Qatar Airways is filing a $600m claim against Lindner Depa Interiors for a delay in opening a new international airport in Doha.
Qataris to sue Depa unit for $600m
Qatar Airways is to file a US$600 million (Dh2.2 billion) legal claim against one of the main contractors on the New Doha International Airport project, accusing the company of delaying the airport's opening by up to a year.
The claim against the joint German-Emirati venture Lindner Depa Interiors (LDI) will accuse the contractor of having performed "extremely poorly" in executing the project and failing to meet construction targets.
Last night, LDI replied that it was "deeply disappointed" by the news, and planned to seek legal counsel "as a result of the damage caused to its reputation based on the false and misleading information made in the Qatar Airways statement".
Qatar Airways said LDI had contracted to complete the construction of 19 new airport lounges for the project by the summer of 2012. However, it said, LDI had "badly defaulted" on the $250m deal by failing to complete the project on time.
The $15.5bn airport, due to have opened this month, will not begin operations before the second half of next year. This is the latest in a series of delays that have pushed the project back three years and resulted in a $1bn-plus overspend.
It is also the latest round in a long running dispute between the two parties. In June, Doha International Airport cancelled LDI's contract performance bond and advance payment guarantee worth a total of Dh177m.
The bond and payment guarantee had been imposed by the airport developers because LDI had refused to accept new non-favourable contract terms and conditions, including dropping all extension-of-time costs and acceleration costs.
LDI, in its statement last night, said it is in arbitration proceeedings with New Doha International Airport, and added that it "has never had a contract or relationship with Qatar Airways".
The company also said it was not to blame for the delays: "LDI was denied full access to the project site for the first nine months of the sixteen months project. This delay, combined with NDIA's refusal to pay acceleration costs recommended by its own management consultancy, meant LDI was unable to start all interior contracting work on site as planned."
Fallout from the dispute has already shown up in the books of the construction and interiors group Depa, LDI's UAE-based parent company. Its third-quarter returns show that although Depa posted an 11 per cent increase in contract earnings for the first nine months of 2012, overall it suffered a net loss of Dh107m, compared to a net profit of Dh32m last year.
The company blamed the loss on three contract-related projects, the most significant being the termination of the LDI contract at the new Doha airport. Doha and the other projects will be closed out by the end of the year, it said.
"The company continues to perform well and we are seeing pleasing levels of new business in the GCC and South East Asia," Mohannad Sweid, Depa's chief executive, has said. "Whilst our bottom-line performance has been impacted by a small number of contract issues it would be wrong to let that mask the good work being undertaken."
The New Doha International Airport project had represented the largest project in Depa's backlog. However it is still has more than 200 projects outstanding across the Middle East, Africa and South East Asia.
Qatar Airways, appointed airport operator after the new airport opens, will claim the delays resulting from the dispute will significantly undermine its expansion plans, inflict damaging revenue losses, push up construction costs and inconvenience passengers.
Doha's existing international airport handles almost 20 million passengers a year, and phase one of the new airport is designed to handle more than 28 million passengers a year, with the capacity expected to more than double by 2018, when all subsequent phases are complete.
"We are extremely disappointed by the poor performance of LDI which has failed to carry out the contract in a timely manner, which, in turn, has forced a delay of the opening of the New Doha International Airport by nearly a year," said the Qatar Airways chief executive, Akbar Al Baker.
"We have been badly affected as an airline with the delay impacting Qatar Airways' expansion plans that include new aircraft deliveries and opening up new routes at the rate we want to and more importantly causing a lot of inconvenience to our passengers in addition to the revenue losses to the airline and its subsidiaries.
"The current airport we are operating from is already full to capacity with virtually no room to grow. We relied on moving to our new home, the New Doha International Airport this month, but this has not happened. Operational trials of the new airport have been ongoing since the summer as everything was in place, but incomplete airport lounges proved a serious setback."