As anticipated, Norwegian has reached an agreement with Airbus to cancel its outstanding aircraft orders. In all, 88 aircraft are no longer to be delivered to the airline, which includes 30 of the long-range A321LR. Norwegian is not walking away without penalty, however, as Airbus will keep any prepayments made, and the airline will still owe it almost $850,000.
Airbus orders canceled
As expected, Norwegian’s restructuring has led to a cancellation of outstanding jet aircraft orders. The airline is reported to have agreed terms with Airbus to cancel the contract for new aircraft, as shared with the Irish High Court today.
Reuters reports that lawyers representing the airline and Airbus told the court that an agreement had been reached in relation to 88 narrowbody jets on order with the planemaker. Norwegian Air lawyer Brian Kennedy told the hearing,
“We have agreed, judge, in the last short while, the terms of a consent order.”
Under a major deal originally signed in 2012, and subsequently revised several times, Norwegian had agreed to purchase 100 aircraft from Airbus. According to the planemaker’s current order book, 88 of these were still outstanding for delivery. The original 100-plane A320neo order had been converted to include 30 A321LRs, intended for transatlantic operations.
For the traditionally Boeing-heavy airline, this was to be its first foray into the Airbus product line. However, as the cash crunch proceeded to damage Norwegian’s finances, cold feet on the order began to set in.
In 2019, it was revealed that Norwegian had removed five A320neo from the Airbus order books. Deliveries of other aircraft were postponed, as Norwegian attempted to wriggle out of its commitment with the European manufacturer. To date, no deliveries have been made by Airbus to Norwegian, and now it looks as though they never will.
But Norwegian is not walking away from the deal without penalty. According to Reuters, Airbus will keep hold of all the prepayments it has received to date. On top of this, it will still be owed $847,800 by the airline.
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What about Boeing?
When Norwegian made the Airbus order, it was in a period of incredible growth. Overall, it contracted to receive more than $9 billion of aircraft from both Boeing and Airbus, for delivery between 2020 and 2027.
Since then, things have been tough for the red-nosed airline. Along with its own financial problems, it has had to deal with the grounding of its 18 737 MAX 8, and other issues with the engines on its 787 Dreamliners. These have left it relying on older, less efficient aircraft, and even hiring in Hi Fly’s wet lease A380 for a time to cover its transportation commitments.
Last year, it said it would cancel all 97 aircraft on order from Boeing, under the guise of the various issues surrounding those aircraft. It also sought compensation from the planemaker for the 737 MAX grounding. However, Boeing’s order book still shows the commitment in its backlog, and counterclaims have reportedly been issued by the US manufacturer.
As yet, no conclusion to the Boeing order has been reached, but with the Irish High Court hearing pressing forward this week, we could hear more on that soon.