Airbus’ Emirates deal to save A380 superjumbo has stalled

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Decline in the value of Rolls-Royce shares

london — Airbus SE’s latest order for the A380 superjumbo has reached an impasse amid drawnout talks involving the engines, according to people familiar with the matter, possibly imperiling a crucial deal seen as a life-saver for the giant aircraft.

The $16 billion accord for as many as 36 additional double-decker aircraft has hit a snag as Emirates negotiates with Rolls-Royce Holdings on price and fuel burn on an engine that’s already falling short of performance parameters, said the people, who asked not to be named discussing confidential information. The companies have missed a deadline to select the engines, possibly delaying first delivery in 2020 — and even threatening the deal outright.

Emirates, the A380’s only major customer, came to the rescue in January, signing on for more after months of tense back-and-forth. The Dubai carrier accounts for about half the total order book, having switched to Rolls-Royce as its engine provider a few years ago after using a joint venture between General Electric Co and Pratt & Whitney on the first batch of the aircraft.

That duo, called Engine Alliance, is the only competitor for the A380 engine, but the JV partners haven’t aggressively pursued the bid at supplying the 36 planes because they’ve not picked up new orders in years and have turned their attention to other programmes, said the people. Besides Emirates, the Engine Alliance model is flown by Etihad Airways, Qatar Airways, Korean Air Lines Co and Air France.

Engine Alliance has offered to provide Emirates with more of the GP7200 engines, which have “exceptional fuel burn and durability,” the venture said in an emailed statement. “We look forward to an Emirates announcement, and we are also focused on supporting their fleet for decades to come.”

Spokesmen for Airbus, RollsRoyce and Emirates declined to comment. Airbus shares fell as much as 1.8 per cent after the Bloomberg report, and traded 0.4 per cent lower at the close in Paris. Rolls-Royce lost four per cent in London.

Airbus separately on Monday named commercial-aviation chief Guillaume Faury as its next chief executive officer, succeeding outgoing Tom Enders next year. With talks with Emirates stalled, the final decision could fall to Faury on whether to scrap the superjumbo programme.

When Rolls-Royce took over from Engine Alliance in 2015, the $9.2 billion deal to power 50 aircraft was heralded as a historic milestone for the UK manufacturer. But RollsRoyce hasn’t being able to meet the fuel-improvement guarantees it previously promised, according to a person familiar with the talks. RollsRoyce itself has racked up millions in charges against durability issues on the engine’s high-pressure turbine blades.