Al-Baker Strikes Again

By Tim Raetzloff | Sep 22, 2011

On Friday September 16, 2011, Luxembourg-based Cargolux declined to accept two Boeing 747-8F cargo airplanes that had been scheduled for delivery on Sept. 19 and Sept. 21.

Airlines defer or cancel deliveries all the time, so this ordinarily wouldn’t be a big deal in the scheme of things.

If Cargolux really doesn’t want the aircraft there are probably other carriers who do; UPS has already been mentioned in industry speculation.

Boeing will probably have these aircraft sold again inside of 6 months.

There will be a small, temporary, blip in earnings that will ultimately be evened out. 

What makes this situation unusual is that the 747-8F is a brand new model and Cargolux was to have been the prestigious launch customer.

Boeing had scheduled three days of festivities to mark the event. Those events have been canceled.

This is the business equivalent of publicly spitting in Boeing’s face. What happened? 

Do you remember Akbar Al-Baker? I have written about him more than once in the last year.

Al-Baker is the CEO of Qatar Airways.

In November he proclaimed that the 787 (not 747) program had completely failed and he wanted to cancel his order for 30 planes.

In December he gave a speech in Qatar that said (in Arabic) “I am canceling my order for Boeing 787s”, or said (in English) “I am reaffirming my order for Boeing 787s”. Personally I believed the Arabic version. 

Unfortunately for Boeing, Qatar Airways, led by Mr Al-Baker recently purchased 35 percent of Cargolux and effectively gained control of the company. 

According to aircraft industry analysts Scott Hamilton and Jon Ostrower, there has been immediate turmoil at Cargolux.

The chairman of the board is out and so is the long-time chief financial officer.

All of this happened at a board meeting on September 16.

At that same meeting the reconstituted board demanded greater compensation from Boeing than what had been negotiated for the two year delay in delivery and deficit in performance of the 747-8F from what had been promised. 

Aircraft industry insiders, and probably people at Boeing, regard Mr Al-Baker as a loose cannon.

The assessment may be fair, but he buys a lot of airplanes and he probably isn’t any worse than a couple of other senior airline executives.

What may be going on is that Al-Baker senses the fragile situation at Boeing caused by the disastrous 787 program and he is going to hold out for the maximum compensation to Cargolux for its 747s and to Qatar Airways for its 787 purchase.

The hazard to Boeing is that every other airline is going to want comparable compensation. Boeing can’t afford that.  

Boeing has often been the aggressor in negotiations – with its suppliers, with its customers, with its employees, and most recently with the NLRB.

Akbar Al-Baker has turned the tables. 


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