Emirates Cancels Airbus A350 Order

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Emirates made a big announcements today that it would cancel an order of 70 Airbus A350 airplanes that it had ordered back in 2007. This is a huge blow for Airbus.

Emirates Airbus A350

The airline ordered 150 Boeing 777X airplanes at the Dubai Airshow last year where it also placed an order for an additional 50 Airbus A380’s.

You can read more about this recent development on BBC’s website here, on Reuters’ here and on New York Times here.

Here are some tidbits from the New York Times article:

Development and testing of the A350 has been progressing more or less on schedule, with none of the major production problems that faced either Airbus’s twin-deck A380 superjumbo or Boeing’s Dreamliner, both of which entered service around three years late.

The Emirates order was the second-largest in Airbus’s A350 order book, behind Qatar Airways with 80 aircraft and alongside Singapore Airlines with 70. It represented about 9 percent of Airbus’s total outstanding orders for the new plane.

The cancellation could also have significant implications for Rolls-Royce of Britain, which is the sole supplier of engines for the A350 series.

Shares of Airbus Group, the parent company of the plane maker, fell by about 4 percent in early European trading on Wednesday, while Rolls-Royce shares were nearly 4 percent lower in London.

A rethink of traffic growth by Emirates could signal wider consequences for economies in the Persian Gulf.

Air transport is big business in Dubai and in the rest of the United Arab Emirates, representing nearly 15 percent of gross domestic product.

And here from the Reuters one:

Emirates and Qatar Airways are part of a trio of Gulf carriers, alongside Abu Dhabi’s Etihad, that have secured large fleets of wide-body jets to support the growth of new hubs.

Nick Cunningham of UK-based Agency Partners said the latest move posed questions including whether Middle Eastern carriers have over-expanded or are expecting lower growth than before.

Airbus and Boeing have dismissed warnings of a “bubble” in aircraft orders, which have mostly defied the economic downturn.

“We do not see this cancellation as a significant change in the outlook for commercial aircraft demand, but more about a rationalization of fleet types at Emirates,” said Bernstein Research analyst Douglas Harned in a note. “Emirates growth plans are based on a very long-term strategy.”

Emirates placed a record provisional order in November for 150 of a revamped 350 to 406-seat version of the Boeing 777 called 777X, which Boeing plans to introduce from mid-2020.

Conclusion

It is quite understandable that the growth of the Emirates, Qatar Airways and Etihad simply just cannot continue at the current speed forever. Maybe this is the first indication that the market for Middle Eastern carriers is reaching saturation point?

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