Does the future of the A380 depend on Emirates?

Without fresh orders from the Gulf, Airbus will phase out production of world's largest jetliner according to reports
The future of the world’s largest jetliner, the A380, is in the balance as Airbus is reportedly looking to phase out the programme unless more orders are placed by Dubai carrier Emirates.
By Shayan Shakeel
Sun 31 Dec 2017 02:22 PM

The future of the world’s largest jetliner, the A380, is in the balance as Airbus is reportedly looking to phase out the programme unless more orders are placed by Dubai carrier Emirates.

It was widely expected that a new order for 36 superjumbos worth $16 billion (AED58.7 billion) would be signed at November’s Dubai Airshow. But with no deal completed by the end of 2017, the loss-making venture is now facing gradual closure after just 10 years in production, according to sources familiar with the company.

Emirates has been a champion of the wide-bodied, four-engined liner since its launch and has taken delivery of 100 of the total 142 planes it has ordered. Airbus, though, needs to add orders to the current backlog, the majority of which are destined for Emirates, in order to justify keeping the programme alive.

Although Emirates declined to comment, according to comments made in November by Fabrice Bregier, Airbus’s outgoing chief operating officer, a fresh order from the Dubai carrier would ensure the company would commit to the A380 for another ten years at least.

At its current production rate, with no new deals, Airbus will have delivered all of its order backlog by 2019.

Bregier said the manufacturer was considering scaling back A380 production down to a possible six per year to meet Emirates’ demands.

“Lowering the production rate to six per year reflects the desire to buy time in the hope of being able to boost sales over the next decade, when global mega-cities and their airport hubs will reach congestion points,” aviation analyst, and managing partner of 1BlueHorizon Group, Leonard Favre, told Arabian Business in an interview.

However, that would mean the A380, which was developed at a cost of 11 billion euros - Bloomberg estimates the programme cost even more at 25 billion euro, although Airbus disputes the figure - would be unable breakeven for at least a portion of the time it remained in production.

Airlines are also realising bigger isn’t necessarily better when it comes to aircraft. “Across the industry, demand has cooled for the double-decker wide-bodied jet the same way it did for the Boeing B747-8 program. Carriers are focused on planes that are smaller, cheaper, and that can be operated with better economics thanks to two engines,” said Favre.

“As fuel costs, rise, operating a four-engine superjumbo aircraft like the A380 becomes extremely unattractive,” he added.

A spokesperson for Airbus told Arabian Business any reports about abandoning the A380 programme are speculation and “cannot be confirmed.”

“Adjusting production rates are nothing unusual and do not suggest the end of the A380 programme. It’s something we are clearly moving forward with, and I can tell you discussions with airlines are ongoing,” the spokesperson added.

“That Airbus has failed thus far to secure an additional order from Emirates speaks volumes,” Saj Ahmed, chief analyst at StrategicAero Research, told Arabian Business in an interview.

“Airbus cannot sustain production, much less launch a re-engined model and committing to more A380s will mean it becomes harder to finance purchases as institutions step back from lending money for what is essentially a depreciating asset. Emirates isn't keen to bear all the risk of being the biggest customer going forward. This is precisely why the airline does not own a single A380. They are all on sale and leaseback agreements.”

The future for Airbus would seem to lie with the A320. 

The European manufacturer late Thursday firmed up its biggest-ever order from Indigo Partners for 430 of the aircraft as well as 50 re-engined planes, part of a package of deals that total $81.5 billion (AED300 billion) for 705 single-aisle planes – pushing total orders for the year to more than 1,000.

The A380 was first developed to challenge the Boeing 747 and cost of 11 billion Euros (AED48.5 billion).

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Last Updated: Sun 31 Dec 2017 02:09 PM GST

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