Huge Qatar order validates Airbus plan for new A350

Airbus, after struggling three years to design a credible competitor to Boeing's 787, won a $16 billion pledge from Qatar Airways for 80 A350 XWBs in the first major commitment to the new long-range, 300-seat jet.

Qatar Airways Chief Executive Akbar Al-Baker signed the agreement today in the Elysee presidential palace in Paris two months after announcing that Qatar finally got what it wanted from Airbus and would move forward with a contract. Deliveries will begin in 2013, Airbus said in a statement. The planes will be equipped with engines made by Rolls-Royce Group.

The agreement is a step toward building credibility for an aircraft that has won only 13 firm orders compared with 567 for Boeing's 787 Dreamliner.

Al-Baker had threatened to buy the Dreamliner unless Airbus came up with a redesign of the A350 by June. Qatar was the first customer for an early version of the plane, though it wavered as other carriers opted for the 787.

"Boeing has been beating the pants off Airbus," said Nick Cunningham, an analyst with Panmure Gordon in London. "They have effectively worked this aircraft over three times so this order does help to validate that work and it certainly is a big leg up. They will need lots more orders, though, before it can be considered a success."

Airbus Chief Louis Gallois said he expects the airline to sign a firm purchase order for the planes "in a few days."

Singapore Airlines signed a commitment for 20 A350s a year ago and hasn't yet signed a firm contract. Emirates, the largest Mideast carrier, has said it is considering the purchase of 100 planes, though hasn't indicated when it'll announce a decision.

The past year for Airbus, based in Toulouse, France, has been the most difficult in its 37-year history. Last June, the planemaker announced that the A380 superjumbo was running a year behind schedule. In October Airbus revised that, saying the plane was two years late, and would cost parent EADS about 4.8 billion euros ($6.4 billion) in profits through 2010.

Airbus, based in Toulouse, France, had orders for about 100 of the A350s from smaller carriers, though most of those have to be confirmed because of the redesign of the plane. The original Qatar order was 60 planes. The 787 may help Chicago-based Boeing regain the lead in commercial-jet building from Airbus as soon as 2008.

"It's a very nice contract; this plane promises to have a great future," Gallois said at the signing ceremony. "It's a plane that interests many airlines." Also at the ceremony were French President Nicolas Sarkozy and Sheikh Hamad bin Khalifa al-Thani, the emir of Qatar.

While the price of today's order was announced as $16 billion, large purchasers generally get discounts on planes. Cunningham said discounts for launch customers typically are around 20 percent and said Qatar may have gotten more.

The Dreamliner, which is scheduled to enter service next year, will be about 50 percent built from composite materials, which are lighter than the traditional aluminum and make the plane more fuel-efficient. The A350 XWB will be as much 60 percent built from composite materials and carbon fibers, though design delays mean it won't enter service until 2013.

The Qatari airline will buy three different versions of the Airbus plane, 20 A350-800s, 40 A350-900s, and 20 A350-1000s.

Airbus said in January it expects to spend about 11.6 billion euros developing the A350 XWB, 50 percent more than the earlier version, as the composite materials add to the expense.

The only firm orders for the A350 XWB have been an 11-plane contract from Finnair Oyj, Finland's state-controlled carrier, signed March 8 and an order in December from U.S.-based leasing company Pegasus Aviation Finance Co., which signed for two.

Singapore Airlines Ltd. agreed to buy 20 A350 XWBs last June, with options to buy 20 more, though hasn't yet signed a firm order.

On March 22, Airbus also won a preliminary agreement from Russia's OAO Aeroflot to buy 22 A350s worth $4.4 billion, with Airbus offering Russian industry a 5 percent stake in building the aircraft.