December 11, 2014

Future of Airbus A380 line looks to hang in the balance

It is a remarkable situation Airbus finds itself in with the A380 at the current time. Despite the world’s largest airline, Emirates, being the company’s greatest supporter, the company’s sales for the A380 have faltered. As at the end of November the order book for the aircraft stood at 318 planes ordered (140 by Emirates) of which 147 have been delivered (55 to Emirates) and a further 171 are to be delivered (85 to Emirates). There currently exist only 28 options on the plane. For the first time Airbus have openly admitted to debating the future of the model, which has consequently angered Emirates’ President, Sir Tim Clark.
Airbus’ Finance Director, Harald Wilhelm, indicated on Wednesday of this week that Airbus would break even on the A380 in 2018 “if we would do something on the product, or even if we would discontinue the product.” Clark is perhaps rightly angered over such comments and lack of direction being shown by Airbus considering the investment they have made in the model. Clark made it perfectly clear that Airbus should be working harder to promote the A380 and comments with such a negative slant only make that task more difficult. One option being explored by Airbus is investing in a new engine with Rolls Royce which would see fuel economies of up to 15% achieved from 2020 onwards. As a form of encouragement Clark indicated that if this new engine and improved aerodynamics were to be adopted then Emirates would be happy to order 140 of what would be the A380neo model. However Clark also intimated that if Airbus decided to discontinue the line, Emirates would still hold them to delivery of the planes ordered but Airbus would probably ask Emirates to forego some of its future deliveries. “That is not a conversation I would like to have” commented Clark. Part of his frustration with the line is that, as he put it in an interview with airlineratings.com “Airlines are too conservative and have not put the right interiors into their A380s. Some of the interiors are a disgrace and used 1970s thinking. We put all our premium seats on the upper deck and economy on the main deck, but others have mixed them which is inefficient. Our competitors laughed at us when we put showers and a lounge in the A380. But passengers love the showers and lounge.” “The A380 is a great aircraft. If airlines don’t believe they can fill an A380 then their business model is wrong,” Mr Clark said. “Their marketing is all wrong.” However there are rumours also floating around that part of this reluctance by Airbus to continue with the line is because Amedeo, a dedicated and actively managed widebody aircraft acquisition and leasing platform based in Dublin, Ireland, may well no longer be thinking of placing a firm order for 20 A380s, despite the fact the company’s website still states “As a widebody operating lessor based in Ireland, Amedeo is determined to transform the aviation industry and educate airlines around the world about the benefits of the A380 aircraft. Amedeo secured an equity partnership with a New York-based private equity firm, Pine Brook, for the financing of its A380 order with Airbus, which was announced at the Singapore Airshow in February 2014.



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