Fabrice Bregier wears the smile of a satisfied man. And no wonder – the boss of one of the world’s two aircraft mega-manufacturers has just secured a series of deals worth a whopping $40bn. Then again, Airbus SAS doesn’t have a reputation for doing things by halves. It has built the world’s biggest plane, posted revenues worth $76bn in 2012 (up by 15 percent on the year before), and employs over 63,000 highly skilled workers.
So is the chief executive planning to rest on his laurels? You could be forgiven for making that assumption, given Airbus’ bumper deals with Emirates (50 A380s at a list value of $23bn), Etihad (87 aircraft, including 50 A350s), and Qatar Airways (13 jets at around $2.8bn). But Bregier says the best is yet to come – and has the stats to back up his claim. Airbus predicts the region’s need for planes will soar 7 percent over the next 20 years, while the rest of the world will lag behind at an average of less than 4.7 percent.
“When the average will be 4.7 percent that means that every 15 years the traffic doubles,” Bregier tells Arabian Business. “So in the Middle East it will grow much faster and this is supported by what Emirates, Etihad and Qatar Airways, for instance, enjoy now, which is growth between 15 percent to more than 20 percent year-on-year. So it means that this region will grow faster than even the most dynamic parts of the world, like Asia.”
It’s a reality not lost on the man who represents the cream of European engineering talent. Middle Eastern carriers ordered 758 Airbus aircraft between 2003 and 2012 and they represent 8 percent of the company’s backlog. Those figures are smaller than regions such as Asia, America and Europe — but the value is far greater.
“The numbers are smaller but the value is higher because traditionally there is a big proportion of long-range aircraft so of course the value of an A380 is much bigger than the value of an A320; it’s about five times more expensive,” Bregier says.
Last month’s Dubai Airshow, a biannual event, has gained must-attend status for anyone in the airline industry. Bregier, who is based in France, says he now ranks it second behind the Paris Airshow, and that’s only because the latter is the deal-breaking hub for most global airlines, including those in North America and Asia.
This year was Airbus’ biggest ever in Dubai, with 142 firm orders worth $40.4bn and a further 26 options totalling $3.6bn. “This region is booming and so they have a lot of ambition, they have a lot of growth, so they need a lot of aeroplanes, so yes, it was crazy when you put all the numbers together, absolutely,” Bregier says.
“We’ve always been very present in the region, of course. If we take Etihad, they started with Airbus aircraft ten years ago. [With] Emirates we also have a long-lasting relationship. Qatar Airways, for instance, was the launch customer of the A350, [while] Emirates is by far the biggest customer of the A380, with 140 aircraft ordered. Etihad has also become a very big customer of the A350 with [the Airshow’s] order of an additional 50 aircraft, so we know them very well. We are very close to them [and] we support their operations.”
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The additional orders also will lead to more aircraft manufacturing in the region, particularly in the UAE through Abu Dhabi’s investment vehicle Mubadala’s aerospace production business Strata. The company, based in Al Ain, signed $5bn worth of new contracts with both Airbus and Boeing during the Dubai Airshow.
Airbus has been working with firm since its inception. “Strata is quite impressive because we started together in 2008 or 2009 and they have now achieved a level of performance which allows them to look for bigger packages, bigger parts of aerostructure,” Bregier says. “We’re continuously talking to them.”
Airbus’ wide-bodied aircraft are particularly popular in the region as the Gulf airlines strive to carry as many passengers as possible across long distances — a key plank of the region’s network strategy.
Without Emirates, Airbus would be looking at a far thinner order book. The Dubai airline has easily become one of the company’s most important customers through its enthusiasm for the double-decker A380. Emirates is the only airline in the world with a purpose-built A380 terminal and it accounts for about half of the jet’s orders worldwide.
Bregier even considers Emirates’ recent order boost his most significant deal during the Dubai Airshow. While American aircraft manufacturer Boeing outdid Airbus on the total value of planes ordered by two-to-one — Boeing took $101.5bn worth of orders including for 259 orders and commitments for its new 777X — the Airbus boss argues his planes will be delivered sooner.
“The biggest decision for me is Emirates taking another 50 A380s. It confirms that their growth model is based around this A380 and when you compare that with Boeing, Boeing has announced big orders or intentions to order a new product which doesn’t exist and they claim will enter service in 2020,” he says.
“I prefer to have orders I can deliver in the coming years than orders I will deliver after 2020.”
Emirates is the superjumbo’s saviour, as it is the only airline to make any A380 orders this year after cracks were found in the wing structure following an incident with a plane within Australian airline Qantas’ fleet. The discovery, a decade after the plane was initially designed, disrupted production schedules and cost Airbus’ parent company EADS significantly, although both firms refuse to publicly disclose the compensation bill. However, the CEO is keen to draw a line under the issue.
“It’s normal practice in the business that when you have this kind of difficulties [you pay compensation],” Bregier says. “This is behind us.”
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The wing-cracks episode followed the grounding of all A380s built with Rolls-Royce engines after the Qantas jet suffered engine failure during a flight in November 2010. The jet was finally given some relief in April when the European Aviation Safety Agency formally approved repairs designed to eliminate potential wing cracks.
Emirates has since been the only airline to prove its dedication to the jet by ordering more. But while Bregier admits the order book has otherwise frozen, he says he’s not concerned about the future of the 525-seat jumbo. It’s just a little too big for some airlines at the moment, he says.
“What counts is whether we have orders or not,” he insists. “It is clear that the market for this very large aircraft is soft right now because many airlines don’t enjoy the growth of Emirates or Etihad or Qatar or other airlines in the region and so they tend to be a little bit shy when it comes to investing in big aircraft.
“I think that in the long run the A380 will be an aircraft of choice for everybody because the trend everywhere is to take aircraft which are slightly bigger and the reason is simple, it’s that the traffic doubles every 15 years and you cannot imagine that the number of airports will double every 15 years. At least in very constrained areas like Asia, Europe [and] America, it’s not possible.
“Even here, if you ask the airlines they will tell you that the international airport which is being built, which is incredible, will also be constrained; this is why we need more A380s. So the trend is there and even if the market is soft right now I’m sure in the coming years that we will enjoy big success with the A380.
“Having said that, with this additional order we have probably got four years’ backlog, with around 25-30 aircraft to be delivered per year, which is excellent visibility, and you will see that we will get additional orders from other customers along the way, probably in the coming months.”
So while both Airbus and Boeing are redesigning and updating their present stocks (Boeing launched its larger version of the 777 — the 777X-8 and 777X-9 — at the Dubai Airshow with orders from Emirates, Etihad and Qatar Airways) it is unlikely the A380 will get a sister model any time soon. Nor is Airbus working on an even larger aircraft, despite Emirates president Tim Clark suggesting the idea.
“No, I think the size of the aircraft is close enough,” Bregier says when asked if he’ll go bigger. “At least for the next five to ten years, of course a stretch technically is always possible but I don’t think there is a market requirement for that.”
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Airbus’ next big launch is the introduction of the A350, with the first due to be delivered to Qatar Airways during the second half of 2014. Two prototypes have flown almost 600 hours with what Bregier says were “satisfactory” results. “It makes me confident that within, let’s say a year, we will be able to enter service to deliver the aircraft to Qatar Airways and to ramp up production,” he says.
The A350’s biggest challenger, Boeing’s 787 Dreamliner, had a hugely delayed launch, and then suffered from a series of problems that led to the worldwide fleet being grounded for four months.
When there’s only two big players in the game, there’s endless rivalry and the most recent grudge match has been over seat width. Airbus initiated the argument, issuing a press release calling for the standard seat width of long-haul aircraft to be increased to 18 inches, from its 1950s standard of 17 inches. The firm follows its own suggestion on all its aircraft but Boeing has stuck to 17 inches, which Airbus publicly criticised as being “substandard”.
It could be dismissed as a publicity stunt — one competitor’s method of making sure the world knows that its seats are wider (and presumably more comfortable) than its rival’s. But Airbus’ director of passenger comfort, Kevin Keniston, said a day before the Dubai Airshow opened that it was a matter of ensuring the future of long haul comfort was not “in jeopardy”.
“Worryingly, we see that standard being maintained for future Boeing products and basically what we are saying now is that is substandard comfort for economy passengers,” Keniston said. “Some of those aircraft are going to be delivered in the 2020s. If those aircraft are delivered with a substandard comfort standard you potentially are in a situation where in 2040 and beyond we will still be flying in a 17-inch standard.”
Airbus also is researching the possibility of increasing the number of seats per row — on the back of interest from Emirates. Clark said during the Dubai Airshow that airline passengers would almost certainly be seated five-across in the centre aisle of future aircraft, confirming he was seriously interested in 11-seat aisles. It was not “such a bad thing” he said, revealing Airbus’ involvement in the research.
“Can we fit 11 [seats] in [one aisle]? Yes… there’s all sorts of smokes and mirrors, but it’ll probably come,” he said.
Bregier agrees it’s a design he’s interested in. “Yeah, yeah, sure,” he says. “It’s too early to say yes, but I think there are ways to make it work with the appropriate level of comfort, absolutely.”
It’s a move that may not be popular with thousands of passengers, but if anyone can make the concept work, it’s likely to be Airbus.
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