Airbus Faces Fresh Blow as A380 Delays Prompt Compensation Talk

Airbus, the European Aeronautic Defense & Space manufacturer based in Toulouse, France, faces a fresh blow as the production of its double-decker A380 airplane is delayed by as long as seven months. Three leading customers, Singapore Airlines, Emirates, and Qantas Airlines, have hinted that they may seek compensation for the delay. Airbus has announced that it will be able to deliver only 9 of the 25 aircraft it originally promised customers by 2007, dealing a significant blow to its sales lead over Boeing.

Key Takeaways:

• Airbus has announced a fresh delay in the delivery of its A380 airplane, with production "bottlenecks" forcing it to postpone shipments to customers by as long as seven months.
• Three leading customers, Singapore Airlines, Emirates, and Qantas Airlines, have hinted that they may seek compensation for the delay, with Singapore Airlines expressing disappointment and suggesting that it could seek compensation from Airbus.
• Airbus has reduced its estimated delivery of A380s to customers, with only 9 of the 25 aircraft it originally promised to deliver by 2007 likely to be delivered.
• The delays have raised questions about the credibility of Airbus and EADS at a critical moment, with analysts suggesting that the magnitude of the delay is more significant than anticipated.
• EADS has warned that the A380 delays will probably reduce its operating profit by €500 million (approximately $627 million) each year from 2007 to 2010.
• The delays are likely to slow the production schedule in 2008, with Airbus expecting to ship between 26 and 30 planes, a reduction from the 35 planes originally planned.
• The certification process with safety regulators is on track, with Airbus expecting to receive clearance this year for the A380 to land at most major airports.
• The A380 has been dogged by problems since production began, including customer demands for quieter engines and problems with weight and fuel economy.

Statistics:

• The A380 delay will reduce EADS's operating profit by €500 million (approximately $627 million) each year from 2007 to 2010.
• Airbus has reduced its estimated delivery of A380s to customers, with only 9 of the 25 aircraft it originally promised to deliver by 2007 likely to be delivered.
• The delays have slowed the production schedule, with Airbus expecting to ship between 26 and 30 planes in 2008, down from the 35 planes originally planned.
• The certification process with safety regulators is on track, with Airbus expecting to receive clearance this year for the A380 to land at most major airports.

Sources:

• "Shares of European Aeronautic Defense & Space plunged Wednesday after the company's Airbus unit announced a fresh delay in the delivery of its double-decker A380 airplane." (The New York Times)
• "Three of the leading customers for the aircraft, Singapore Airlines, Emirates and Qantas Airlines, suggested that they would seek compensation for the delay." (The New York Times)
• "Airbus said late Tuesday that production 'bottlenecks' would force it to postpone shipments of the 555-seat superjumbo to customers by as long as seven months." (The New York Times)
• "EADS, which owns 80 percent of Airbus, warned Tuesday that the A380 delays would probably reduce its operating profit by €500 million, or $627 million, each year from 2007 to 2010." (The New York Times)
• "Singapore Airlines expressed disappointment in the delay and suggested that the carrier could seek compensation from Airbus for late deliveries." (The New York Times)
• "A spokeswoman for Emirates, the airline based in Dubai, United Arab Emirates, which has ordered 45 of the planes, also said that it would begin discussions with Airbus in the coming weeks." (The New York Times)
• "John Leahy, chief operating officer for customers, declined to estimate the cost of any possible compensation, saying only that it would probably be 'in the hundreds of millions of dollars.'" (The New York Times)