stocks dropped 4pc in early trading.
John Leahy, chief operating office, customers at Airbus, said Emirates had cancelled the order “recently” and it had been aware that the airline was in the process of reviewing its fleet.
With 70 slots now available for delivery of an A350 between 2019 and 2023, Mr Leahy said the plane manufacturer had already had enquiries from other airlines who were interested in taking those slots.
“It’s not the world’s greatest news, but Tim [Clarke, president of Emirates] does change his mind from time to time,” he said.
“The first planes were not due to be delivered to Emirates for another five years, so the early slots we will have no problem filling. We have already had enquiries from other airlines about these slots.”
When questioned about whether this cancellation would affect future sales of the A350, Mr Leahy said that while it was “not good news commercially, it has no impact financially”, and he did not expect any issues on future sales.
He added that he was also not aware of any imminent cancellations.
The cancellation of 70 A350s just six months before the aircraft is due to enter service will be a major blow for the programme. It is Airbus’ largest cancellation to date.
The decision cuts the order book for Airbus' newest jet by roughly 10pc, with 742 orders still in place for the aircraft.
The aircraft is currently is undergoing flight testing, which Airbus said was "progressing well", and was "on track" for certification in the coming months.
The order of 50 A350-900 and 20 A350-1000 was originally placed by Emirates in 2007 with the first plane due to be delivered in 2019.
But since placing the order, Tim Clark, president of Emirates, has been critical of Airbus and the A350-1000, the biggest version of the model.
In 2011, Airbus revealed a revised specification for the largest model, which centred on a modified, more powerful version of the XWB engine which powers the A350.
Mr Clark reacted angrily to the modification, which he said were implemented without any dialogue. He was quoted at the time as saying that if Airbus had discussed the revisions with him he would have said they were “not good enough”.
Wednesday’s decision to cancel the order by the Dubai-based airline follows the airline’s announcement last November that it would buy 150 wide-body aircraft from Airbus-rival Boeing, known as the 777x.
Emirates would not expand further on the cancellation past saying it was reviewing its fleet, but reiterated that it the airline “continued to have a firm relationship with Airbus” as a major operator of A380s, A330s and A340s.
Robert Stallard, analyst at RBC Capital Markets, said the A350 looked like a “bit of an outlier”, with Emirates talking about additional orders for the A380 and the 150 777x.
However, he said that he did not expect this cancellation to hit Airbus’ bottom line.
“Although a cancellation by a blue chip airline is hardly a positive, when put in perspective versus the remaining A350 backlog and the aggregate Airbus backlog it's not the end of the world,” he said.
“We imagine the Airbus sales team will be out there re-marketing these slots, and that ultimately this cancellation will have no impact on the production plans for the A350 for at least the next five years.”
end quote from:
http://www.telegraph.co.uk/finance/newsbysector/epic/rrdot/10891759/Emirates-scraps-A350-order-in-blow-to-Airbus-and-Rolls.html
