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Emirates cancels its Airbus A350 order: explanations

Published on 16/06/2014 08:30 - By

On 11th., June, Airbus recorded its biggest cancellation of firm orders for seventy A-350's. Emirates, who signed this contract in 2007 finally backed out. A decision was officially taken in the context of the revision of its fleet plan. Put more clearly, for the time being, the Dubai company wishes to limit itself to two types of aircraft capable of carrying 350 to 500 passengers : the Boeing 777-X and A-380 respectively odered at 150 and 140 units. One way of overcoming the costs incurred by the arrival of a third type of aircraft in its fleet such as those related to maintenance and pilot training.

But this cancellation is nevertheless a cost to the airframer and to the airline. When customers sign a contract, they must pay the airframer in effect a pre-delivery payment which guarantees them, simultaneously, both the purchase price of the aircraft on the day of signature, and also a delivery schedule.

This kind of bond or deposit is, according to our sources, between 5 and 10% of the total order value. In the case of cancellation, the deposit is obviously kept by the manufacturer. Numbers to handle with caution, however, because depending on the importance of the client and number of aircraft that are still on order, the manufacturer can make a gesture of goodwill, and provide a ''discount'' on the aforementioned payment that they received on signature of the contract.

For any maintained order, however, it is on the day of delivery that the airline pays the outstanding balance to the manufacturer, for each aircraft, for which it officially takes possession.

Thus in terms of numbers, this historic Emirates cancellation reshuffles the cards in the commercial battle between Airbus and Boeing. If we compare the firm orders for the A-350 with those of its direct competitor, the Boeing 787, the Boeing is well ahead with 1,031 purchase commitments against 742 for the European manufacturer. And in of cancellation terms, Boeing has suffered 223 total since 2006 for its Dreamliner, and Airbus 252 since 2007 for the A-350.

At just one month away from the opening of the Farnborough Airshow in the U.K., the race for orders between the two rivals is on again.

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