© Reuters. FILE PHOTO: An Airbus A321neo during the 52nd Paris Air Show at Le Bourget airport near Paris, France, June 21, 2017. REUTERS/Pascal Rossignol
By Tim Hepher
LONDON (Reuters) – Airbus and Qatar Airways are set to face each other in court as a dispute over billions of dollars of jets enters a theatrical phase and rattles some airline leaders.
The Gulf carrier will on Thursday ask a UK judge to extend an order that prevents Airbus revoking a contract for 50 A321neo jets, pending fuller hearings.
Airbus took the exceptionally rare step of halting the order in January in retaliation for Qatar’s refusal to accept delivery of larger A350s, citing a breakdown in relations that has the makings of a corporate divorce trial.
Qatar has grounded 23 of the A350 jets, voicing concerns over the safety impact of gaps in a layer of lightning protection left exposed by cracked and bubbling paint.
It says it will not take further deliveries until the cause is formally explained and is suing Airbus for steadily rising compensation that now exceeds $1 billion.
The world’s largest planemaker has acknowledged quality problems with the jets but insists the damage is well within safety tolerances, noting that European regulators consider them airworthy and other airlines continue to fly them.
Airline chiefs contacted by Reuters did not share Qatar’s concerns over airworthiness of the A350 but voiced growing alarm over the scale of the dispute which has disturbed a broad industry consensus over safety and generated a trail of intricate filings.
“It is not good for the industry. They both need to get it out of the courtroom and find an agreement,” the chief executive of one Airbus customer told Reuters.
Several industry players have offered to mediate but so far there are no signs of any breakthrough, though neither side has definitively closed the door to discussion and Airbus has said it wants an “amicable” settlement.
Thursday’s hearing will be the first in-person clash after procedural sessions were held online because of COVID-19 restrictions.
Statements filed in advance of the unusual hearing shed new light on industrial planning and details of aircraft negotiations that are typically kept under wraps.
The case has also shone a spotlight on delicate relations between France, where Airbus is based, and one of its closest Gulf allies at a time when Qatar’s role as a gas producer has come to the fore as Europe seeks to reduce its reliance on Russia.
In order to decide on Qatar’s request for an injunction, a judge will weigh which side has most to lose if the A321 contract is scrapped and to what extent the plane is unique in its category. That issue goes to the heart of Airbus’s battle for sales with rival Boeing (NYSE:) in the busiest part of the market.
Airbus has outsold Boeing about four to one at the top end of the market for single-aisle jets and Chief Operating Officer Christian Scherer said last year the A321neo had “unmatched capabilities (and) operating economics”.
In statements pre-filed to the court, however, Airbus said Qatar Airways could replace the cancelled A321neos with the rival Boeing 737 MAX, which it provisionally ordered in December, or Airbus jets available from leasing companies.
The case has also given a glimpse of the stakes involved as leasing companies handle an uneven recovery while waiting for lease rates to catch up with the levels they planned before the pandemic.
Airbus told the court leasing companies are looking for homes for 80 A320s and 48 A321s in 2023 – a relatively high number a year before delivery, according to market sources.
“It shows that lessors believe the lease market is going to move up and are holding back before placing airplanes acquired before the pandemic – but it’s a dangerous game,” said aviation adviser Bertrand Grabowski.
Qatar Airways, in turn, revealed normally closely held details of product plans for the A321neo, including pedal controls for seats and toilets adapted from those on the luxurious A380 superjumbo. Such details are usually jealously guarded until airlines are ready to reveal them in a highly competitive travel industry.
After the glare of proceedings at the High Court in London this month, the two sides are heading for a potentially uncomfortable meeting at the airline industry’s largest annual event in June, relocated to Qatar because of travel restrictions in China.
Willie Walsh, the head of the International Air Transport Association, said on Wednesday he did not expect the dispute to distract from the meeting which is likely to focus on the impact of the Ukraine conflict.