Airbus, Qatar Airways back in court as plane row heats up

A British judge will on Tuesday rule whether Airbus must keep building A321neo jetliners for estranged Qatar Airways in a decision with implications for future multi-billion-dollar jet deals, as their public bust-up returns to London's High Court.

Airbus revoked the A321neo deal in January in retaliation for Qatar's refusal to stop taking A350s in a separate legal and safety dispute over damage to the surface of the larger jets.

The knock-on decision to cancel the A321neo deal alarmed some airlines, with the head of the International Air Transport Association describing it as a "worrying" development in a corner of the market where Airbus enjoys the bulk of new orders.

The head of Dubai's Emirates has said he is "not unsympathetic" to its main Gulf rival over the A321neo fallout.

Airbus says the two contracts are connected by a "cross-default" clause that allows it to pull the plug on one deal when an airline refuses to honour the other.

It has accused Qatar Airways, the A350's biggest customer, of airing invalid safety concerns to avoid taking jets at a time of weak demand, and to activate a $1 billion compensation claim.

Qatar says it was right to stop taking A350 deliveries over what it describes as genuine safety concerns by Doha's regulator over gaps or corrosion in a sub-layer of lightning protection left exposed by cratered paint on over 20 grounded A350s. It says the cross-default clause does not in any case apply.

Airline officials worry the A321neo case may set a precedent allowing disputes to ricochet from one contract to another, tightening the grip of plane giants Airbus and Boeing.

"People will look at this and take extra care to resist such cross-default clauses," the head of a large airline fleet said.

Backed by European regulators, Airbus denies any A350 safety flaws, though it has acknowledged that paint peeling is a feature of modern carbon jets, requiring re-painting more often.

Qatar Airways says the problem of decaying paint, and the resulting exposure of anti-lightning mesh surrounding the carbon fuselage, results from a defect in the plane's design.

A Reuters investigation in November revealed the problem affected other carriers though apart from Qatar none has taken planes out of service, except for surface repairs.

The two sides have clashed over the extent to which exposed lightning protection means a safety risk. Airbus says the planes have backup protections and the affected areas would have to be much larger to pose a hazard. Qatar Airways has said it cannot rule out such risks without deeper analysis from Airbus and is unwilling to take any more A350s until the point is settled.

Qatar's refusal to take deliveries led to both sides calling foul and spilled over to the row over the cancelled A321neos.

Rare spotlight

The court battle has punctured the secrecy surrounding more than a decade of aircraft negotiations and taken the lid off closely guarded planning methods inside the global jet industry.

Multiple industry sources say it is in neither side's interest to spark a full-scale trial, producing a flood of further disclosures and testing relations between France and Qatar at a time when Europe urgently seeks new gas supplies.

But while neither side has closed the door to a negotiated settlement, Tuesday's preliminary hearing is expected to reflect the gloves-off nature of their unusually acrimonious divorce.

An earlier hearing saw Airbus take the unusual step of minimising the advantages of its best-selling A321neo over Boeing's 737 MAX, in contrast with its own marketing rhetoric.

Most experts described it as a legal tactic to blunt Qatar's bid to reinstate the A321neo contract, whose success depends on convincing the UK judge that no real alternative is available.

Chief Executive Guillaume Faury returned to the offensive against Boeing a week later, telling a shareholder meeting, "our planes are more competitive for the majority of them than ... the competition; the A321 in particular is extremely performing."

(Reuters)