As the industry continues to grapple with the effects caused by the coronavirus crisis, the tension between aircraft manufacturers and airlines has risen as Airbus announced at the end of last week that court action may be taken against airlines defaulting on their contracts.
Many airlines across the board have been reluctant on taking on more aircraft due to the decline in air travel and as a measure to save money, some carriers are seeking ways to exit contracts with manufacturers. Adversely this has resulted negatively on manufacturers and leasing companies who have been experiencing record-low delivery numbers as well as an increase in requests to delay deliveries.
As published on Reuters, Guillaume Faury, Airbus CEO is hopeful that compromises with airlines that don’t lead to court action can be reached. This comes on the back of him mentioning that some carriers, who were not identified, had refused to engage in dialogue amid the heat of the crisis.
He further stated: “But if and when airlines – and it’s happening – have no other choice than fully defaulting and not proposing something better than nothing, or are not willing to do it, then (lawsuits) will happen.”
This stance taken by Airbus can be likened to the approach seen during the collapse of Swissair and Sabena in 2001. However, while the manufacturer’s stance is justified in protecting its positions, some sources have cautioned against the action which could potentially backfire in a loss of customers.
Over the weekend in an interview on Bloomberg, Akbar Al Baker the CEO of Qatar Airways called on the world’s two largest manufacturers (Airbus and Boeing) to soften demands until at least 2022 as a cushion for airlines with pending deliveries – Qatar with about $50 billion on pending orders and rival airline Emirates recently announcing that it will be unable to commit to pending orders.
“All airlines in the world are in the same boat, what is important is for Boeing and Airbus to show their customers that they are not only with them in good times, but also in bad times. They should accept airlines’ requirements for delivery delays. If they don’t oblige, they will permanently lose us as a customer,” stated Akbar Al Baker.
Some financial advisers have aligned with the analysis that pre-crisis, manufacturers were producing too many aircraft for carriers without a sound business model and the financial strength to deliver on the growth listed in their books.