Bloomberg
Airbus Group’s struggles with its A380 superjumbo are deepening as the planemaker delays deliveries of a dozen aircraft over the next two years to Emirates, the double-decker’s biggest customer.
The delay stems from an agreement between Emirates and engine supplier Rolls-Royce Holdings, Airbus said late Tuesday, adding that it will accelerate cost cuts at the unit to make up for the financial drag. Handovers of six A380s apiece that were originally planned for 2017 and 2018 will be shifted to a year later following a subsequent accord with Emirates and Airbus, the planemaker said, adding it still plans to deliver about 12 A380s per year as of 2018.
Emirates and Rolls-Royce reached a settlement in early December over the airline’s A380 engine performance and maintenance concerns, after the carrier revealed technical shortcomings a few weeks earlier. The delays compound Airbus’s efforts to turn around the fortunes of the A380, the world’s largest commercial jetliner, which lists for $433 million before the discounts customary in the industry.
Airbus shares fell 0.3 percent to 62.74 euros as of 12:03 p.m. in Paris. That pared the stock’s gain this year to 1.2 percent, valuing the Toulouse, France-based manufacturer at 48.5 billion euros ($50.6 billion). Rolls-Royce declined 0.3 percent in London to 679 pence, for a market value of 12.5 billion pounds ($15.3 billion). State-owned Emirates isn’t traded.
The delays cap a year of negative news for Airbus’s flagship model. An order for A380s from Iran never materialized when that country announced purchases from Airbus in mid-December, meaning the company hasn’t received any advance contracts on the model this year. As a consequence of slack demand, Airbus cut its delivery target for the A380 in July. U.S. competitor Boeing Co. is also having trouble selling its competing 747-8.
Emirates is by far the biggest buyer and operator of the A380, with orders for more than 140 of the plane, configured for 489 to 615 seats. The carrier, also the world’s biggest long-haul airline, is set to take delivery of its first Rolls-Royce-powered version of the jetliner on Wednesday, almost four weeks later than planned. A further two aircraft will be delivered this week, a spokeswoman for Emirates said by email. The carrier will continue to take delivery of A380s as well as Boeing 777s in 2017 and 2018, she said, declining to provide a breakdown.
The Dubai-based carrier switched to Rolls-Royce engines for its latest batch of A380s after relying on General Electric’s Engine Alliance joint venture with Pratt & Whitney for its first 90 orders, the last of which will be delivered early next year.
Winning Emirates as a customer for its Trent 900 engine was a major commercial victory for Rolls-Royce when it was announced in 2015. The contract for 217 powerplants — sufficient to power 50 four-engine planes, plus spares — remains the largest in the history of the U.K.’s prime manufacturer.
In November, Emirates President Tim Clark revealed that feedback on the powerplants indicated “technical issues” that needed to be resolved before the first plane would be handed over. Clark said the engines required a “higher intervention rate” than expected for maintenance, in part due to unanticipated levels of wear to fan blades stemming from their deployment in Dubai’s desert climate. Rolls-Royce will take the full financial brunt of the extra costs, he said in December.
A spokesman for the London-based engine maker said Rolls-Royce will “continue to work with Airbus and Emirates to meet their requirements.”
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