Qatar Airways says it was under no obligation to accept deliveries of faulty Airbus aircraft

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Qatar Airways has said it is under no obligation to accept deliveries of Airbus SE A350 jetliners until a surface paint issue is resolved, accusing the European aircraft maker of lowering its standards to minimize the problem.

At a London court hearing on Thursday, Philip Shepherd, a lawyer representing Gulf airline, said Airbus had still not provided a required root cause analysis of the paint surface issues “because we suspect they don’t like what it means for this aircraft.

The hearing addresses a separate issue related to the dispute – Airbus’ decision to cancel an order for 50 A321 small narrow bodies as relations between the two parties soured. Qatar Airways, one of the planemaker’s biggest customers, is challenging the decision, arguing there is no good substitute given the model‘s superior range.

“I’m asking them to perform the contract,” Shepherd said. “They are the monopoly supplier of the A321, there is no other supplier and as such they have a particular duty not to abuse their monopoly position.”

Industry shock

The court told Airbus not to permanently cede A321 production slots to other customers until the court determines whether to allow the cancellation. The aircraft manufacturer’s decision to withdraw the contract has shocked the industry, as it is almost unheard of for a manufacturer to reject an order when a customer has the ability to pay.

The judge will consider the inconvenience to both parties of canceling or reinstating the contract, as well as the uniqueness of the product offered. Airbus has touted its A321 aircraft as a game changer for airlines, allowing them to fly longer routes more economically.

At one point in the hearing, the judge asked Qatar Airways whether it had sought to lease A321s from aircraft lessors rather than buying them outright. The airline’s lawyer said its customers had inquired but there was no availability, reiterating that the company would suffer significant damages if the contract was cancelled.

Threats

The judge questioned why the lack of availability was not included in the evidence, calling it “absolutely critical” to the hearing.

Airbus lawyers said the relationship had “seriously broken down” and it would be wrong to force the parties to meet. Sonia Tolaney, representing Airbus, said the airline had questioned the safety of the A350 and sought to damage the reputation of the European Union Aviation Safety Agency by drawing comparisons to the “debacle ” of the Boeing Co. 737 Max.

“It would be an extraordinary injunction that would force hostile parties to cooperate and Airbus to produce planes under threat of contempt for nearly a decade,” Tolaney said.

The cost to Qatar of obtaining planes on the leasing market can be covered by damages, Airbus said, and the plane cannot be considered unique because similar planes can be obtained either on the rental market, or by turning to competing Boeing 737 models.

Airbus said competing models from Boeing had “comparable if not better range” than what Qatar had ordered from Airbus – a claim that raised eyebrows given Airbus’ boast of the A321’s capabilities.

Longer range

The aircraft manufacturer’s lawyer said only 20% of the airline’s order was for the longer-range version of the A321, with a range of 6,500 kilometers, or 3,500 nautical miles, depending on the configuration chosen by the airline. Qatar said these models are the ones to be delivered first, so they are the most relevant.

Another hearing on April 26 will set the timetable for the broader case over the A350 contract. The judge said he could see reason to speed up the timetable given “vested interests” in the outcome of the wider case, including other airlines that use the A350.

He said he would make his decision on whether to cancel the A321 by that date after giving both parties more time to submit evidence on whether the contracts limit the amount of damages that can be awarded. If so, this could make an injunction more likely, as Qatar may not be able to fully recover the amount lost by canceling the order.

–With help from Katharine Gemmell.

Photograph: A worker under an Airbus SE A350 at the Wings India 2022 Airshow held at Begumpet Airport in Hyderabad, India on Thursday, March 24, 2022. Photo credit: Dhiraj Singh/Bloomberg.

Copyright 2022 Bloomberg.

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