In a recent Supply Chain Matters commentary, we highlighted that Airbus’s commercial aircraft delivery cadence was under a broader looking glass with perhaps undesired customer visibility. That visibility took on a more succinct perspective last week with the announcement of a customer order cancellation from none other than the Airbus A320neo launch customer.
Reports indicate that Qatar Airways has invoked a cancellation clause in its contract with Airbus for canceling one of a total of 50 A320neo family aircraft.
What makes this development more newsworthy are statements from the airline’s chief executive indicating that the airline could potentially cancel more aircraft orders, and further declaring to The Wall Street Journal: “It is (delayed deliveries) making a huge impact on my bottom line. We are, quite frankly, screaming.”
That is a statement that any aircraft manufacturer does not want to hear from a customer, let alone the designated and highly influential launch customer.
In January, because of undisclosed documentation and other issues, Airbus quickly changed initial delivery of the first A320neo off the assembly line to substitute customer Lufthansa when Qatar refused to accept initial delivery because of performance concerns.
Fabrice Bregier, head of Airbus’s commercial aircraft group acknowledged to the WSJ the aircraft’s lateness to original promise of delivery which was originally due for delivery in 2015. However on Friday, the same executive indicated to Reuters that the current delivery issues would be resolved by mid-year and the problems would be forgotten in months.
Perhaps the context of the latter statement was not exactly ideal given ongoing customer concern and sensitivities.
As we have noted in prior commentaries, the bulk of the contract delivery delays relative to the A320neo are not solely in Airbus’s court, and our shared with aircraft engine producer Pratt & Whitney. According to published reports, Pratt has struggled to get the new model engine up to required delivery milestones due to a reported turbine glitch and other software issues causing premature or false alert messages. Engine deliveries are not expected to catch-up until after June.
Meanwhile, similar to previous actions related to the Boeing 787 Dreamliner lithium ion battery crisis, a reported two-dozen completed A320neo aircraft continue to pile-up in parking areas located in Toulouse France and Hamburg Germany awaiting engine delivery and installation creating what one Airbus executive cited as a queue of “gliders.”
The latest published reports further indicate that Airbus will now attempt to make-up for the shortfall in 2016 delivery volume of A320neo aircraft by bringing forward deliveries of the existing version of the aircraft, now termed A320ceo (current engine option). Cudos to the Airbus marketing team for their novel re-branding.
In essence, Airbus and certain airline customers may trade-off the current low prices of jet fuel to gain earlier delivery of new aircraft rather than wait for the promised fuel efficiencies of the new engine option. The other new engine offering, the new LEAP model from CFM International is expected to be available in the second-half of this year as-well.
A tense launch customer relationship had already existed among Qatar and Airbus dating back to the scheduled initial delivery of the new Airbus A350 XWB aircraft. As noted previously, subsequent deliveries of new A350 model aircraft remain impacted due to adequate supply of cabin seating and interior equipment. Plans called for delivery of a total of 50 A350 aircraft in 2016, but Airbus has managed to deliver only 10 so far this year due to the supply delays. There are a reported 40 of this aircraft in various stages of final assembly and Airbus has augmented production with added work stations to get late delivered cabin equipment installed as quickly as possible.
The takeaway is obvious apparent strained and perhaps tense relationships involving an influential Middle East based airline customer, perhaps other customers, and certain suppliers. Unfinished aircraft sitting idle in all available spaces within manufacturer host airport tarmacs is of course a monument to supply chain glitches and disruption.
Once again, the commercial aircraft industry dominates business media headlines with product design and supply chain management glitches that are impacting delivery commitments, and it seems that no manufacturer is immune.