January 31, 2019
By Tim Hepher and Alexander Cornwell
PARIS/DUBAI (Reuters) – Dubai’s Emirates is exploring switching some orders for the world’s largest jetliner, the Airbus A380, to the smaller A350 in a move raising new doubts about the future of Europe’s superjumbo, people familiar with the matter said.
The Gulf carrier, which has invested tens of billions of dollars in more than 100 A380s, has been struggling to finalize a deal to buy another 36 to keep assembly lines open, due to differences with engine maker Rolls-Royce.
Now, Airbus is looking closely at closing A380 factories sooner than expected as part of a reshuffle of orders, with Chief Executive Tom Enders unlikely to leave the situation unresolved when his mandate ends in April, they said.
A person familiar with the matter said Airbus was looking “extremely seriously” at setting the timetable for a shutdown but said no decision had been taken.
Airbus said in a statement after Reuters first published news of the talks that it “confirms it is in discussions with Emirates airline in relation to its A380 contract”. But it said details of negotiations were confidential.
Emirates and Rolls-Royce declined to comment.
Emirates announced the deal for up to 36 aircraft worth as much as $16 billion at list prices a year ago, throwing a lifeline to the program’s roughly 3,000 workers and securing its future for at least another decade.
The airline is an ardent supporter of the jet, which was designed with luxury features like bars and showers.
But sales of four-engined planes are tumbling as many airlines switch to smaller twin-engined jets like the A350 and Boeing 777 due to improvements in range and efficiency.
A year-long impasse between Emirates and Rolls-Royce over shortfalls in fuel savings has so far blocked the order.
Airbus is trying to broker a complex workaround which could see Emirates take smaller jets also powered by Rolls-Royce while it tries to secure homes for as many A380s as possible, with British Airways recently expressing interest.
Airbus has dangled the prospect of closing A380 production before, and industry sources say such maneuvers can be a negotiating tactic to force the feuding parties to agree.
But time is running out for the A380 with few airlines willing to spend the sums invested by Emirates, which has made it a backbone of its global network alongside the Boeing 777.
The production line is “untenable”, a senior industry source said
A decision by Emirates to order the A350 would offer a respite for Airbus and its main engine partner Rolls-Royce after the Gulf carrier axed an order for the A350 in 2014.
Airbus and Rolls are keen to maintain a foothold with the Gulf carrier and prevent Boeing filling the gap with more of its General Electric-powered 777s.
(This story corrects typo on model canceled in 2014 to A350, para 15.)
(Reporting by Tim Hepher and Alexander Cornwell; Editing by Michel Rose and Edmund Blair)