Airbus Braces for Order Cancellations on Oil Price


European planemaker Airbus is starting to feel the pain of the high price of oil and is bracing for airline customers to delay and even cancel orders, its chief salesman said on Wednesday.

John Leahy told reporters at the ILA Berlin Air Show he expected more postponements and some cancellations, especially of single-aisle A320 family planes.

He was speaking after U.S. carrier JetBlue Airways said on Tuesday it planned to defer delivery of 21 Airbus A320s for up to five years, blaming the cost of fuel.

Oil prices have roughly doubled in the last year, putting pressure on airlines which have seen their fuel costs soar.

However oil prices eased somewhat on Wednesday, helping adding 2 percent to shares of Airbus parent EADS.

EADS Chief Executive Louis Gallois told the air show on Tuesday that the price of oil was a worry though the company was not yet feeling the consequences.

"One of our worries is that the financial situation of the airlines could be (negatively affected) by the oil price," he told a news conference.

Asked if he could imagine oil at $200 a barrel, Gallois said: "I don't know. I am looking every week to the ... oil price. "We see also companies which are deeply hurt by the oil price increase. It could have consequences on the aircraft market, it's clear. For the time being we do not see the consequences, but we are monitoring closely the situation."

Leahy said on Wednesday Airbus would still stick to its plans to ramp up monthly A320 production to 40 by 2010 from 34 based on its large order book.

Factory Sales

Airbus Chief Executive Tom Enders said the planemaker may have to wait years for economic conditions to improve before it can sell some plants that it wants to divest to reduce costs.

Talks between Airbus and potential buyers of its factories in France and Germany recently collapsed, though it is still aiming to sell two sites at Filton in western England and Laupheim in Germany.

Airbus blamed dollar weakness and the financial crisis.

"We therefore now have an interim solution and we will see how things are looking in a few years when conditions are better again," Enders told a news conference at the air show.

The divestments should then be successful, he added.

The CEO said Airbus would make a decision on the sale of Laupheim very soon.

Airbus has embarked on a cost saving program, dubbed Power8, aimed at saving 2.1 billion euros annually and cutting 10,000 jobs by 2010, as it suffers from delays to its A380 superjumbo program and dollar weakness against the euro.

Parent EADS plans to announce more cost-saving measures by the end of July.

Enders also said Airbus had not made an official application for state support to build its A350 mid-size model to take on rival Boeing's 787 Dreamliner.

At a news conference at the show on Tuesday, representatives from the governments of the four nations that produce Airbus planes -- France, Germany, Spain and Britain -- said they had agreed in principle to support the A350 after Airbus asked them about financial aid.

But the governments said they wanted to see research, development and production stay substantially in Europe.

Enders and Gallois both renewed calls on Tuesday for a level playing field with Boeing in terms of state aid.

Both companies, which control the market for passenger jets of over 100 seats, accuse the other of taking illegal subsidies and have taken their cases to the World Trade Organisation.

EADS has been through three years of turbulence caused by management squabbles, industrial delays and a probe into suspected insider share trading.

Former EADS co-chief executive chief Noel Forgeard was detained in Paris police custody for questioning on Wednesday as part of a probe into possible insider trading at the European aerospace giant, French police sources said.

Forgeard, EADS and other executives deny any wrongdoing.