- The Washington Times - Thursday, September 21, 2006

PARIS (AP) — Airbus faces the possibility of crippling A380 order cancellations after its parent company confirmed yesterday that the flagship superjumbo program will be delayed a third time. Emirates, the biggest A380 corporate customer so far, said its 45-plane order was now “up in the air.”

European Aeronautic Defence and Space Co., which owns 80 percent of Airbus, said the 555-seater jet program will fall even further behind schedule than the one-year delay already announced, but gave no new timetable or cost estimate.

A380 customers are still awaiting a revised delivery schedule, according to several of the 14 airlines and leasing companies that have placed 134 orders for the world’s biggest passenger jet.

Airbus has taken an additional 25 orders for the superjumbo’s freighter version.

But in a worrying sign for the Toulouse, France, plane maker, its biggest superjumbo customer said the future of its order could be in doubt.

Asked whether Dubai company Emirates might cancel its order, worth more than $13 billion at list prices, spokeswoman Valerie Tan said: “Things are up in the air right now. It’s hard for us to say.”

Virgin Atlantic Airways Ltd. also said the fresh setback could affect its order for six A380s, with a catalog value of $1.75 billion.

“You would expect another delay like this to have an impact on our A380 program and we will now wait to hear from Airbus on their delivery plans,” spokeswoman Anna Knowles said.

The production hitch is just the latest in a series of setbacks for Airbus and EADS, whose shares plunged 26 percent in one day after the previous six-month A380 delay was announced in June.

The crisis led to the sacking of top officials including Airbus boss Gustav Humbert and EADS co-CEO Noel Forgeard — who remains under investigation by market authorities after it emerged that he had sold his stock options at a profit of $3.2 million, just weeks before ordering an internal probe into the delays.

Airbus has been losing customers to U.S. rival Boeing Co. in the market for midsized jets and was forced in July to start a costly redesign of the planned A350 to compete with Boeing’s 777 and 787 Dreamliner, scheduled to enter service in 2008.

Though the lack of a near-term alternative from Boeing makes it unlikely that carriers will cancel their A380 orders en masse, analysts say any lost orders would be a bad omen for the plane’s future.

“If people leave, it’s because they see better ways to operate their route networks,” said Richard Aboulafia of aviation analyst firm Teal Group.

Losing Emirates, which accounts for almost one-third of the A380 order book and is the only airline so far to put the plane at the heart of its strategy, would be a “heart attack moment,” he said.

Even without cancellations, Airbus faces increased production costs as well as compensation claims and contract renegotiation demands from customers, Mr. Aboulafia added. “That’s plenty of exposure.” Several airlines have said they will seek compensation for the A380 delays.

EADS, which is carrying out an audit of A380 manufacturing at Airbus, said the new delays were caused by “continuing industrialization challenges with the wiring of production aircraft.” Wiring problems were also blamed for the second six-month program delay in June.

Airbus CEO Christian Streiff, who has imposed a temporary hiring freeze, is scheduled to report to shareholders next month on the full extent of the A380 delays.

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