EDITORIAL: In Airbus vs Akbar, Who’s Going To Blink?
Why has Airbus provoked one of its toughest but also most prominent airline customers with the possibly unprecedented action of unilaterally canceling a major order that the airline is presumably able to afford?
The escalating dispute between Airbus and Qatar Airways has many in the industry scratching their heads; not least, it seems, IATA director general and former IAG CEO Willie Walsh. He was asked about the situation in a media briefing Tuesday and responded that it was something “everyone in the industry will be looking at and trying to better understand.”
The trouble centers on the A350 widebody, for which Qatar Airways was the launch customer, for both the -900 and -1000 variants, and is the second largest operator (after Singapore Airlines), with 53 in service and another 23 on order.
The Qatar Civil Aviation Authority, however, has grounded 21 of Qatar Airways’ aircraft because of concerns about paint and surface degradation issues that the Doha-based airline says pose “serious and legitimate safety concerns.”
Always outspoken and never shy to use the media to make his point, Qatar Airways Group CEO Akbar Al Baker steadily raised the rhetoric on this issue. When he was unable to reach a satisfactory outcome with Airbus, from whom he is believed to be seeking more than $600 million in compensation, he took the matter to an English High Court.
That was a significant ratcheting of an already tense situation. But the backlash from Airbus is what has caused the wider industry to take a sharp intake of breath. The French manufacturer canceled Qatar Airways’ order for 50 A321neos.
Not surprisingly, Qatar swung right back, posting a video of the defects on its grounded aircraft, which it describes as “not superficial” and which “causes the aircraft’s lightning protection system to be exposed and damaged” and “leaves the underlying composite structure exposed to moisture and ultraviolet light.”
The video images are certainly worrying, but it must be noted that while other A350 operators have reported similar issues, they appear to be much less severe and the European Union aviation authority, EASA, has said it does not consider this to be a safety issue.
Nonetheless, ungrounding aircraft is a much lengthier and complicated exercise than grounding them and Qatar Airways is now seemingly stuck with the daily loss of revenue from those out-of-service widebodies while being unable to expand its narrowbody fleet with the highly efficient and much-in-demand A321neo. Even if a court can sort out the first problem, it will likely be another lengthy and expensive process. Might Qatar Airways also sue over the forced cancellation of its narrowbody order?
Walsh’s remarks focused on whether the neo order cancellation, which he said was “a worrying development” was an indication of one manufacturer, effectively in a duopoly, taking advantage of its current market strength.
“I would hate to think that one of the suppliers is taking advantage of its position,” Walsh said, in an apparent reference to Boeing’s issues with the 737 MAX and 787. “The relationships between airlines and suppliers do go through different phases, but none as bad as this.”
Walsh, of course, was speaking as the head of IATA and representative of its some 290 airline members, so one has to imagine that his concern reflects thoughts expressed by other CEOs, at least among the IATA board of governors, which includes Al Baker. But Walsh also has a close relationship with Al Baker—while at IAG and British Airways, he was instrumental in getting Qatar Airways into the oneworld alliance and Qatar Airways took a stake in IAG. So Walsh likely has some insight into Al Baker’s case, if not necessarily why Airbus has cancelled a large aircraft order, a rare move usually only taken as a last resort when an airline defaults on payment.
Qatar Airways’ history with the A350-1000 contract might throw up some clues. Back in December 2017, when the airline was scheduled to take the first aircraft delivery, Al Baker haggled for a lower price (my understanding it was a significantly lower price). Airbus’ then-president Commercial Fabrice Brégier was reportedly furious and a first delivery ceremony that should have taken place right before the Christmas holidays was postponed until agreement was reached for a delivery in early 2018. At the time, Al Baker hailed the A350 as “a remarkable state-of-the-art aircraft that will become a firm part of Qatar Airways fleet and will keep us ahead of the curve.”
Did Al Baker’s push, just three years later, to get $600 million from Airbus convince the manufacturer it was not worth the risk of a potential future financial battle over the neos, which Airbus knows it can easily place elsewhere?
And even if this ugly dispute ends up harming Airbus more than Qatar Airways, will it benefit Boeing? Al Baker can potentially cut a deal for MAXs. The question is how badly does Boeing want that deal? The US manufacturer execs are likely as intrigued as the rest of the industry to first see how this game of chess plays out.
Airbus says that there is no safety danger in the A350 skin damage phenomenon but Boeing said exactly the same thing before the 2 737-MAX crashes.
My educated guess is that both parties are neither absolutely right nor wrong. Then it becomes a game of nerves.