November 15, 2011 / 7:19 AM / in 6 years

Qatar, Airbus make up and sign $6 billion deal

DUBAI (Reuters) - Qatar Airways placed a $6.5 billion order for Airbus jets on Tuesday, just hours after saying at the Dubai Air Show it had walked away from the deal.

A row over which airline would be first to get the European planemaker’s latest jet, a revamped, more fuel-efficient version of its A320 short-haul airliner, nearly scuppered the order, which also included five more Airbus A380 superjumbos, people close to the matter said.

As a result Qatar’s final negotiations were turned into a public drama at the airshow with Qatar Airway’s chief executive Akbar Al Baker first saying the deal was off, only to return hours later to announce the signing.

“Every deal sometimes gets stuck especially when the lawyers throw the spanner in the wheel. The price was not at all an issue, from the beginning,” Al Baker later said.

The eventual deal includes 50 orders for A320neo narrowbody jets worth $4.6 billion, plus options for another 30, and the five-airplane A380 order which doubles Qatar’s planned superjumbo fleet, together with options for a further three.

Pratt & WhitneyUTX.N won a key engine order for the deal.

But the first sign of trouble at the airshow came when Airbus executives failed to put out a name plate for Al Baker at the scheduled press conference, and then an Airbus spokesman announced the deal had been postponed.

Al Baker, who is known for springing surprises and has often been outspoken about both Airbus and Boeing, then compounded the European jetmaker’s embarrassment at a news conference held by Boeing to announce Qatar’s acquisition of two Boeing 777 freighters.

“Airbus is still learning how to make airplanes. We have canceled the (A320) announcement. There is an impasse. If this is resolved, fine ... If not then bye-bye.”

WALKAWAY MOMENT

Al Baker has overseen rapid expansion at the flag carrier but his 14-year tenure at the top of Qatar Airways has been marked by several outspoken comments against both Boeing and Airbus.

Airbus had been counting on an order surge on day three of the Middle East’s largest air show to hit back at Boeing, which so far dominates with an $18-billion order from host airline Emirates for 50 of its 777 aircraft.

More than $30 billion in mainly Middle East plane orders at the biennial air show reflects competition by state-backed Gulf carriers to establish their territory as hubs of a new global transport system as economic activity shifts eastwards.

Despite Tuesday’s uncertainty, Airbus officials say it is heading for a record year after launching the A320neo.

Neither Qatar Airways nor Airbus would say in any detail what caused their $6 billion-plus deal to blow up.

But people familiar with the matter said there had been difficult negotiations over who should get the prestigious first delivery for the revamped A320neo, due in 2015.

“It was a walkaway moment,” a source close to the deal said.

Al Baker also took the opportunity to vent his frustration over delays to and projected performance of Airbus’s new A350 family of lightweight jets which are designed to compete with Boeing’s latest 787 and 777 aircraft.

Qatar is Airbus’s biggest customer so far for the A350.

“I will wait and see what they come up with. Either they prove us wrong about what we feel about their airplane or we prove them wrong about what they feel about it.”

Meanwhile Canada’s Bombardier BBDb.TO, which is seeking to break into the shorthaul plane markets dominated by Airbus and Boeing, bagged a provisional deal at the air show to sell 10 of its CS300 Series aircraft to Turkey’s Atlasjet Havacilik worth $776 million.

FINANCING

The aircraft industry has produced bullish forecasts for demand this week, despite the spreading economic gloom, coupled with fears over how airlines will finance their fleets.

Aviation Capital Group, while placing a $2.7 billion Airbus order, said the conditions were tough.

“The bank market and the European bank market in particular, which has been a large supporter of the aviation sector, is undergoing a lot of stress right now,” Chief Executive Stephen Hannahs said.

“I suspect for the next six months you’re going to see banks in the euro zone sitting on the sidelines -- they won’t be active participants until they sort out their capital structure. So there are going to be challenges.”

Additional reporting by Nadia Saleem; and Sitaraman Shankar; Editing by Amran Abocar and Greg Mahlich

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