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Airbus, Rolls-Royce out of Emirates 70 plane order

  • Airbus (EADSF) has received a major blow after Dubai's Emirates airline cancelled its entire purchase of 70 Airbus A350 jets. The cancellation also stung engine maker Rolls-Royce (RYCEY), the sole engine maker for the A350.
  • The deal, which closed in 2007, was worth around $16B ($22B based on the current price catalog). Rolls-Royce commented that the cancellation will result in a £2.6B ($4.4B) loss from its order book.
Comments (2)
  • John Wingerson
    , contributor
    Comment (1) | Send Message
     
    One wonders whether this cancellation is a reflection of the mid east political climate rather than whether the new planes are a necessity. Perhaps the buyers finally realized that the Arab's wild spending habits needed some modification. There does seem to be a potential for a massive upset in that area.
    11 Jun, 04:36 PM Reply Like
  • User 7530821
    , contributor
    Comments (156) | Send Message
     
    The sell-off may very well reflect the over reaction of weak hands in the market and is an opportunity for patient investors in Airbus and Rolls-Royce. (The later declined 5.48% today). The cancellation may actually have a silver lining for Airbus and Rolls-Royce. Demand remains robust and 70 airlines/engines for 2019 delivery are more valuable today than in 2007 when the planes were sold and capacity was not so constrained. Does the market really think that Airbus will now give away these planes? I would submit that Airbus should be able to resell this precious capacity at higher price/margin than they did in 2007, and worse case, pull into 2019 later deliveries as needed. Net-net, the sell-off seems a bit silly since the potential impact is on 2019 revenues - there is ample time replace by other higher margin orders.
    11 Jun, 08:08 PM Reply Like
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