THAI, Airbus agree on A380 delays

Thai Airways International (THAI) has sealed an agreement with the European plane maker Airbus to delay the delivery of its six A380 superjumbos by about two years.

THAI acting president Narongsak Sangapong and Airbus executive vice-president Kiran Rao confirmed the agreement that avoided legal complications from the US$1.8-billion contract default.The national carrier earlier had considered cancelling the order first placed 2004 or switching to the smaller A350- 1000 XWB jets that Airbus is now developing.

THAI executives were concerned that the megajets were too costly and could be hard to fill profitably at a time when air travel was falling in a weak economy. The airline also faces liquidity constraints.

But they now see signs of the economy and air travel improving, while they believe the carrier's cashflow problems will be resolved by the time the A380s are delivered.

The airline would have been exposed to a loss of $700 million - the amount it had already paid Airbus and other A380 suppliers - if it scrapped the order.

"We fully understand the economic climate, current market situation, their (THAI) concerns and requirements, and we found an appropriate solution and came to an agreement (to delay the delivery)," Dr Rao told the Bangkok Post.

THAI is now scheduled to receive its first A380 in the third quarter of 2012, instead of late 2010 as scheduled earlier. Subsequent deliveries would take place in October and December 2012, January, September and October 2013, according to THAI insiders.

Aside from the revised delivery dates, the terms of the A380 contract were largely unchanged, they added.

THAI will not be penalised and Airbus will keep the $300-million price of each double-decker jetliner unchanged if fails to meet the delivery targets by three months.

The European company will also absorb cost escalation, based partly on inflation rates, of up to 3.8% a year for delays beyond three months.

But if the annual escalation cost exceeds 6%, THAI is obliged to pay the difference.

THAI now plans to use the A380s on its trunk European routes, from its Bangkok hub to Frankfurt, London and Paris, with the possibility of operating shorter high-volume services to Sydney, Tokyo and Shanghai, executive chairman Wallop Bhukkanasut said.

Though the A380 can seat 525 passengers in a typical three-class layout, THAI's aircraft would have 510 seats in three classes.

Airbus executives declined to comment on reports that some other A380 buyers including British Airways were seeking deferrals. "We have talked to all our customers and we have found the right solution for each one of them," said Dr Rao. "Some of them will have fast delivery."

He acknowledged that production rates for the A380 were now being tailored to the prevailing economic climate.

He expressed optimism that the A380 had a good outlook in spite of criticism that its market niche - high-traffic, long-haul point-to-point routes - could shrink

"The long-term future of the A380 is very sound. Airports around the world are congested. Once you have an economic recovery, traffic demand will be more or less back on track, at growth of 4-5% a year," he said. "That means that every 15 years the traffic is doubling, every 20 years traffic is tripling."

Total firm orders for the A380s currently stand at 200 aircraft from 16 customers. There are 17 A380s in service with three airlines - Singapore Airlines, Emirates Airlines and Qantas.

Meanwhile, THAI on Thursday took delivery the 1,000th A330/A340 wide-body aircraft from Airbus's final assembly plant in southern France. The 299-seat aircraft is the 25th from the A330/340 family in THAI's fleet.

(Bangkok Post)