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The Boeing 787 Dreamliner's fuel efficiency, because of its use of composite materials, gives it a major marketing advantage. Duncan Chard / Bloomberg News
The Boeing 787 Dreamliner's fuel efficiency, because of its use of composite materials, gives it a major marketing advantage. Duncan Chard / Bloomberg News

Up and down for Airbus and Boeing

Cancellations for cutting-edge aircraft from Boeing and Airbus are mounting but it's not all doom and gloom. Lost sales provide the European and US manufacturers a chance to catch up on backlogs of deliveries, while airlines can use the freed-up capital to good effect.

Boeing and Airbus have had a deluge of orders cancelled as airlines are buffeted by the euro-zone crisis, a stalled recovery in the United States and a slowdown in China's economy.

But this has not been all bad news for the world's two biggest aircraft manufacturers - now they can catch up with a backlog of orders.

Still, the number of lost sales are mounting up. Last week, Qantas scrapped its order for 35 Boeing 787 Dreamliners, pushing the total number of cancellations so far for the next-generation aircraft to more than 200.

Airbus suffered a similar blow to its state-of-the-art project, the A350-1000, in May, when Etihad Airways confirmed it was ditching almost half of its initial order for 25 for the new twin-jet.

In Australia, Qantas cancelled its order for the 787-8 variant to reduce capital expenditure. But deliveries of 15 of that model to its low-cost subsidiary, Jetstar, will continue as planned. Qantas itself still aims to take delivery of 50 of the larger 787-9 variant as early as 2016 if needed.

The Australian carrier said the cancellations would help it to save US$8.5 billion (Dh31.22bn).

"Qantas continues to practise disciplined capital management and, in the context of returning Qantas International to profit, this is a prudent decision," said Alan Joyce, the chief executive. "Qantas has always maintained flexibility in its fleet plan and made changes when required."

In May, Etihad cut seven Airbus A350-1000s from its order book, having previously cancelled six, saying delivery delays had forced it to rethink its schedule for bringing new aircraft into the fleet.

"Although not intrinsically linked, the recent delay to the A350 programme provided an appropriate opportunity for Etihad to revisit its projected fleet mix in the latter part of the decade," a spokesman said.

"Etihad Airways has a great deal of confidence in the A350 programme and we retain attractive delivery positions."

The decision to cancel seven planes represents a loss of $2.2bn for Airbus at the catalogue price. So you might think both blows would have plunged the world's two greatest airliner manufacturers into crisis.

Not at all.

"The cancellation is not seen as having any major repercussions for the 787 programme," reported Flight International, an aviation industry journal, last week.

Similar sentiments were expressed following Etihad's announcement.

The reason is because, when it comes to buying airliners, cancellations are not always permanent. And, for the plane makers, it also takes the pressure off packed order books. So one man's cancellation is another man's early delivery.

Boeing secured the 787 order from Qantas back in December 2005 in the teeth of competition from Airbus and its A350.

The Australian airline was originally due to receive its first 787 in July 2009 but that was pushed back by successive delays.

Eddy Pieniazek, the director of consultancy at the aviation analyst Ascend, pointed out the hold-up in deliveries would have helped Qantas to wriggle out of the contract.

"Because of the delays, Qantas probably hasn't been as far into the pre-delivery payment schedule as it could have been," he said. "The delays may have allowed Qantas the option to cancel and recover pre-delivery payments and compensation without too much of a penalty.

"Although the Qantas cancellation is a big number, it's not happened because the aircraft isn't performing, so we don't see any major repercussions. Boeing has more than 800 deliveries to work through and we could even see Qantas coming back for more later in the programme. Qantas still have 50 options, they will be back."

Since 2009, customers have cancelled some 216 Dreamliners, citing a variety of reasons.

Just as Boeing has had teething problems bringing the 787 to service on time, Airbus has had numerous hiccups on its A350 programme.

Hans Peter Ring, the chief financial officer of Airbus' parent company EADS, has attributed the initial three to six-month delay in the A350-900s delivery to a "shortage of parts". This has been caused by a supplier funding issue - a result of the euro-zone debt crisis.

The new aircraft was then put through a re-design, much to the consternation of customers such as Qatar Airways and Emirates Airline.

"This programme will likely be a challenge for several years," said Bernstein Research in New York."Feedback we have received from customers is that the A350 is considerably overweight at this stage.

"The programme has also become more complex with the need to develop a second engine core to provide sufficient thrust for the A350-1000. Some customers, particularly in the Middle East, have complained that the current design of the A350-1000 is not large enough."

Bernstein does not expect the first A350-900 to be delivered until 2015. There have been a total of 41 cancellations for the A350, leaving the total order book at 555 aircraft.

That does not mean orders for the A350 programme have dried up. Airbus received 10 last year and this month, Cathay Pacific said it would convert 16 A350-900s on order into the larger variant 1000s and buy an additional 10 with delivery between 2018 and 2020.

"[The primary issue is] getting them early delivery positions," said John Leahy, the chief operating officer for customers at Airbus.


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