EADS: Airbus to Delay Program Yet Again

PARIS_Airbus faces the possibility of crippling A380 order cancellations after its parent company confirmed Thursday that the flagship superjumbo program will be delayed a third time. Emirates, the biggest A380 customer so far, said its 45-plane order was now "up in the air."

European Aeronautic Defence and Space Co., which owns 80 percent of Airbus, said the 555-seater jet program will fall even further behind schedule than the one-year delay already announced, but gave no new timetable or cost estimate.

EADS shares fell 2.4 percent Thursday to close at 22.26 euros in Paris.

A380 customers are still awaiting a revised delivery schedule, according to several of the 14 airlines and leasing companies that have placed 134 orders for the world's biggest passenger jet. Airbus has taken a further 25 orders for the superjumbo's freighter version.

But in a worrying sign for the Toulouse, France-based plane maker, its biggest superjumbo customer said the future of its order could now be in doubt.

Asked whether Dubai-based Emirates might cancel its order, worth over $13 billion at list prices, spokeswoman Valerie Tan said: "Things are up in the air right now. It's hard for us to say."

Virgin Atlantic Airways Ltd. also said the fresh setback could affect its order for six A380s, with a catalog value of $1.75 billion.

"You would expect another delay like this to have an impact on our A380 program and we will now wait to hear from Airbus on their delivery plans," airline spokeswoman Anna Knowles said.

The production hitch is just the latest in a series of setbacks for Airbus and EADS, whose shares plunged 26 percent in one day after the last six-month A380 delay was announced in June.

The crisis led to the sacking of top officials including Airbus boss Gustav Humbert and EADS co-CEO Noel Forgeard - who remains under investigation by market authorities after it emerged that he had offloaded his stock options at a profit of $3.2 million, just weeks before ordering an internal probe into the delays.

Airbus has also been losing customers to U.S. rival Boeing Co. in the market for mid-sized jets and was forced in July to launch a costly redesign of the planned A350 to compete with Boeing's 777 and 787 Dreamliner, due to enter service in 2008.

The European planemaker has bet heavily on future demand for superjumbos to serve the world's increasingly congested major airports. But Boeing does not see a profitable market for very large planes and has no plans for a similarly sized aircraft.

Though the lack of a near-term alternative from Boeing makes it unlikely that carriers will cancel their A380 orders en masse, analysts say any lost orders would be a bad omen for the plane's future.

"If people leave it's because they see better ways to operate their route networks," said Richard Aboulafia of U.S.-based Teal Group.

Losing Emirates, which accounts for almost one-third of the A380 order book and is the only airline so far to put the plane at the heart of its strategy, would be a "heart-attack moment," he said.

Even without cancelations, Airbus faces increased production costs as well as compensation claims and contract renegotiation demands from customers, Aboulafia added. "That's plenty of exposure." Several airlines have already said they will seek compensation for the A380 delays.

Emirates Chairman Tim Clark said in a statement Thursday that the airline "has taken no position with regard to cancellation" or a possible compensation claim.

"Emirates is concerned primarily with establishing exactly when the aircraft will be delivered," Clark said, adding: "There is no point in any further speculation."

Emirates has reserved 43 superjumbos from Airbus and two more through a leasing company - orders that Airbus would not necessarily lose if Emirates withdrew.

EADS, which is carrying out an audit of A380 manufacturing at Airbus, said the new delays were caused by "continuing industrialization challenges with the wiring of production aircraft." Wiring problems were also blamed for the second six-month program delay in June.

Airbus CEO Christian Streiff, who has imposed a temporary hiring freeze since taking over from Humbert in July, is scheduled to report to shareholders next month on the full extent of the A380 delays.

The European jet maker maintains it is still on track to deliver the first superjumbo to launch customer Singapore Airlines Ltd. by the end of the year. But the carrier suggested Wednesday that the timetable could still slip.

"Airbus can only confirm the date after they have completed their technical review at the end of September," airline spokesman Stephen Forshaw said.

Germany's Lufthansa AG said Thursday it still expects Airbus to deliver its 15 superjumbos on time, despite news of another production delay.

"We still assume that we will receive and operate our first A380 in the summer of 2008, so the situation hasn't changed for us," airline spokesman Stefan Schaffrath said.

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AP Business Writer Jim Krane in Dubai contributed to this report.

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