The Puzzling Reason Qatar Airways Canceled Four A350 Orders

While Qatar Airways orders a ton of new planes, they’re also known for being one of the toughest clients of Airbus and Boeing. That’s probably largely because their CEO, Akbar Al Baker, is quite demanding, to put it mildly.

Qatar Airways was the launch customer for the A350, and the airline also has over 80 of them on order, between the A350-900 and A350-1000. That’s more than any other airline. However, it looks like Qatar Airways doesn’t want all the A350s they’ve ordered. Bloomberg reports that Qatar Airways has canceled four A350 orders. Specifically, these are planes that were nearing completion, but were somewhat delayed. When delivery of planes is delayed beyond a certain point, the airline has the ability to get out of their contract:

Delivery issues stem from the manufacturer, Akbar Al Baker, Qatar’s chief executive officer, said in response to questions after Bloomberg reported the cancellation plan earlier. The airline’s A350 contract includes a clause allowing it to scrap handovers that are delayed beyond a certain point, Airbus said, adding that the planes will be reallocated to other customers.

Qatar Airways is within their right to terminate the contract due to the delay, but here’s the puzzling part — Qatar Airways is angry that they’re not getting their planes fast enough, and claim they’re having to put off destinations as a result of this:

“We are asking Airbus to deliver it faster. The delay is from Airbus.”

“I have to scream at Airbus to get my planes faster. I am nearly eight destinations behind schedule because of delays in aircraft deliveries. I hope this will be resolved during this year.”

If you’re desperately behind on planes, and are having to put off destinations due to a plane shortage, wouldn’t you negotiate with Airbus some compensation for the delay (which is a standard practice), rather than canceling the orders for three planes which have already been assembled?

To me, this suggests a likely explanation — Qatar Airways is experiencing weaker demand due to a variety of issues (not the least of which is their current diplomatic issues with their neighbors), they’ve ordered too many planes, and they’ll do what they can to reduce their capital expenditures as much as possible.

Again, Qatar Airways is within their right to cancel these orders, but their story doesn’t make sense. You can’t say “damn you, we have a shortage of planes and want these delivered faster,” but at the same time cancel orders for planes that are almost ready to go.

This sure seems to me like a way to save money and face.

What do you guys make of Qatar Airways’ A350 order cancelation?

Comments

  1. Been looking forward to your view on this news story. Only makes sense they are deferring capex given the environment they are operating in. They still have those leased LATAM A350’s as well. Flew on a Qatar leased one earlier this year in J. Nice bird. Still says Bienvenidos on the wall when you board 🙂

  2. Generally speaking, when Akbar says something, you can bet the opposite is true and you will come or ahead. The guy is a lying scumbag.

  3. So… is this have any impact on Qatar Airways travel quality? Or it is fun bashing ME3 without looking stupid like Delta?

  4. Interesting to see who they go to. This might perhaps move Delta’s order up a bit on the list and we could see more of them and the upgraded Delta One ramping up much faster over this fall and winter.

  5. Your blog post is misleading as Airline CEO wants Airbus to deliver aircraft faster but media reports state order of four A350s has been cancelled.

    Either way it seems like you have to update your blog post instead of generating more traffic and money to your blog.

  6. Seems to be an odd decision to cancel these A-350s based off of the current situation with other Gulf countries. Highly doubt that the A-350 would be utilized on trips from Doha to Dubai, Abu Dhabi, Cairo, Manama, Riyadh when the A-350 is better fit for long haul flights with smaller loads than A-380 or 777 such as the seemingly always evasive Las Vegas route . This cancellation seems to be more in line with lower than expected demand from North America and possibly Australia.

  7. Sounds like a standard business thought process, based upon “just in time” delivery of a component. There would be more to the product than just “the airplane” and all those other pieces shouldn’t be sitting around unused just because another piece is somewhere in transit, so to speak.

    Windows of opportunity don’t always stay open and if a slot at airport X opens September 1st having a plane show up November 1st doesn’t work to your advantage. Also, having spare airplanes sit around for the next opportunity doesn’t solve the problems down the road, it creates new ones.

  8. Or he realizes that 4 planes is small potatoes for an airline of QR’s size — particularly one that doesn’t need the capacity right now — and by letting Airbus know that he plans to play hardball if they screw up, he’s ensuring the rest of his deliveries are made on time.

  9. @Alex E

    Back to third grade you must go. Do not collect $200.

    “Qatar Airways will not cancel its *remaining* Airbus A350 order over delays with the delivery of the long-haul jets, its chief executive said.”

    Reading comprehension, sir, reading comprehension.

  10. Good to see that government subsidized labor abusing ME3 is finally having their unsustainable expansion catch up with them. Hope they start doing realistic business and scale down because I’m sick of bloggers raving about how great these airlines from human rights violating countries are.

  11. From Alex E’s link: “We confirm that Qatar Airways has cancelled four of their contractual A350 delivery slots,” Reuters quoted the Airbus spokesman as saying. The decision was related to “known supply chain issues”.

    This seems to mean that Qatar Airways has cancelled the 4 aircraft which came off the line and Airbus struggled with the cutout. These have never flown. It shall be interesting if Airbus can put them back into the later delivery slots. It does point to the fact that in the short term the drop in loads is enough to not want spare frames. The closing of UAE (DXB and AUH) access is a loss of significant feeder traffic.

  12. Save face. Save capex on a slowdown. And save $$$ by not having to retrofit with Q Suites later. The a350-1000s all come with Q but these 4 -900s wouldn’t. Also gives leverage with airbus later. Whatever you want to call the CEO, just seems like an overall good decision from my view.

  13. I think the 4 359s they leased from JJ may also have played a part in this whole circus. The deeper question is why did JJ dump their brand new 359s? The 359 is positioned in no man’s land between the 789 and 787-10 and is certainly larger than the 788. So what do you do if your routes are not dense enough to support this aircraft? Interesting to note that JJ & QR seem to have developed an aversion to the 350 while hanging onto their 787s.

  14. You seem to be quick to slag off Qatar Airways whenever possible, however you never wrote a post about how qatar airways made a profit for the last two years – completely making a number of your previous assertions incorrect. Had that report not been out, you would have no doubt made another incorrect assumption that qatar airways is losing money

  15. @ Ben — I’m also quick to “slag off” the US carriers whenever they attack the Gulf carriers without profit. As far as Qatar’s profit goes, of course I didn’t write about it because it was a lie. It didn’t account for any of their hundreds of millions of dollars of subsidies.

  16. As @Stuart sort of alluded to, it would be sweetly ironic if Airbus delivered those (originally Qatar-bound) A350-900s to one of the Big 3 U.S. carriers. Al Baker is definitely one of the most entertaining international airline execs around, he definitely knows how to channel that hot air always blowing in the Middle East.

    Wonder how Qatar’s finances are being impacted by the Saudi-Egypt-etc. boycott.

  17. If Qatar has leased 4 A350s then perhaps it was to fill the gaps left by the 4 planes not delivered on time, not deliver with several months of “on time” even?

    The leases would be for a minimum period and most likely be A350s that are similar to (maybe slightly less well produced due to each early build being a learning experience) the 4 that were delayed extensively.

    So if I have 4 planes filling those slots and am hoping that the remaining 76 on order will actually be produced by the contracted date for each AND that each subsequent plane will have the advantage of all production enhancements to date – then why would I want to take 4 less well-built planes that do not fit the schedule laid out and planned for?

  18. @Micah, you’d be surprised. I flew one of the leased Latam 350s from Doha to Dubai. In fact, Emirates operates an A380 twice daily between Kuwait and Dubai. Strange is the demand on some of these routes and it helps that these are massive airports, capable of handling these loads.

  19. Ha! Admiral Ackbar up to his usual BS. Also, loved the reply to @Ben, Lucky :

    “I’m also quick to “slag off” the US carriers whenever they attack the Gulf carriers without profit. As far as Qatar’s profit goes, of course I didn’t write about it because it was a lie. It didn’t account for any of their hundreds of millions of dollars of subsidies.”

    BAMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMM`!

  20. The local political climate probably doesnt help (since they cant hop DOH to DXB/AUH and proceed long haul from there), but I also cant imagine these jets would have been utilized intra-ME. I have to suspect that this is partially due to lower-than-expected demand in longer haul markets (North America, Australia). The Airbus delay is likely due to some “just-in-time” parts not arriving when expected – which gives Qatar the ability to re-establish/reconfigure their order.

    Speaking of reconfiguration, another possibility is aircraft configuration. If these jets were not slated to have Q-Suites, this may simply be a re-alignment of orders so that Qatar doesnt have to pay to reconfigure brand new aircraft. Four jets could be reinstated towards the end of the order.

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