July 5, 2018 / 8:15 PM / in 14 days

Airbus fails to break deadlock on AirAsia A330neo jet order: sources

PARIS (Reuters) - Airbus has failed to break an impasse with AirAsia over the fate of a multi-billion-dollar order seen as key to the future of its A330neo passenger jet, people familiar with the matter said.

FILE PHOTO: Tony Fernandes, CEO of AirAsia, holds a media event in Bangkok, Thailand May 15, 2018. REUTERS/Soe Zeya Tun/File Photo

AirAsia (AIRA.KL) co-founder Tony Fernandes visited the planemaker this week for talks aimed at shoring up and increasing the existing order for 66 jets, but left Toulouse without signing a deal after what one source described as challenging talks.

The future of the deal with the airline’s AirAsia X (AIRX.KL) long-haul unit is crucial to the latest version of the A330, a key source of profits at the European group, after a string of market losses to Boeing’s (BA.N) competing 787 Dreamliner.

AirAsia declined to comment.

An Airbus spokesman said, “As a leading aircraft manufacturer we are always in talks with our customers about their fleet needs. We keep the content of those talks confidential.”

Fernandes - who has spoken in the past of switching to the 787 only to reaffirm support for the A330neo and then raise fresh questions over the Airbus deal - publicly set out a list of conditions for confirming the planes this week.

These included price, performance, engines and advance payments, he said on his Twitter account, before adding: “Or else” in a remark apparently designed to leave open the prospect of reviving interest in the Boeing jet.

After meeting Airbus Chief Executive Tom Enders, Fernandes wrote on LinkedIn on Thursday that the A330neo was a “great aircraft” for long-haul, low-cost travel, while adding: “Airbus has to work hard to make it a world beater. Let’s see”.

Fernandes, a music executive turned airline mogul, is adroit at keeping suppliers on their toes through his wide social media following. But the suspense over the deal is seen as a crucial test for Airbus as it tries to close a gap in orders this year compared to Boeing and defend the profitable A330 wide-body jet.

Sources say relations between Airbus and its largest Asian customer, which has ordered almost 600 single-aisle jets, have deteriorated following management changes at the planemaker and due to differences over prices and advance payment schedules.AirAsia X also has 10 A350s on order but in April, Fernandes said they were “too expensive” and would not be purchased. It is possible those orders could be converted to other jets, such as A330neos.

Airbus nonetheless hopes to strike an expanded final deal in time for the Farnborough Airshow in 10 days.

Airbus is working to secure at least one other significant A330neo order soon, industry sources said. It also posted an order for 10 A330neos from an undisclosed customer.

Airbus said it had ended the first half with 206 net orders, compared with Boeing’s total of 306 up to end-May. For wide-body jets, it accumulated 50 net orders by end-June, compared with Boeing’s latest available tally of 113 by end-May.

Editing by Matthew Mpoke Bigg and Muralikumar Anantharaman

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