Additional delays in Airbus jet deliveries

PARIS — Airbus said Tuesday that deliveries of its new superjumbo A380 could be delayed by up to seven months, with airlines likely to get only nine planes next year.

The European manufacturer blamed the setback on production-line bottlenecks.

Airbus said flight certification of the 555-passenger aircraft and the first delivery to launch customer Singapore Airlines were still expected by year's end.

Progress in flight testing is "satisfactory," the company added.

But "the delivery schedule will undergo a shift of six to seven months," said a statement from the aircraft manufacturer. It said the new delays were mainly due to bottlenecks with the plane's electrical systems.

"Modifications of electrical systems and reworks have been necessary ... progressively disturbing the final assembly flow," it said. "Airbus is fully aware of the burden this industrial issue represents for the airlines who are anxious to begin operating the A380."

The launch of the A380 had previously been delayed by three to six months. While most new aircraft are subject to some delay, this latest setback would be an embarrassment to Airbus.

The European plane maker has been counting on the A380 to maintain its lead over Boeing in commercial aircraft. The new delays may help Boeing sell its competing model, the 747-8.

Noël Forgeard, head of Airbus parent European Aeronautic Defence and Space (EADS), said earlier this year he expected between 20 and 25 deliveries of the A380 in 2007, each with a list price of nearly $300 million.

Deliveries of the double-decker aircraft will likely be limited to nine in 2007, Airbus said.

The Toulouse, France-based company has 159 orders for the A380, and delivery slots have been taken up through 2011.

EADS said the revised delivery schedule will not change its 2006 outlook for earnings before interest and taxes.

But for 2007 to 2010, EADS said it anticipates the delays will reduce its annual operating profit by about 500 million euros ($628 million).

"This is very bad news from the standpoint of revenue and credibility," said Richard Aboulafia, an analyst at the Teal Group in Fairfax, Va. "You have a situation where cash is now not going to show up when it was supposed to and penalty payments are sure to follow."

Airbus' chief commercial officer, John Leahy, told Dow Jones Newswires that the company will incur more late-delivery penalties but declined to provide a figure. He said Airbus is talking to customers to explain the situation.

"Naturally, they're not happy," he said, "but nobody's questioning their commitment to the aircraft. In fact, we've been talking to some customers about firming up their options."

Airbus has given assurances to China Southern Airlines, which has ordered five A380s, that it will start receiving its aircraft before the start of the Beijing Olympic Games in 2008, Leahy said.

He said some airlines want Airbus to pay for leased aircraft to fill the gap until their A380s arrive.

Leahy said the production slowdown is likely to cause a delivery shortfall of between five to nine aircraft in 2008 compared with the 35 planned, and that 2009 deliveries could be about five less than the 45 originally planned.

"In a modern aircraft like the A380, everything is integrated. Even minor changes required for certification, or to comply with customers' specifications, can cause a lot of extra work," said Airbus' top salesman.

Information from Bloomberg News is included in this report.