UPS and Airbus revise A380 contract

United Parcel Service, the world's largest package shipper, and planemaker Airbus agreed that either company can cancel a pending order for 10 A380 freighters following repeated production delays.

UPS will decide this year whether to retain the $2.8 billion order after getting new delivery dates from Airbus, UPS spokesman Mark Giuffre said today in an interview. The companies declined to provide details of the accord.

Atlanta-based UPS's order is the last surviving contract for the freighter model of the enormous, troubled jet.

Airbus's ability to scrap the UPS order heightens chances that the manufacturer may give up on the freighter version of the A380, the world's largest commercial jet, amid production delays, cost overruns and customer cancellations.

"It's a telling fact," Daniel Ortwerth, an Edward Jones & Co. analyst in St. Louis, said in an interview. Airbus doesn't "want to let go of this unless they have to, but the way things are going, they might have to. Both sides need to protect themselves."

Airbus's development of the superjumbo A380 has been delayed at least two years because of the complexity of installing wiring. Completion of the triple-decker freighter version was pushed back three times in a 16-month period.

"The good news is that the airline's order remains intact," said Mary Anne Greczyn, an Airbus spokeswoman in New York. "It's not unusual for an amendment such as this to be cancelable by either party."

FedEx Corp., the largest air-cargo company, canceled its order for 10 A380 freighters in November after the repeated production delays.

UPS placed its A380 order in 2005, and originally was to receive 10 of the planes from 2009 through 2012. Toulouse, France-based Airbus notified UPS last year that the first delivery would be delayed at least eight months, and the companies were in talks for months over the future of the order.

"The important thing is that we did come to an agreement, and that agreement gives us the information to be able to make an appropriate decision," Giuffre said today.

On Feb. 5, UPS announced an order for 27 Boeing Co. 767- 300ER freighters valued at as much as $3.89 billion. The planes weren't intended to replace the A380s and will be used for shorter routes, UPS said at the time.

FedEx in 2002 became the first company to order the freighter version of the A380 and the first to cancel its contract amid repeated delays. The Memphis, Tennessee-based shipper ordered 15 Boeing Co. 777s to replace the A380s.

International Lease Finance Corp., the world's biggest aircraft-leasing company, in December opted to convert orders for five A380 freighters to passenger versions of the jet. The company, a unit of American International Group Inc., delayed its order for the A380 passenger jets.

Airbus is running at least two years behind schedule on the A380 program. It estimated the program's cost at $19 billion as of Feb. 7, including development funding and penalties for late deliveries. It has 166 orders for the plane, almost all of them passenger models.