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Exclusive-Inside the hangar at the centre of the $1 billion Airbus-Qatar jet dispute

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6/6

© Reuters. A view shows the Qatar Airways’ airbus A350 parked outside Qatar Airways maintenance hangar in Doha, Qatar, June 20, 2022. REUTERS/Imad Creidi

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By Alexander Cornwell and Tim Hepher

DOHA (Reuters) – Two high-tech Airbus A350 jets sit idle with their windows taped and engines covered in a floodlit hangar in the Gulf, hobbled by an international legal dispute between European industrial giant Airbus and Qatar’s national carrier.

From a distance, the planes might seem like any other long-haul jetliners crowding the busy Doha hub. But a rare on-site visit by Reuters journalists showed what appeared to be evidence of damage to the surface of wingtips, tail and hull.

The two planes, worth around $300 million combined according to analysts, are among 23 grounded A350s at the centre of a $1 billion London court battle over whether the damage represents a potential safety risk, something Airbus strongly denies.

The planes were grounded by Qatar’s regulator after premature paint erosion exposed damage to a metallic sub-layer that provides protection to the fuselage from lightning strikes.

Other airlines continue to fly the A350 after European regulators declared the aircraft safe.

Reuters journalists were granted rare first-hand access after requesting the visit on the sidelines of an airline industry meeting in the Qatari capital, Doha, this week.

Sporadic surface flaws on the A350s viewed by Reuters included an elongated stretch of blistered and cracked or missing paint along the roof or crown of the jets.

In some areas, the protective lightning mesh that sits between the hull and the paint appeared exposed and corroded.

In other parts it appeared to be missing, leaving areas of the composite hull of the aircraft exposed to the environments.

The paint on the tail of one of the A350s emblazoned with Qatar Airways’ maroon Arabian Oryx emblem was pockmarked by cracked and missing paint that exposed the layer beneath.

Airbus and Qatar Airways had no immediate comment on Reuters’ findings.

EROSION

Airbus acknowledges quality flaws to the A350s, but denies they pose any safety risk because of the amount of backup systems and tolerance built into design.

Qatar Airways has argued this can’t be known until further analysis, and is refusing to take more of the planes.

Airbus has argued that some paint erosion is a feature of the carbon-composite technology used to build all modern long-haul jets – a necessary trade-off for weight savings.

It says the cracks are caused by the way paint, anti-lightning material called ECF and the composite structure interact. The tail does not all contain the ECF foil, prompting a technical debate over whether the damage there is caused by the same problem.

Amid hundreds of pages of conflicting technical court filings presented by both sides, Reuters has not been able to verify independently the cause of the damage.

Qatar Airways’ Chief Executive Akbar Al Baker and Airbus Chief Executive Guillaume Faury had the opportunity to mingle during the three-day industry gathering in Qatar this week.

Asked whether the relationship had improved after the event, which included the two men seated next to each other over dinner, Al Baker suggested the two sides remain far apart.

“On a personal level I am friends with everyone but when it comes to an issue with my company, then it’s a different story. If things were settled, we would not be still waiting for a trial to happen next year,” he told a news conference.

Faury said this week he was in discussion with the airline and reported “progress in the sense that we are communicating”.

One of the airline industry’s most senior officials voiced concerns after the Doha meeting that the dispute could have a toxic effect on contractual ties across the industry.

“It would be much better if we were dealing with friends that than dealing in the courts,” Willie Walsh, director general of the International Air Transport Association, told reporters.

Economy

Futures rise as easing China COVID curbs lift travel, leisure stocks

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© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 22, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal

(Reuters) – Travel and leisure shares propped up U.S. stock index futures after China relaxed some COVID-19 quarantine requirements for international travelers, raising hopes of a revival in global growth.

Airlines, cruises, casinos and hotels were among the gainers in premarket trading after China’s slashing of the quarantine time for inbound travelers by half boosted hopes of a big jump in international travel and spending.

Shares of Walt Disney (NYSE:DIS) Inc rose 2.5% to top the list of gainers on the Dow Jones Industrial Average, after the company’s Shanghai Disney Resort said it would reopen the Disneyland theme park on June 30 after being shut for more than three months.

Spirit Airlines (NYSE:SAVE) and American Airlines (NASDAQ:AAL) Group Inc were the biggest gainers in the sector, rising 4% and 2% respectively.

Melco Resorts jumped 10% and led the rise in the casino sector, closely followed by Wynn Resorts (NASDAQ:WYNN), MGM Resorts (NYSE:MGM) International.

Wall Street’s main indexes started the week on soft footing after worries of surging inflation and an aggressive Federal Reserve dominated sentiment amid few market moving catalysts till the start of earnings season in two weeks.

Investors are now looking at data to determine whether the economy can withstand large interest rate hikes by the U.S. central bank to stamp out inflation.

A survey from the Conference Board is expected to show its consumer confidence index slipped to a reading of 100.4 in June, from 106.4 in May, at 10 a.m. ET.

The S&P 500 and the Nasdaq are set to post losses in June and are on course to log two straight quarterly declines for the first time since 2015.

At 6:49 a.m. ET, Dow e-minis were up 175 points, or 0.56%, S&P 500 e-minis were up 20 points, or 0.51%, and Nasdaq 100 e-minis were up 52.25 points, or 0.43%.

Nike Inc (NYSE:NKE) shed 2.8% as it forecast first-quarter revenue below estimates on expectations of more discounts and pandemic-related disruptions in China, its most profitable market.

Occidental Petroleum Corp (NYSE:OXY) climbed 3.1% after top investor Warren Buffett raised stake in the shale producer.

China ADRs also rose on Beijing easing its COVID curbs, with e-commerce firms Alibaba (NYSE:BABA).com, JD (NASDAQ:JD).com and Pinduoduo (NASDAQ:PDD) up between 1.2% and 1.4%

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Economy

Euro below $1.06 as Lagarde keeps July policy options open

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© Reuters. A shopper pays with a ten Euro bank note at a local market in Nice, France, June 7, 2022. REUTERS/Eric Gaillard

By Saikat Chatterjee

LONDON (Reuters) – The Aussie and the Canadian dollar climbed on Tuesday on firmer oil prices while the euro held below $1.06 as European Central Bank (ECB) President Christine Lagarde offered no fresh insight on the central bank’s policy outlook.

The ECB is widely expected to follow its global peers by raising interest rates in July to check soaring inflation though economists are divided on the magnitude of the rate hike to protect a struggling economic recovery due to high oil prices.

Oil prices are up 10% in barely a week on supply constraint concerns with Brent crude holding above $117, pushing the Canadian dollar and the Australian dollar up 0.3% and 0.4% respectively. [O/R]

“Oil is helping the Norwegian crown and the Canadian dollar to outperform and the euro is again running into resistance at the 1.06 level,” said Kenneth Broux, an FX strategist at Societe Generale (OTC:SCGLY) in London.

The euro held below $1.06 after the ECB’s Lagarde said the central bank would move gradually but with the option to act decisively on any deterioration in medium-term inflation, especially if there were signs of a de-anchoring of inflation expectations.

Money markets are pricing in about 238 basis points (bps) of cumulative rate hikes by mid-2023 compared to around 280 bps two weeks ago.

Broader currency market moves were contained in a big week for markets in economic data terms. German inflation figures are due on Wednesday, French data on Thursday and euro zone numbers on Friday.

At the other end of the dial, higher oil prices caused the partially convertible Indian rupee to open at a record low, and fall further to 78.67 per dollar.

The U.S. dollar index struck a two-decade high of 105.79 this month and was last steady at 103.93.

Elsewhere, the offshore Chinese yuan moved higher after China reduced COVID quarantine for international travellers.

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Economy

China’s economy recovering but foundation not solid, premier says

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© Reuters. FILE PHOTO: Chinese Premier Li Keqiang is seen on a screen as he attends a news conference via video link after the closing session of the National People’s Congress (NPC) in Beijing, China March 11, 2022. REUTERS/Ryan Woo

BEIJING (Reuters) -China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.

China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.

“Currently, the implementation of the policy package to stabilise the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.

“The task of stabilising employment remains arduous.”

China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.

China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.

In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.

Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.

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