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Airbus A380 Death Watch Begins

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  • Airbus A380 Death Watch Begins

    Last week saw an astonishing moment of frankness from the A380’s biggest customer. Tim Clark, President of Emirates, told Bloomberg that not only had discussions on a new re-engined A380neo version of Airbus’s 525-seat jet “kind of lapsed,” but that his “main concern is that they stop producing the plane.”

    This was the first intimation that sudden death is a possibility for the troubled super jumbo. And the numbers highlight this risk.

    It has been years since there was any significant commercial demand for the A380, aside from Emirates steadily growing its position to 142 orders. In April, Airbus executives admitted that output in 2017 could be as low as 20 aircraft. This is far below the 30 aircraft needed for annual recurring breakeven (this excludes program nonrecurring costs; there is no way to even begin to recover the $25-30 billion or so invested in the development of this aircraft).



    How long can this keep up? Emirates has just reported its first annual sales decline in a decade. Its load factor dropped 3.1 points to 76.5%. Its yield fell 10%. Ramping up capacity hardly seems like the right move now.

    Meanwhile, Emirates has ordered 150 Boeing BA +3.55% 777-9Xs, with deliveries starting in 2020. This jet has the same range as the A380, more belly cargo, just 25% fewer seats (the discounted ones, of course) and has two fewer engines. They’re more modern engines, too.

    Thus, the question becomes, how long is Airbus willing to lose money, particularly when there’s no doubt about the ultimate outcome? Assuming that next year’s rate of 20 isn’t too ruinous, and assuming that Emirates can keep taking 14 per year (despite declining traffic growth rates and falling load factors), that means Airbus can sustain about three more years of production (14 Emirates planes per year, plus six for other customers). But then again, since Airbus is losing money on all of these planes, Tim Clark is correct to worry that Airbus could simply end the program at any time

    Demand for the the world's largest passenger plane has vanished, and core customer Emirates is unlikely to be able to keep the program afloat on its own much longer.


    Seems like the "jumbo" types are becoming more of a niche aircraft, or is the author blowing smoke?

    I say bring on the Boeing 797 BWB with 1,000 seats. (Yes, it's sarcasm.)

  • #2
    On the used-A380 market we have Willie Walsh's statement;

    https://www.flightglobal.com/news/ar...ngus-w-424428/
    As well as possibly growing BA's London Heathrow based fleet, "where it can work for us, because of the group structure we have, we could see a case for a couple of A380s in Iberia", says Walsh. "You might even make a case for an A380 in Aer Lingus."
    That then puts the following aircraft in play (matching his Rolls Royce requirement).

    - SQ with 5 being returned to the lessors shortly;

    http://www.bloomberg.com/news/articl...ngapore-planes
    Singapore Air must reach a decision by next September, though a clause requiring it to refurbish the jets at a total cost of as much as $125 million provides a strong incentive to extend 10-year leases that expire from 2017, according to Dr. Peters Group, which owns four of the double-deckers.
    For SQ, the moment is opportune; take on some of the newest A380s (which will be some of the most efficient yet) starting in 2018 (5 on order, 'coincidentally') and at that time, upgrade their product on the A380, or, keep these 5, and reconfigure, or both. In this case, with as much as SQ has coming online (with 64 A350s, 30 787-10s, and 5 A380s {99} coming online versus 23 777-200s and 28 A330s {51} heading out) there is a significant capacity increase planned. Do older A380s still have a place?

    If the lessor can offer this refurb-contract to SQ, I can imagine they would willingly offer it to IAG (who is going to have to do a refit anyway,) if they lease terms were long enough.

    - and/or MH with 6 currently in fleet.

    MH's current fleet challenges (having retired the 777s completely, and now relying solely on the A330s and A380s for their long-haul routes). 6 A350s are expected in future, and would be (as stated by the airline) the necessary capacity decrease/flexibility they need to return to profitability. Conceivably, IAG could offer some of their A350 slots to MH - thus allowing the transition (essentially swapping the A380s to IAG, and A350s to MH). Delaying the A350s (by picking up MH's then future slots) or just selling them completely might serve IAG well. The A350s could, also, just as easily go to IB, or even to EI (if needed).

    So, we could see, hypothetically, more A380s at IAG - with the possibility, of some of them being operated by EI, or IB.

    Good news for IAG, as they get the planes cheaply.
    Good news of lessors, as the aircraft are placed at a new home.
    Good news for Airbus as used A380s can no longer be a burden to new A380 pricing.
    Hypothetically.

    A player that I omitted was QF, with 12 current A380s (and the almost indefinitely postponed 8 on order).

    QF has recently, publically entered the A350 vs 777-8/9 battle with the following statement;
    http://www.ausbt.com.au/qantas-flags...80-replacement

    “I think a fleet of 12 (sic A380s) works well for us and we will hold onto those planes through their economic life,” Qantas International chief executive Gareth Evans said.

    “But when you then look at what point those sorts of aircraft will be coming up for replacement, new technology aeroplanes will be in place by then — 787-9s, A350s, the 777-8X and 9X,” Evans told The Australian overnight at the annual International Air Transport Association meeting in Miami, Florida.
    Which means either keep these 12, or replace 8 with the 8 on order - and potentially 8 more for BA. He also convert the 8 outstanding A380s in A350s.

    All in all, BA has 11 opting coming online in 2018, and potentially 8 more to lock up for the future.
    Whatever is necessary, is never unwise.

    Comment


    • #3
      I don't remotely see Aer Lingus as an A380 operator. I think that was a bit of Irish humour from that comedian Mr Walsh. Aer Lingus struggled to fill 747s 20 to 40 years ago, and now their long haul routes are more point-to-point. They often struggle to fill their A330s.

      Iberia is certainly a more likely A380 user, but realistically the latest 777s and A350s have the A380's range and close to the same payload on half the number of engines.

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