Bloomberg News

Cargolux to Take Boeing 747 After Resolving Fuel-Burn Issue

October 01, 2011

(Adds Cargolux comment in the fourth paragraph.)

Oct. 1 (Bloomberg) -- Boeing Co.’s new 747-8 jumbo jet will enter service in mid-October, a month later than planned, after initial customer Cargolux International SA resolved a fuel-burn dispute with engine-maker General Electric Co.

Cargolux rejected delivery of the first two 747-8 freighters because of a 2.7 percent shortfall in fuel-efficiency guarantees, said Akbar Al-Baker, chief executive officer of Cargolux investor Qatar Airways Ltd. The carrier made the decision three days before it was to accept the planes, during a Sept. 16 board meeting that was Al-Baker’s first after Qatar Airways took a 35 percent stake in June.

“Unfortunately, the management of Cargolux did not take the action they should have taken during the process of the aircraft acceptance,” Al-Baker said yesterday as he prepared to pick up a 777 at Boeing’s wide-body jet plant in Everett, Washington. “As we sit on the board of Cargolux, we have full right to object if we find something is not fair as far as Cargolux is concerned.”

The GEnx engine was underperforming, “and this issue was very strongly raised and was appreciated by the board,” he said. The problem has been resolved with GE, and the delivery will now occur around Oct. 12, pending another board meeting on Oct. 7, Al-Baker said. Luxembourg-based Cargolux confirmed the “tentative agreement” in a statement today.

GE Engine

“We will do delivery planning once the Cargolux board has approved” the plane’s handover, said Jim Proulx, a spokesman for Boeing, which had to cancel three days’ worth of events and ceremonies planned last month to mark the plane’s intended entry into service. He declined to comment on the jet’s performance guarantees or on contractual agreements with customers.

Al-Baker declined to comment on compensation or say how the issue was resolved. A GE Aviation spokeswoman, Deborah Case, declined to comment on Al-Baker’s remarks.

GE Aviation reiterated in August that it was developing a performance improvement package, first discussed in April, for the GEnx-2B engine used on the 747-8. The PIP, as it is known, should be ready in mid to late 2013, Case said.

Cargolux’s delivery deferral was followed the next week by Atlas Air Worldwide Holdings Inc.’s decision to reject the first three of 12 747-8s it had ordered, citing “lengthy delays and performance considerations.” Boeing has said the planes, two years behind schedule, won’t initially meet performance guarantees, though they will be improved.

Cargolux Board

“Even these first airplanes we deliver will have double- digit gains in fuel efficiency” over the 747-400, Proulx said.

Boeing now has orders for 75 of the $319.3 million freighters and for 36 of the 747-8 Intercontinental, the $317.5 million passenger version that’s still being tested and is set for its first delivery by year-end. Airlines typically get discounts off the list prices.

Qatar Air has three representatives on Cargolux’s board, including Al-Baker, who has criticized Boeing for delays on the 787s he has ordered.

The matters are “absolutely unrelated,” he said yesterday. “I cannot use Cargolux to get additional concessions from Boeing.”

Qatar now expects its first 787 delivery by mid-2012, not February as planned, Al-Baker said. The delay is because of certification needed for special equipment Qatar wants to add rather than the plane itself, he said.

‘A Few Hiccups’

Al-Baker in 2009 threatened to cancel his order of the plastic-composite 787 if there were any further setbacks, saying the Chicago-based planemaker was being run by “bean counters.” The 787 was delivered to its first customer this week, after seven delays put it more than three years behind schedule.

Al-Baker yesterday described his relationship with Boeing as strong, “despite a few hiccups along the way.” The 777 Qatar Air picked up yesterday is the 14-year-old carrier’s 100th Boeing plane.

“We have absolute confidence in Boeing and its fine aircraft, and of course we will be interested once we see what Boeing will do” in tweaking the 777 to better compete against Airbus SAS’s A350-1000, he said. The planemaker has said it may revamp the 777’s wings and engines and use more lighter-weight composites to improve fuel efficiency.

Qatar is still evaluating its fleet requirements for smaller aircraft, he said, adding that he wanted to wait until the Dubai Air Show next month before making an announcement regarding Airbus’s A320neo.

Al-Baker said the airline is “too busy with our other aircraft programs” to decide whether to order Bombardier Inc.’s new CSeries model. A planned order for that model at the Farnborough Air Show in 2010 was shelved after Qatar Air said it hadn’t been able to reach terms with engine supplier Pratt & Whitney.

“We hope we will reinvigorate our interest once we have finished the current programs we have on hand,” Al-Baker said yesterday.

--With assistance from Rachel Layne in Boston. Editors: James Langford, Sylvia Wier

To contact the reporter on this story: Susanna Ray in Everett, Washington, at sray7@bloomberg.net

To contact the editor responsible for this story: James Langford at jlangford2@bloomberg.net


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