Airbus And Qatar Airways Resolve Acrimonious A350 Jet Dispute

Airbus and Qatar Airways have reached a settlement over the grounded A350 jets, the firms announced on Wednesday, averting a potentially catastrophic UK court trial after an 18-month conflict that shook the global jet market.

The "amicable and mutually satisfactory settlement" settles a $2 billion dispute over long-haul jets' surface damage. The dispute pushed Airbus to cancel deals worth billions of dollars and Qatar to increase its purchases from Boeing (NYSE:BA).

Under the current agreement, the canceled contracts for 23 undelivered A350s and 50 smaller A321neos have been reinstated. Airbus is also likely to pay the Gulf carrier several hundred million dollars while gaining immunity from further claims.

The financial specifics were not made public.

According to the firms, neither admitted liability. Both parties agreed to withdraw their claims and "go forward as partners."

The agreement averts what would have been an unusual public divorce trial between titans in the generally private and $150 billion aircraft business.

Prior to the June trial, the two parties had amassed claims and counterclaims totaling around $2 billion.

French Finance Minister Bruno Le Maire applauded the agreement, which followed a rise in political engagement in light of the tight relations between France, where Airbus is headquartered, and Qatar.

"It is the result of extensive collaborative efforts. It's good news for the French aircraft industry, "he stated.

Before the announcement, Airbus shares finished up 1%.

After paint cracks showed vulnerabilities in a sub-layer of lightning protection on its new-generation A350 carbon-composite jets, Qatar Airways took the unprecedented step of openly suing the world's largest planemaker over safety.

Airbus acknowledged quality faults but, supported by European regulators, argued the jets were safe and accused the airline of misrepresenting flaws to obtain compensation.

Supported by a growing army of attorneys, both parties frequently argued throughout preliminary hearings over access to records, much to the frustration of the judge who was compelled to order cooperation.

Analysts opined that the settlement would allow both parties to feel vindicated, with Qatar Airways winning damages and recognition that the problem lay outside the manual and thus required a new repair, and Airbus standing firm on safety and avoiding the difficult task of finding a home for cancelled A350s.

Qatar will receive the in-demand A321neos required for its growth strategy in 2026, three years later than anticipated. IATA had criticized Airbus' decision to cancel this purchase, which was unrelated to the disagreement over the A350 contract.

Airbus stated that it made every effort to avoid pushing Qatar too far back in the queue, although several experts dispute whether it could have met the earlier deadline due to supply issues.

The settlement is also expected to halt the clock on a claim for grounding compensation that had been increasing by $6 million per day, triggered by an agreed-upon condition when the repainting of a jet for the World Cup showed considerable surface damage.

Initially assessed at $200,000 per day per plane, Airbus' potential liability increased by a total of $250,000 per hour for 30 jets, or $2 billion per year, by the time the bargain was reached, according to court documents. Neither side commented on the terms of the settlement.

Airbus stated that it would now collaborate with the airline and regulators to deliver the required "repair solution" and return Qatar's 30 grounded aircraft to flight.

Reuters reported on Tuesday that a settlement might be reached as early as Wednesday. In 2021, an investigation by Reuters discovered that several airlines had been affected by A350 skin degradation, with all of them claiming that the issue was "cosmetic."

The dispute has drawn attention to the design of new carbon-fiber jets, which do not interact with paint as smoothly as classic metal jets, and shed light on manufacturing processes.