Airbus Threatens To Sue Airlines Over Aircraft Deliveries

Filed Under: Misc.

It’s rare to see aircraft manufacturers publicly make threats towards airlines, given how close their partnerships are. Airbus’ CEO countered that trend with some comments yesterday.

Airbus CEO threatens airlines

We know that many airlines are attempting to defer or even cancel aircraft deliveries. The aviation industry was growing like crazy for the past few years, but now we’re seeing airlines wanting to downsize.

Arguably that’s not really the problem of aircraft manufacturers, though. The reality is that airlines take risks when they order planes, and there’s presumably no clause in contracts saying “we’ll only follow through on this confirmed order if demand is strong.”

Along those lines, Airbus CEO Guillaume Faury shared a warning with Politico yesterday for airlines. He claimed that some airlines have refused to take calls from Airbus during the height of the crisis regarding aircraft deliveries. As he explained:

“It will remain, I hope, the exception because we always try to find a different route than going to court.

But if and when airlines – and it’s happening – have no other choice than fully defaulting and not proposing something better than nothing, or are not willing to do it, then (lawsuits) will happen.”

Airbus is threatening to go after airlines

This follows Qatar Airways threatening Airbus & Boeing

While it’s not clear that the above threat from Airbus was directed at Qatar Airways, it does come a few days after Qatar Airways CEO Akbar Al Baker threatened Airbus and Boeing. As he said at the time:

“They have no other alternative to oblige and if they make it difficult to oblige we will keep them in mind and we will not do business with them again.”

Al Baker even created a video message directed at aircraft manufacturers:

“At the moment we will not cancel any aircraft order that we have placed. I am not unique in pushing back deliveries of our airplanes and not accepting aeroplan deliveries. All the airlines in the world is in the same boat. And what is now important is for both Boeing and Airbus to show to their customers that they will not only be with them in good times, but will also be with them in bad times. And they should accept the requirements of the airlines to delay deliveries of the aeroplanes until at least 2022.

I (mostly) side with aircraft manufacturers here

I’m mostly on team Airbus and Boeing here (and that’s rare, because Boeing hasn’t exactly done a lot to impress lately):

  • Aircraft manufacturers should do what they can to help airlines and not be punitive with fees
  • That being said, it’s not fair for airlines to expect aircraft deliveries to just be pushed back by years without fees, given that no airline is going to want to take deliveries anytime soon
  • Are Airbus and Boeing supposed to just shut down completely for a couple of years, or what do airlines actually want to see happen?
  • In the case of Qatar Airways, it’s a bit ironic for the CEO of an airline wholly owned by one of the richest countries in the world to make these demands, since it’s not like the country can’t afford these planes
  • Qatar Airways currently has a fleet of roughly 240 planes, and has nearly 170 planes on order; it’s not like they were being conservative with growth plans

Qatar Airways has nearly 170 planes on order

Bottom line

It’s rare to see public spats between airlines and aircraft manufacturers, given how closely they work together behind the scenes.

I’ll be curious to see how this situation unfolds, as presumably it will get pretty messy. Some airlines won’t be able to pay for new planes, while other airlines won’t want to spend their money that way, so we’ll see how much action Airbus takes against these airlines.

Comments
  1. That’s what happens when the economy treats good times as the norm. The worlds perspective just come crumbling down.

    You note many times that the list price vs airline prices are significantly different and the discounts comes at a price and commitment. It’s just like plane tickets. If you want a refundable ticket pay the prices. Else don’t grumble about cancellations or deferments when your situation changes. It’s their own policies biting them back.

  2. They wouldn’t dare. This is just a counter-soundbite against Al-Baker’s words. They’ll meet in the middle. Let’s all hope there’ll be a safe vaccine soon

  3. I don’t get AAB’s threat, either. They won’t do business with Airbus and Boeing? Are they going to get all of their long-haul jets from Sukhoi?

    Qatar Airways doesn’t really have options, either.

  4. New deals will be done with the lease companies and the airlines, my guess some of the older aircraft will be part of a “buy back” scheme against the delivery of new replacements over 5 year period, this is classic brinkmanship.

  5. Threatening your own customers IS NOT a good look. Recognize that the customer is always right. From there, you find a solution. Basically telling them to f**k off is not one of them!!

  6. The world economies are in opposite pendulum in pre and post pandemic. All airlines are now bankrupted without government bailouts. Their cash flow is mostly based on tickets sale the airlines collect from flyers before departure dates. The oil producing countries are in economic tailspin so we cannot assume their wealth status maintains unaffected. Airlines are still liable for their orders that are closed to delivery dates, but the remaining orders should be scrapped as leisure travel will be curtailed in near future. When the contract is unconscionable, it will be unenforceable.

  7. Avoiding arguments over what’s “fair” is the entire point of negotiating contracts beforehand. Both the airlines and the manufacturers came to an agreement on what was fair, and it’s entirely reasonable to expect that agreement to be upheld. “But the rona” isn’t an excuse for just ignoring the contracts; both parties here are big and sophisticated enough that they had the option of including terms for what happens in case of a major downturn or purchasing insurance.

  8. I find it hilarious that some of these multi-billion dollar, global mega corporations with tens of thousands of employees are literally ducking phone calls like some kind of deadbeat late on his car payments.

  9. The airlines need to uphold the terms of the contract, regardless of how unpalatable or difficult it is, whether the contract is with Airbus or their customers (such as refunds). After all, they’ve used their contract terms to their benefit as well.

  10. Who are they gonna deliver to when the airlines go bankrupt? And close up. They will loose customers.
    Airbus and Boeing should work with a solution along side the airlines, the I’m gonna pull you to court approach is not feasible.
    They need to flexible and this extends upstream in the supply chain with suppliers. (Let’s not forget the suppliers could go out of business and cause delays then will manufacturers compensate airlines for delays or file for Force Majeure?)
    It works both ways

  11. I’m agreed on your position but also the case is not only for QR… you must have seen other’s situation as well. Airbus as all other airplanes manufacturers hasn’t built all the orders, they could slow production… prioritize deliveries… is not about shutdown, but they can slow a bit as all others are doing.

  12. Unless there are new airplane manufacturers, Boeing and Airbus have the upper hand here. What are the airlines going to do, not buy planes ever again? Go with the competition?

  13. The weirdest result here — and a totally possible one — is that the airlines successfully bankrupt Boeing and Airbus by stopping all receipts of new aircraft. Airlines survive bankruptcy and 15 years later when new planes are desired, they ship from China which owns all the IP from those two former companies.

  14. @Commenting Commenter

    The only other option on the horizon is COMAC. But I honestly can’t see any western airline which cares about its own reputation dealing with that manufacturer. Their pax would be too spooked! Even I would gladly fly a 737Max without hesitation instead of a COMAC aircraft.

  15. Akbar Al Baker is quite frankly an @$$-clown. This guy runs his piehole much more than any other airline CEO, and while they are all basically full of….BS…. this guy really is an imbecile. Never fly Qatar because of him and probably wont until the day he is gone.

  16. I’m a little confused with the total situation at this moment.

    With Covid and distancing etc the manufacturers must be only producing a fraction of the aircraft they normally would. So to complain that everyone must take their planes as scheduled is counter productive when they won’t have any to sell, or at least deliveries will definitely be delayed anyway.

    I was gob smacked when Boeing announced it was restarting the Max 737 production when they already have hundreds lying around waiting certification and no market for them at this time. Is this just foolish or a ploy to force the certification process? I can’t see the benefit here for anyone.

    As another author pointed out, the airplanes they are mostly talking about have not even been started let alone built. Delaying production or producing the product with a smaller work force at a slower pace would probably be better for everyone in the long run.

    Or is it about Bragging Rights as to who sold and delivered the most airplanes post covid?

  17. If it had been Tim Clark who would have made a statement like Al Baker, I’m pretty sure Lucky would have unconditionally supported it.

  18. These behemoths don’t want to go to court because they don’t want to admit that in the hundreds of contract pages incorporated in aircraft orders, their lawyers did a lousy job of specifying who had the risk of a fundamental change in our underlying economy. They papered it over, swept it under the rug, and now neither side wants the world to know that they misled their investors about risks.

  19. Be serious. Boeing’s complete trashing of their own engineering culture– and their directly-resulting financial problems– should force them into receivership, with a resulting break-up and nationalization of the commercial business. At least until you get some grown-ups to manage the company, preferably from Lockheed-Martin or Northrup-Grumman HQ.

    Break Boeing Up.

  20. There are contracts, which outline the duties and responsibilities of all parties involved. If signed, contracts are legally binding. I’m with Boeing and Airbus in this situation. Airlines gambled, they lost. They can renegotiate contracts, but ignoring their obligations is just “wow”. Not even answering phone calls? Says a lot.

  21. In my opinion, Faury’s message was for Airbus shareholders, who need some assurance the company can remain viable until the airline business recovers. If Airbus can’t work some deal out on future delivery contracts, it’s going to have to start writing these off on its books, and that will get ugly. Remember that Boeing is a very big military contractor, while Airbus is largely a commercial company. Boeing has the military side of its business to carry it through the airline downturn and Airbus largely doesn’t. In some ways, the MAX disaster might have helped Boeing indirectly by causing it to decelerate production and cut costs well in advance of Covid. Airbus on the other hand was madly scooping up orders and filling its books with deals that may now never happen.

  22. @Endre:
    I agree- a contract is a contract.

    But if there is no money to pay they can’t just create some out of thin air. And if the airlines file for bankruptcy then their obligations are cancelled anyway, no?

  23. Al Baker is an arrogant person given the seat and too much impotance by his owners. I had personal experience with him. I must say he needs a hard kick in the butt, he acts always as a howling crazy person.He orders aircrafts not by plans but egoistic ways and now then wants to cancel with arrogance and proudness. Thata is not a CEO acting but a crazy person on a seat of power.Well if Boeing and Airbus have a little sense they should sue Qatar airways and as well as thus short sized idiot and teeach them a lesson. Qatar airways has to survive if they want to fly and they will come as timid goats when they have a need for aircraft from either one supplier. Albakar should be put in a circus with the other Arab idiots who mis behave with the world norms. Arabs from the GCC are in nature coward people they howl when the us or Europe support them but when their butts are on fure they run as timid creatures for support. The world should start to teach these arrogant GCC arabs a lesson of courtesy and respect and humanity

  24. Everyone needs to “cool their jets”!!! Threatening litigation is simply a bargaining ploy by the various players while the aviation market sorts itself out. Several airlines will not survive these times, so manufacturers will be absorbing de-facto cancellations, while other carriers will be dealing with longer-term international travel complications. GCC airlines probably the most vulnerable, so little wonder of the current squawk. More to come unfortunately….

  25. Most equipment contracts have provisions for termination and force majeure. I think this is just saber rattling to let the airlines know they won’t accept a tidal wave of defaults. Driving a customer to bankruptcy over an order is pretty drastic and not advised with such a limited customer base.

  26. This situation is almost identical to the prisoner’s dilemma in game theory. If both Boeing and Airbus remain firm with their stance on continued deliveries (as per their contracts with Qatar Airways), Qatar will be the loser. However, if Qatar can get just one of the two manufacturers to cave, then the other manufacturer will have to do likewise (or lose future orders) and Qatar wins.

  27. Al Baker has been long known in the industry for running his mouth. He’s been especially mouthy towards Airbus since before the A350 launch as if he’s their best, most important customer. I’m glad to see Airbus calling him on it.

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