Norwegian Air Expects Boeing Dispute To Be Decided In US Court; Its Cancellations Spark Airbus Jet Order Deficit
Norwegian Air expects its dispute with Boeing over the cancellation of orders for 97 aircraft to be decided in US legal proceedings and not as part of an Irish restructuring process, a lawyer for the airline has said.
Norwegian was given protection from bankruptcy in both Norway and Ireland, where most of its assets are registered, late last year and is aiming to emerge from the process in April with fewer aircraft and less debt.
On Friday March 5, the airline indicated to the Irish court that it was seeking to repudiate three aircraft sales contracts with Boeing.
But a lawyer for Norwegian later made clear to the court that any repudiation will not impact or prejudge ongoing legal proceedings linked to the contracts in the United States.
Last year, Norwegian unilaterally terminated its remaining orders with Boeing for 97 aircraft and sought compensation for the grounding of Boeing 737 MAX jets and technical problems with 787 Dreamliners.
"Clearly it is not proper for this court to interfere in those proceedings or to prejudge them in any way," Declan Murphy, representing Norwegian, told the court.
"We are not asking this court to exercise an exorbitant jurisdiction to interfere with those proceedings," he said.
Judge Michael Quinn said that he understood the repudiation applications were being brought "out of an abundance of caution" and "without prejudice to the US litigation."
Boeing has declined to comment on the legal process, but continues to show the Norwegian orders on its published order book.
Industry sources say that this indicates that Boeing continues to assert its right in the contracts, partly to deter other airlines from walking away from deals amid the coronavirus crisis.
Norwegian Cancellations Spark Airbus Jet Order Deficit
The disappearance of billions of dollars' worth of orders from Norwegian Air has left Europe's Airbus with more cancellations than orders so far this year, company data has shown.
Last month, Norwegian obtained the Irish court's agreement to cancel all 88 aircraft on order from Airbus as it staves off collapse.
The airline's name was dropped from a monthly update of orders issued by Airbus on February 5, leaving the European firm with a negative total of 81 orders for January and February.
Reuters first reported hefty upcoming order cancellations on February 23, on the eve of a court hearing at which agreement over the terms of the cancellation was announced.
The cancellation marks a turning point in the jet industry, nine years after Airbus and Boeing waged an epic contest for the young airline's business.
After losing the main order battle to Boeing, Airbus struck a last-ditch deal to sell 100 of its own planes to help the airline set up its own leasing operation at a time of booming travel demand, people familiar with the negotiations said.
The deal was widely seen as a high point in a bruising market-share war between plane giants that weighed on prices and stoked trade tensions as budget carriers took advantage of cheap interest rates to scoop up the latest fuel-saving airplanes.
But the gamble did not pay off and Norwegian's plans to diversify into financing, as well as losses at its core airline, left a hole in the production plans of both planemakers.
After growing rapidly to become Europe's third-largest low-cost airline and the biggest foreign carrier serving New York and other major US cities, Norwegian sought bankruptcy protection last November with debts over $7 billion.
Airbus said on Febuary 5 that it had sold 10 A320neos to an unidentified customer. That reassigns part of the yet-to-be-produced fleet ordered by Norwegian, industry sources said.
Financiers say that both jet makers are expected to keep Norwegian's deposits.
Airbus February Deliveries And Boeing January Deliveries
Airbus, meanwhile, said that it had delivered 32 jets in February, bringing the total for the year to 53. Boeing delivered 26 jets in January, the latest period for which data is available.