International Lease Switches Airbus 380 Order

Airbus suffered another setback in its A380 freighter program Monday when the world's largest aviation leasing company canceled orders for five planes.

Instead of the freighters, International Lease Finance Corp. will take five more A380 passenger planes, doubling its order total for that model. But ILFC will defer delivery of all 10 planes for several years - and that's still more bad news for a program that has been rocked by delays.

The development could give The Boeing Co. an opportunity to sell more 747-8 freighters, a plane that is under development and has been selling well.

United Parcel Service is now the only remaining customer for the A380 freighter, and it is re-evaluating its order for 10 planes, a spokesman said.

Ned Laird, managing director of the Air Cargo Management Group, an aviation consulting and research firm in Seattle, said he believes UPS will cancel its A380 orders. In that case, he said, Airbus likely would postpone for several years - but not cancel - development of the A380 freighter. That would allow Airbus to shift more resources to the A380 passenger plane that is two years behind schedule but not exit the large-freighter market.

In 2005, UPS ordered eight Boeing 747-400 freighters that it needed for growth until the bigger A380 entered service. That makes it more likely UPS might go with Boeing's 747-8 should it not take the A380, Laird said.

Last month, cargo express carrier FedEx, the launch customer for the A380 freighter, canceled its 10-plane Airbus order. Instead, FedEx ordered 15 Boeing 777 freighters and took options to buy 15 more. Like the 747-8, the 777 freighter is in development. It was the first time that any A380 customer has canceled an order because of a series of embarrassing delays. FedEx said its decision to cancel its 10 A380 freighters, as well as 10 options, was the result of not being able to get its planes soon enough.

FedEx had been a strong and vocal advocate of the A380.

So has ILFC.

But John Plueger, chief operating officer for Los Angeles-based ILFC, told Bloomberg News that the leasing company exercised its rights to take passenger planes instead of freighters. He said delivery of the 10 A380 passenger jets will be deferred three years, until 2013-15.

Airbus announced in January 2001 it was developing the A380 freighter with the order from FedEx. The first freighter was supposed to be delivered to FedEx in mid-2008. That was pushed back to the first quarter of 2009 when Airbus announced the initial delay in the A380 program. In June, Airbus said the program would be delayed another year because of wiring problems.

If Airbus stopped development of the A380 freighter, it would leave that part of the market to Boeing and its 747 and 777 freighters. Laird said that having two competitors in the large-freighter segment means more competitive aircraft pricing.

Airbus has 149 firm orders for the A380, of which 10 are freighters.

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