Page last updated at 17:32 GMT, Monday, 30 October 2006

Q&A: A380 delays

Airbus A380
Engineers have had problems with the A380's 500km of wiring

European aircraft maker Airbus has infuriated customers by announcing a further one-year delay in deliveries for its A380 super-jumbo, the world's biggest jetliner.

The delays are set to cost Airbus 4.8bn euros ($6.1bn; 3.2bn) over the next four years, and the company has announced a drastic new cost-cutting plan to try to recoup some of the losses.

What are the delays?

The A380 is the most complex passenger jet ever built and engineers at Airbus' massive assembly site in Toulouse have been struggling to install the 500km of wiring that each plane needs.

The issue first came to light in June 2005, when Airbus said that the delivery schedule would slip by six months.

A further delay of six to seven months was announced in July 2006.

Gustav Humbert
Gustav Humbert has been a central figure in Airbus' development

This caused turmoil in the boardrooms of both Airbus and its parent company EADS, with bosses accused of sitting on the news for months before revealing it to shareholders.

It led to the resignations of Airbus chief executive Gustav Humbert and A380 programme manager Charles Campion, as well as EADS co-chief executive Noel Forgeard.

And the man brought in as chief executive to rescue Airbus, Christian Streiff, resigned after just a few months after he fell Airbus owner EADS. He was replaced by EADS co-chief executive Louis Gallois.

But less than three months later, and following an audit of the entire A380 production process, a further delay of up to 12 months was announced.

The first A380 will now be delivered to Singapore Airlines in October 2007, 20 months after the carrier had intended to start services.

What are customers saying?

Airbus's 16 long-suffering launch customers are not happy.

Airbus says that nobody has threatened to cancel any orders, but several airlines have made belligerent statements.

One plane in October 2007
13 planes in 2008
25 planes in 2009
45 planes in 2010

Virgin Atlantic, which is awaiting six planes and is the only UK airline to have ordered the plane, has said it will defer its order by four years to 2013.

Emirates, the A380's biggest customer with 43 planes on order, called the new delay a "serious issue" and said it would "review its options".

There is speculation that it is in talks with rival plane maker Boeing about swapping half of its A380 order for the US manufacturer's new 747-8.

But Qantas has upped its order from 12 aircraft to 20 - almost certainly after landing a better deal from the beleaguered planemaker.

What are the implications for Airbus?

Unlike most forms of transport, large commercial jets cannot be bought on the day and flown out of the showroom, so any A380 customers would have to plan carefully before cancelling their orders.

The only alternative is to source their aircraft from Airbus' rival Boeing, but the US planemaker's production line is working at near full capacity after last year's bumper sales, so quick delivery would probably be out of the question.

Compensation is a far more likely option, and Airbus is braced for a massive bill, which some analysts forecast could reach 2bn euros.

Already the company had to tell its shareholders that it will not make a profit until it has sold 420 A380s, up from a previous estimate of 270 aeroplanes.

What is Airbus doing about the new delays?

Airbus has announced the Power8 programme, the objective of which is to "reduce costs, save cash and develop new products faster".

Emirates: 43 aircraft
Lufthansa: 15
Qantas: 20
Air France: 10
Singapore Airlines: 10
Fedex: 10
International Lease Finance: 10
UPS: 10
Thai Airways: 6
Virgin Atlantic: 6
Korean Air Lines: 5
Etihad Airways: 4
Qatar Airways: 2
China Southern Airlines: 5
Kingfisher Airlines: 5
Malaysia Airlines: 6
Source: Airbus

It wants to increase productivity by 20% and reduce overheads by 30%.

This should deliver cash savings of 5bn euros by 2010, and reduce spending by 2bn euros per year after that.

Job losses are inevitable, but bosses have not yet put a figure on it.

Many analysts think that Airbus will have to try to reconfigure its elongated production line that features factories in France, Germany, Spain and the UK.

There has been speculation that many of the 13,000 jobs in the UK, where the A380's wings are built, could be at risk.

And there have also been reports that the A380 production line in Hamburg could be under threat.

Hasn't Airbus got other issues?

UK defence and aviation company BAE Systems is selling its 20% stake in Airbus to EADS, which currently owns the remaining 80% of the business, for 1.87bn.

BAE says the asset is peripheral to its main defence and aerospace operations, increasingly focused on the US.

The plans first became public in April 2006, and some industry observers think BAE's decision to sell-up was influenced by some knowledge of impending delivery delays for the A380.

Airbus is also in the middle of a long-running legal dispute with Boeing and US authorities over the amount of launch and other government aid given to the European planemaker.

The World Trade Organization is currently arbitrating the dispute.

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