More Airbus Headaches: ICAO Wants Greater Separation

ICAO's final approach rule for the A380 changes the cost calculus for airports such as Heathrow, which depend on constant traffic flow for profit margin.</


When core shareholders all rush for the exits at the same time, be prepared for trouble.

BAE Systems, DaimlerChrysler, and Lagardère each announced a disposal of their stake in Europe's Airbus venture last month, muttering vaguely about other plans. Now we know what was on their minds.

The electrical systems on the A380 "fly-by-wire'' super-jumbo, the most ambitious aircraft ever built, fruit of $11 billion of sunk costs, are apparently a shambles. "Hundreds'' of other problems have yet to be resolved.

And, just as Airbus announces the major production delays for the A380, the International Civil Aviation Organisation (ICAO) has recommended a far greater separation between the A380 and the next plane than it has with any other aircraft.

The wake turbulence from the A380 may be such a threat to other aircraft on take-off and landing that ICAO is imposing a barrier of 10 nautical miles, twice the distance for a Boeing 747. Airbus wanted just six nautical miles to separate the A380 from the next aircraft when landing.

ICAO has not made its recommendations for take-off separations.

The final approach rule, temporary at first, changes the cost calculus for airports such as Heathrow, which depend on constant traffic flow for profit margin.

Airbus announced earlier this week that just nine of the $300 million double-decker whales will be delivered next year instead of 20 to 25, with a backlog of delays and penalty clauses cascading through the decade.

At a minimum, the blunder will cut profits by 2 billion euros over four years, the company admitted yesterday.

The verdict on the Paris bourse was swift and brutal. The Franco-Geman mother company, EADS, lost a third of its value before lunch, recovering slightly to close down 26 percent at 18.73 euros.

David Buik from Cantor Fitzgerald said: "This is an absolute catastrophe of the highest order. At least some French lawyers will be very busy with litigation.''

Sash Tusa, a Goldman Sachs analyst, said the debacle had stunned investors: "This is very damaging to both the credibility of EADS management, and also to Airbus's reputation for programme management.''

Emirates Airlines, the irrepressible Dubai-based carrier with the biggest launch order, for 43 aircraft, will now have to wait an extra seven months before receiving its first batch. The company said it was "considering its position'' but denied it was mulling cancelling orders.

A "not happy'' Singapore Airlines said it was already in talks with Airbus over compensation. Rubbing salt into the wound, the company announced a $4.5 billion order yesterday for 20 Dreamliners, the super-efficient Boeing 787 mid-haul jet made from carbon composites.

John Leahy, Airbus's chief operating officer, confessed that the cock-up would cost "hundreds of millions'' in late delivery penalties but hoped the storm would pass without causing deeper damage. "The airlines are upset, but they're staying with the programme,'' he said.

EADS's share price has now fallen 48 percent since April, shedding some 15 billion euros in market capitalisation. The group derived the lion's share of its 2.9 billion euros profits last year from its 80 percent stake in Airbus.

It is a sobering moment for Europe's flagship industrial venture, at the peak of its fortunes just months ago.

"The symbol of what Europe can achieve,'' in the words of French president Jacques Chirac, it now risks suffering the same fate as the draft European constitution, fellow child of a hubristic French elite.

The next shoe to drop is likely to be the mid-haul A350, much denigrated as a revamped hybrid that relies on the ageing core of a previous model. Airbus has netted 180 orders for the aircraft, against 400 for Boeing's higher-tech Dreamliner, but these are not secure.

Qatar Airways said last week that it may scrap its $10 billion order for 60 aircraft if there are further delays. It said: "We won't wait forever. If Airbus is not capable of meeting our needs, we'll look elsewhere.''

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