Qatar Airways Denied by U.K. High Court in Dispute With Airbus

The U.K. high court has denied Qatar Airways’ request that Airbus be forced to keep building A321neo jetliners for the airline.

The ruling, while preliminary, means Airbus is now able to market the popular, smaller jets to other airlines, even while the two companies remain locked in a different disagreement over the safety of Airbus’ larger A350 jets.

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The dispute, which has lasted for 16 months and counting, began when Qatar claimed that peeling and cracking paint on the A350 poses safety issues during lightning strikes. Airbus, however, has argued the paint is a maintenance rather than a safety issue.

In January, the Toulouse, France-based Airbus revoked a $6 billion deal with Qatar for 50 single-aisle, short-haul A321neo jets in retaliation for the airline’s refusal to take any more A350s. Qatar responded by taking the case to the high court, where it argued that Airbus cancelling its A321neo jet order was a breach of contract.

Airbus, for its part, argues that the two contracts, while for different aircraft, are linked by a “cross-default” clause that allows it to cancel one deal when an airline refuses to honor the other. It has said that the claims Qatar, which is the A350’s biggest customer, has made about the safety of the larger jets are not based in reality, and that the airline is just trying to avoid taking them due to decreased demand.

In addition to Qatar’s request of the high court that Airbus be forced to honor its contract for the smaller jets, the airline has also filed a $1 billion compensation claim, as it was forced to ground 23 jets in its A350 fleet. It also argues that the cross-default clause does not apply.

Airbus’s decision to cancel the deal has caused alarm among other airlines. “I would hate to think that one of the suppliers is taking advantage of their current market strength to exploit their position, and that is something we are watching very closely,” said Willie Walsh, head of the International Air Transport Association (IATA).

The case has officials worried that it may set a bad precedent, allowing disputes to bounce from one contract to another, thereby tightening the grip of Airbus and its U.S. rival Boeing on the industry.

Airbus, which is backed by European regulators, denies that its A350 jets have any safety flaws. However, it acknowledges that peeling paint is to be expected on modern carbon jets, and that they invariably require repainting more often. The planes also have backup protections, and the affected areas would have to be much larger to pose a hazard.

Qatar is unwilling to rule out any risks, however, before Airbus conducts deeper analysis, and it refuses to take any more A350s until the issue is resolved.

A full-scale public trial, which industry experts do not believe is in the best interest of either party, could lead to an outpouring of further disclosures and test France-Qatar relations. This could have knock-on effects throughout the economy, as Europe is urgently seeking supplies of gas from sources other than Russia.