Airbus and Qatar Airways dispute escalates as Airbus cancels 50 A321neo order for airline

In all my time that I have been covering aviation, I’ve not seen a dispute between an airline and an OEM escalate this far, this quickly.

Qatar Airways grounded A350s and sues Airbus.

Qatar Airways is one of the biggest customers of the Airbus A350 jet globally, with 74 on order amongst the -900 and the -1000 variants. Qatar Airways has been the launch customer for both variants and has 34 A350-900 aircraft in its fleet, and 19 out of their 42 A350-1000s delivered.

In August 2021, Qatar Airways began to ground A350 aircraft. Qatar Airways said its regulator instructed them to ground 13 Airbus A350 planes due to “a faster than expected deterioration of the fuselage surface below the paint on the jets”. The latest reports reveal that Qatar Airways has had 21 A350 jets grounded since the initial groundings. Per Qatar Airways, they have had to bring their A380 jets out of retirement due to the continued grounding of their A350 aircraft (and presumably also leased 777s from other airlines)

Airbus had initially called Qatar Airways’ complaints as being about cosmetic issues, calling Qatar’s move an “ongoing mischaracterisation” of the problem. Still, a Reuters report, released in November 2021, how other A350 customers were facing the same issue. Having said that, no one other than the Qatari regulator had ordered their grounding in the meantime. The OEM maintained that the issue is fully understood and poses no safety risk, which has been confirmed by Europe’s aviation regulator EASA.

Qatar Airways went ahead and sued Airbus in December 2021 in the Technology and Construction division of the High Court in London, escalating the dispute between the OEM and one of its biggest customers. Qatar Airways maintained that they had failed to reach a constructive solution with Airbus about the accelerated surface degradation condition adversely impacting the Airbus A350 aircraft and were left with no alternative but to seek a rapid resolution of this dispute via the courts. Qatar Airways sought USD 600 million in compensation from Airbus.

Airbus, in the meantime, maintained that the A350 is performing well in service with a 99.5% operational reliability. In January 2022, they reported they were preparing for an independent legal assessment in response to customer disagreement over A350 surface degradation.

Qatar Airways, in the meantime, has declined the delivery of new A350 aircraft.

Airbus unilaterally cancels Qatar Airways A321neo order.

Earlier this week, Reuters reported that Airbus had unilaterally cancelled Qatar Airways’ order for 50 A321neos. The OEM said that it looked at Qatar Airways refusal to take delivery of two new A350 aircraft as a default, and it was exercising its rights accordingly. Per Airbus 2021 December figures, the A321neo across variants has 4079 orders outstanding, out of which only 667 were delivered. Such is the rush for the upcoming variants such as the A321XLR that Airbus is investing in more facilities to build their A320 family jets in Toulouse.

AirInsight, which claims to have reviewed the documents, states that an agreement between Airbus and Qatar Airways entitles Qatar Airways to USD 175K per day for every day the A350s are grounded for over 12 hours. The amount is adding up to 4 million dollars every day.

A decision to terminate an airline’s order by the airframe maker is very unusual, as airlines usually exercise this right. Airbus has previously cancelled orders from Kingfisher Airlines, and Boeing did the same for Jet Airways’ 737 MAX aircraft. The A321neo is a highly demanded jet, and if Airbus would like, other carriers would easily fill the positions pretty quickly.

Unfortunately, if this is a permanent posture, Qatar Airways won’t have an option but to go back to Boeing to sign up some 737 MAX aircraft to replace their ageing A320 fleet.

Qatar Airways publicly issues a statement on the paint degradation issue.

In a related development, Qatar Airways released a statement on the evening of January 21, 2022.

On 20 January 2022, Qatar Airways, through the legal proceedings against Airbus in the Technology & Construction division of the High Court in England, sought an expedited hearing of a preliminary issue to address our serious and legitimate safety concerns regarding the surface degradation condition adversely impacting our Airbus A350 fleet which has resulted so far in 21 Airbus A350 aircraft being grounded. As this video clearly shows, these defects are not superficial and one of the defects causes the aircraft’s lightning protection system to be exposed and damaged, another defect leaves the underlying composite structure exposed to moisture and ultraviolet light, and other defects include cracking in the composite and damage around a high percentage of rivets on the aircraft fuselage. We welcome the decision of the court to expedite this issue and order a hearing in April in an effort to bring about a more rapid resolution to the dispute.

We continue to strongly believe that Airbus must undertake a thorough investigation of this condition to conclusively establish its full root cause in order to establish whether any proposed repair solution will rectify the underlying condition and ensure no risk to the continued airworthiness of the aircraft.

Qatar Airways’ number one priority remains the safety of its passengers and crew. For this reason, all affected aircraft remain grounded, and we are unable to accept delivery of further aircraft tendered for delivery by Airbus.  Airbus has responded by seeking to cancel an entirely separate contract for the delivery of 50 A321 Neo aircraft. We confirm that we are adhering to all of our obligations under all applicable contracts. It is therefore a matter of considerable regret and frustration that Airbus has taken the apparent decision to expand and escalate this dispute. We continue to urge Airbus to undertake a satisfactory root cause analysis into the cause of the defects, as it is required to do. Qatar Airways remains prepared to help with the root cause analysis however it can. In the meantime, we will continue to robustly defend our position in the legal proceedings.

The video is here.

Qatar has asked the Court for an extension for its defence until February 28. The first hearing at the London High Court is scheduled for April 26.

Bottomline

Airbus has terminated an agreement with Qatar Airways for the sale of 50 Airbus A321neo jets, which were supposed to be beginning delivery in 2023. This comes as the two companies are at a standstill in a legal dispute regarding issues noticed by Qatar Airways on their A350 aircraft.

What do you think of the dispute between Qatar Airways and Airbus on the A350 aircraft and the responses from both side so far?


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About Ajay

Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe. Ajay is a frequent contributor and commentator on the media as well, including ET Now, BBC, CNBC TV18, NDTV, Conde Nast Traveller and many other outlets.

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