Airbus A350 orders cancelled

Implications: Airbus has lost two airline customers in two weeks for its proposed A350XWB. While the orders themselves were small (13 aircraft total), they're another delay-engendered setback for EADS while Boeing is adding B787 orders despite its own compromised delivery schedule.

Analysis: A couple of weeks ago Airbus made great store about how it had built more commercial aircraft in 2007 than Boeing and had amassed another record orderbook. Well, in the past two weeks that orderbook has shrunk by 13 A350XWBs (list price $2.8 billion) as two European airlines decided not to wait for an aicraft that likely won't enter service before 2014.

Is there another fundamental problem with the much-redesigned A350, is the global financial maelstrom starting to have an effect on orders or are these cancellations symptomatic of problems with the airlines in question? A little of each is the answer, although the two airlines' circumstances are somewhat different.

Firstly, Spain's Air Europa switched its order for 10 A350XWBs to eight Boeing 787s (plus eight options). This is straightforward and is the worst type of news for Airbus and EADS -- a defection to your only competitor. Airbus had counted this business as a firm order -- it still features on its website, www.airbus.com.

Next, Italy's Eurofly has cancelled orders for three A350s, citing delays at Toulouse. Eurofly certainly has its own little financial issues at present but considering payment for these aircraft would still be years away, this cancellation is another blow to Airbus and another order that will have to be scratched from the online orderbook...

The current credit squeeze is not yet having a tangible effect on global aircraft orders although the uncertainty it is causing has on the one hand stimulated a lot of uniformed, nonsense talk about airline mergers (speaking of mergers, Addison Schonland and Timothy O'Neil-Dunne here on GLG News have perceptive insight on the U.S. airline industry and all its myriad follies) and on the other hand it has raised longer-term questions about the link between the availability of credit, levels of consumer spending and the pressures on discretionary travel.

Basically, if the finanical problems endure, airlines will suffer, but they're really only worrying just now. Nothing new there...

Almost hard to imagine after all the delays, incidents, losses, arguments, strikes, over-crowding and international rows, but the airline industry might actually soon be looking back on 2007 as the good old days...