Airbus may pursue litigation against airlines that dishonour existing contracts

The Coronavirus pandemic has brought the global travel and tourism industry to a near halt. Numberless airlines, including Etihad Airways, have been pushed into grounding fleets, minimising flights, and deferring deliveries of jetliners. Amidst the chaos, Airbus (EPA: AIR) warned on Friday that it will pursue litigation against airlines that dishonour existing contracts.

Shares of the company posted an about 8% intraday gain on Friday. At £72.20 per share, Airbus is roughly 40% down year to date in the stock market after recovering from £44 per share in March. Learn more about how to invest in the stock market.

Airbus sees a partial recovery in deliveries

Airbus revealed a partial recovery in deliveries last month to 24 jets on Friday. CEO Guillaume Faury, however, branded May deliveries significantly lower than pre-virus levels as he signalled to sue the airlines.

Faury also highlighted that lawsuits will not be a priority for Airbus. The aeroplane manufacturer is open to negotiating a middle ground with its customers. According to the CEO:

“It will remain, I hope, the exception because we always try to find a different route than going to court. But if and when airlines – and it’s happening – have no other choice than fully defaulting and not proposing something better than nothing, or are not willing to do it, then lawsuits will happen.”

Industry sources also commented on the news on Friday and highlighted that such public warnings are not a common occurrence for the aviation market. While Airbus’ aggressive stance is understandable considering the unparalleled market disruption due to COVID-19, the prospect of it backfiring on the world’s largest aeroplane maker still holds.

Qatar Airways warns Boeing and Airbus

Sources confirmed on Friday that Airbus has already sent default notices to dozens of airlines. The move can result in litigation but is also expected to hurt relations. Some airlines, sources added, have expressed displease in a private response.

Major players like Qatar Airways recently made a statement that warned both Boeing and Airbus that the planemakers will risk future business if they refuse to defer deliveries. Qatar Airways, however, did not mention if either of the manufacturer sent a formal warning to the air carrier.

Airbus performed largely upbeat in the stock market last year with an annual gain of more than 50%. At the time of writing, the European aeroplane manufacturer has a market cap of £56.43 billion.