Airbus suffers superjumbo order setback

Airbus has terminated an order with Skymark Airlines of Japan for six A380 superjumbos, a rare move that highlights the European manufacturer's difficulties in selling the world's largest passenger jet.

The lost order - worth $2.3bn at catalogue prices in 2011, when the contract was signed between the two companies - is a setback to the Toulouse-based manufacturer's efforts to break Boeing's dominance in the Japanese commercial aircraft market.

The loss of Skymark as an A380 customer also underlines Airbus's challenges in turning the superjumbo into a mass market product.

Airbus has secured orders for 318 A380s with 19 customers, and some analysts believe the superjumbo - which carries more than 500 passengers - will struggle to generate sales to match smaller long-range aircraft.

Boeing has orders for more than 1,000 Dreamliners from 58 airlines and leasing companies, while 38 carriers have committed to buying more than 700 A350s, Airbus' planned long-range jet.

Airbus said on Tuesday that its decision to terminate the order followed talks between the two companies that "explored various solutions to ensure that Skymark was in a position to take delivery of the first two aircraft".

"Those discussions are confidential, but Airbus terminated the contract when Skymark made it clear that it was not going to perform its contractual obligations," it said, adding it was "reserving all its rights and remedies" - a reference to possible compensation claims.

Skymark said it had been preparing to introduce the A380 for the past four years but that increasing competition and depreciation of the yen had forced it to reconsider its plans.

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Skymark said it had been in talks with Airbus since April about possible changes to its A380 order, adding if it had cancelled the contract outright the manufacturer was demanding an "unreasonable cancellation fee which is beyond all common sense".

Rolls-Royce, which was supplying engines for the Skymark A380s, said the cancellation reduced its order book by £351m.

Airbus said it was seeking to place Skymark's A380s with other customers.

Emirates Airline, the fast-growing Gulf carrier that is world's largest operator of the A380, dominates the superjumbo order book with Airbus, having committed to buy 140 of them. Of the A380s on order but yet to be delivered, Dubai-based Emirates is due to take almost half of them.

Airbus's A380 order book could be vulnerable to further cancellations. Virgin Atlantic, the UK carrier that was among the first batch of A380 customers, is committed to buying six but said last year it was reviewing whether to buy the aircraft.

Meanwhile, Airbus Group confirmed the completion of the acquisition of Salzburg Munchen Bank, which is expected to lend to some customers and suppliers that have struggled to obtain credit since the financial crisis.

Additional reporting by Nobuko Juji

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