Airbus A380 deal with Emirates in danger, HNA future deliveries uncertain

Airbus and Boeing have both had issues with production deliveries, but Airbus has a double edged problem to deal with.

The heavily stressed HNA Group, that has buried itself under a $50 billion debt and is being made to sell at least $20 billion of its assets by the Chinese Government, is one customer from hell.

The company has a backlog of 7 A330ceo orders that Airbus chose to delay the production of, rather than pay for them itself and store them until HNA were ready. That in itself suggests Airbus aren’t expecting to get paid any time soon, if ever.

Airbus are saying little but it’s known that tense negotiations over the future orders – and those for the A350, are ongoing.

In some ways it works to Airbus advantage, because the company has production issues it’s unwilling to disclose on the A330ceo line.

The Emirates situation is quite different. Similar problems for Airbus exist with undisclosed production issues, but the future of the A380 may well be in serious doubt again.

Emirates and Airbus agreed to delay 12 A380’s in 2016 and have 6 delivered in 2018 and 6 more in 2019. However Emirates is struggling with over capacity, has laid up some aircraft, and a shortage of pilots has led it to cancel a substantial number of flights this year.

Emirates has also delayed accepting some of this years aircraft having only taken three of the six.

The A380’s future was dependent on a 36 aircraft order from the airline that would keep the production line open until 2025-27. That however is said to be in jeopardy because Emirates is getting cold feet, and can’t find an engine supplier willing to provide the power on their terms, for a long enough lease and service contract.

You might think turning down engine orders is hardly good business, but suppliers are pushed to their limits and beyond with Neo, Max, 777-X, A350 and 787 orders of various types, and a difficult customer who doesn’t want to let them operate at a profit they need, is the last thing any of them want. Rolls Royce learnt the hard way how expensive it is to supply deals to Emirates and won’t do it again.

The consequences are that the A380 may once again, be on the chopping block. Times are changing, fuel costs are high and the end of an aviation boom cycle is approaching.

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