Airbus and Qatar Airways settle bitter A350 jet row

2/2 © Reuters. FILE PHOTO: A view shows the Qatar Airways' airbus A350 parked outside Qatar Airways maintenance hangar in Doha, Qatar, June 20, 2022. REUTERS/Imad Creidi 2/2

By Tim Hepher

PARIS (Reuters) - Airbus and Qatar Airways have settled a dispute over grounded A350 jets, the companies said on Wednesday, averting a potentially damaging UK court trial after a blistering 18-month feud that tore the lid off the global jet market.

The "amicable and mutually agreeable settlement" ends a $2 billion row over surface damage on the long-haul jets. The spat led to the withdrawal of billions of dollars' worth of jet deals by Airbus and prompted Qatar to increase purchases from Boeing (NYSE:BA).

The cancelled orders for 23 undelivered A350s and 50 smaller A321neos have been restored under the new deal, which is also expected to see Airbus pay several hundred million dollars to the Gulf carrier, while winning a reprieve from other claims.

Financial details were not publicly disclosed.

The companies said neither admitted liability. Both pledged to drop claims and "move forward and work together as partners".

The deal heads off what amounted to an unprecedented public divorce trial between heavyweights in the normally tight-knit and secretive $150 billion jet industry.

The two sides had piled up combined claims and counter-claims worth about $2 billion ahead of the June trial.

French Finance Minister Bruno Le Maire welcomed the deal, which came in the wake of increasing political involvement amid close ties between France, where Airbus is based, and Qatar.

"It is the culmination of significant joint efforts. It is excellent news for the French aerospace industry," he said.

Airbus shares closed up 1% before the announcement.

Qatar Airways had taken the unusual step of publicly challenging the world's largest planemaker over safety after paint cracks exposed gaps in a sub-layer of lightning protection on its new-generation A350 carbon-composite jets.

Airbus had acknowledged quality flaws but, backed by European regulators, had insisted that the jets were safe and accused the airline of exaggerating flaws to win compensation.

DAMAGES

Supported by a growing army of lawyers, both sides repeatedly bickered in preliminary hearings over access to documents, to the growing frustration of a judge forced to order co-operation.

Analysts said the deal would allow both sides to feel vindicated, with Qatar Airways winning damages and recognition that the problem lay outside the manual and therefore required a new repair, and Airbus standing its ground on safety and spared the difficult task of finding a home for cancelled A350s.

Qatar will get the in-demand A321neos needed to plan its growth, albeit three years later than expected, in 2026. Airbus' decision to revoke that order, separate from the disputed A350 contract, had been criticised by global airlines group IATA.

Airbus said it had done its best to avoid pushing Qatar too far back in the queue, though some experts question whether it could have met the earlier schedule because of supply problems.

The settlement is also expected to stop the clock ticking on a claim for grounding compensation that had been growing by $6 million a day, triggered by a clause agreed upon after the repainting of a jet for the World Cup revealed significant surface damage.

Originally valued at $200,000 per day per plane, Airbus' theoretical liability was ratcheting upwards by a total of $250,000 an hour for 30 jets - or $2 billion a year - by the time the deal was struck, based on court filings. Neither side commented on settlement details.

Airbus said it would now work with the airline and regulators to provide the necessary "repair solution" and return Qatar's 30 grounded planes to the air.

Confirmation of a settlement came after Reuters reported a deal could arrive as early as Wednesday. In 2021, a Reuters investigation revealed other airlines had been affected by A350 skin degradation, all of whom said it was "cosmetic".

The dispute has focused attention on the design of modern carbon-fibre jets, which do not interact as smoothly with paint as traditional metal ones, and shed light on industrial methods.