UPS cancels A380 freighter in new blow for Airbus

(Adds UPS spokesman, industrial logic)

PARIS/BOSTON, March 2 (Reuters) - Troubled Airbus suffered its second blow in a week on Friday when the last customer for the freight version of its A380 superjumbo dropped the aircraft maker, days after it announced it was cutting 10,000 jobs.

United Parcel Service Inc. UPS.N said it planned to cancel an order for 10 Airbus A380 freighters, worth up to $3 billion at list prices, joining rival FedEx Corp. FDX.N, which cancelled an identical order last year.

The U.S. express companies were the sole industrial buyers of the superfreighter, which Airbus had hoped would break the Boeing 747’s dominance of inter-continental airborne cargo.

But like other buyers, they were angered by delays that pushed the ambitious A380 project back two years.

The cancellaion was unexpected after UPS reached agreement with Airbus last week to delay taking deliveries of its 10 aircraft beyond 2010, while it reviewed its purchases.

But all that changed when EADS and Airbus confirmed a news leak that Airbus would temporarily stop work on the cargo version of the world’s largest airliner amid a major restructuring.

UPS said it had now lost confidence that Airbus, a unit of EADS EAD.PA, could fill its orders in a timely manner.

“UPS had intended to complete an internal study of whether it could wait until 2012 for the aircraft, but now understands Airbus is diverting employees from the A380 freighter program to work on the passenger version of the plane,” it said.

“Based on our previous discussions, we had felt that 2012 was a reasonable estimate of when Airbus could supply this plane,” UPS president David Abney said in a statement. “We no longer are confident that Airbus can adhere to that schedule.”

UPS had an option to cancel by the end of the year, but was not expected to make a final decision so quickly.

Airbus said it respected the decision and remained confident of delivering the first passenger plane in October.

EADS shares fell 4 percent to 23.62 euros on Friday.

Airbus supporters believe the decision to pull workers off the cargo model was normal given it now has 5 years to develop and deliver the first A380 freighter.

But Airbus will be anxious to prevent any suspicion that its restructuring plans have weakened its reliability from spreading to other A380 customers, or to its unions, which are looking for reasons to block the shake-up.

UPS spokesman Normal Black said UPS would not immediately place an order with another supplier. Boeing Co. BA.N is Airbus's only competitor for large aircraft.


The latest bad news ended a dire week for Airbus, which warned on Wednesday that its survival was at stake as it cut jobs and put plants up for sale, triggering a union backlash.

The leader of one of France’s biggest unions said he feared there would be forced lay-offs in the restructuring plan, despite assurances from Airbus and the French government.

“I hear the (French) prime minister say that we have assurances there will be no forced lay-offs,” CGT secretary- general Bernard Thibault told France 2 television. “What is certain ... is that, at the contracting firms, the consequence will be forced lay-offs.

“We know what the next stage is -- outsourcing, contracting and then moving work to low-cost countries,” Thibault added.

Unions have said they would make job cuts and 1,500 lay- offs at French-American telecommunications equipment company Alcatel Lucent ALU.N an issue in presidential elections in April and May.

Socialist candidate Segolene Royal was due to meet union representatives late on Friday and conservative front-runner Nicolas Sarkozy scheduled a trip to Airbus’s French base in Toulouse on Monday.

Airbus says it could reconsider whether to impose redundancies if its fortunes do not improve in 12-18 months.

“We are at the start of the process and it has been designed in a way to leave room for dialogue,” said the head of Airbus in Germany, Gerhard Puttfarcken.

On a more positive note, the German government did not expect delays to deliveries of the future A400M military airlifter.

The first 60 A400M aircraft ordered by the German army are due in 2010. The aircraft is seen as an integral part of European Union plans to develop the bloc’s military capacity on global scale.

(Additional reporting by Marcel Michelson, Jean-Michel Belot, Sabine Blumel, Paule Bonjean, Kerstin Doerr, Jason Neely)

(((Writing by Tim Hepher/Marcel Michelson; +331 4949 5452; editing by Andre Grenon)) Keywords: AIRBUS/

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