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British Airways owner IAG SA has suspended negotiations with Airbus SE over a possible deal for additional A380 superjumbos, a potential setback for the already-struggling program and Airbus’s new sales chief, according to people familiar with the matter.
The carrier had been weighing an order for close to 10 of the double-deckers after Airbus managed to secure a critical follow-on deal earlier this year from Emirates, the plane’s biggest customer. Those discussions have since been put on hold amid IAG’s frustration with Airbus, in particular delivery delays on the A320neo narrowbody, the people said. Talks may still be revived at a later stage, one of the people said.
For new Airbus sales chief Eric Schulz, the development is an early test of his ability to replicate the success of his predecessor, John Leahy, who retired in February after more than two decades and more than a trillion dollars in sales. The sales shake-up at Airbus and its strained bargaining position on the A380 has given BA parent IAG an opportunity to play the European manufacturer against its arch-rival Boeing Co.
A spokeswoman for IAG declined to comment when contacted. A spokesman for Airbus declined to comment on confidential talks with customers.
IAG Chief Executive Officer Willie Walsh has already come down on Airbus since Schulz took over, saying publicly that the planemaker needed to be more “aggressive” on A380 pricing. Earlier this month, he took another swipe at the Toulouse, France-based manufacturer, telling analysts that talks on a separate wide-body deal for IAG’s new discount, long-haul operation was looking particularly positive for Boeing.
“We continue to be in dialog with Boeing and Airbus on wide-body aircraft,” Walsh said at IAG’s first-quarter earnings on May 4. “We found them — that’s Boeing — to be particularly constructive in the dialog we’ve been having with them of late.”
Schulz, whose self-confessed straight-laced sales style contrasts with Leahy’s more wildcard approach, needs a deal with British Airways to help close a gap in the plane’s backlog and keep production rates at six planes a year from 2019. The 36-plane deal with Emirates was pitched as a means to win over customers that were uncertain about the aircraft program’s viability, with Schulz handed the baton of securing the follow-on orders needed to keep the production lines going.
IAG has previously looked into boosting its existing fleet of 12 A380s with second-hand aircraft, but found that the cost of retrofitting the jets was less viable than negotiating a price directly with Airbus, people familiar with the matter told Bloomberg earlier this year. The group, which also owns Spain’s Iberia, Ireland’s Aer Lingus and Vueling, wants the aircraft to help boost traffic at its slot-constrained hub at London Heathrow airport.
Airbus has long argued that the superjumbo was launched too soon and that airlines globally will require planes with 500-plus seats as the growth in air passengers outstrips airport capacity. The four-engine aircraft sells for $446 million at list price, though customers typically get discounts for buying in bulk.
©2018 Bloomberg L.P.