(Published in Aviation Business ME Magazine - Issue April 2017) www.aviationbusinessme.com
In the low yield predicament that aviation finds itself, the market has been rife with speculation about the future of the A380...
Since it entered commercial service with MSN003 in October 2007 with Singapore Airlines, the Airbus A380-800 has brought a long-lost sense of glamour back to travel. Its three-room suites feature private showers and buttery leather armchairs. It sports in-flight lounges where bartenders mix bespoke cocktails. A broad staircase reminiscent of a 1920s ocean liner links the two decks. Some airlines even made outlandish promises of kitting out their new superjumbos with casinos and gyms, although none did so far. Incontestably the Superjumbo draws passengers, but will it draw more airlines, that the remining question and so far, financially speaking, it’s a disaster of similarly grand proportions, without to mention carriers finding it tough to fill in turbulent economic times.
An initial flood of interest from airlines has turned into a slow drip, and Airbus is leaning heavily on one customer, Emirates, for sales with almost 50 percent of the firm orders. Not a single U.S. carrier has bought one, and Japanese airlines, among the biggest cheerleaders for huge planes, have taken just a handful. Airbus has delivered 208 A380s. Early on with its credible proposal for the Very Large Aircraft (VLA) market, it predicted airlines would buy 1,200 Superjumbo over two decades, but has only 121 in its order book, to be built over the next five years or so. Worse, many orders appear squishy, because airlines are shifting away from VLA. In the context of a white-hot market for next-generation largest twinjets like the Boeing 777-9X with 400 seats and Airbus A350-1000, both with much better economics, is there a future for the A380 - including the notional re-engined A380neo and stretched A380-900?
Already before the A380 first lifted off the runway as 50,000 people looked on at France's Toulouse-Blagnac Airport on April 27, 2005, there were questions about the A380's viability, and the bottom line remains actual: Singapore Airlines’ opting not to extend the lease for its first early-build Airbus A380 after only 10 years of flying it.
Malaysian Airlines not able to draw enough traffic to fill the half-dozen A380s it had bought put on light something long dreads: the lack of second hand market for the VLA despite moves to make them more commercially viable, a 700-seat dedicated to transporting Muslim travelers on the annual Hajj pilgrimage to Mecca, basically squeezing extra seats into a cabin that once set new standards of spaciousness. On top of that, leading legacy carriers are not considering more orders, if they are not reducing the initial order. Last but not least, if Iran Air order for the superjumbo grabbed attention last year, it was most probably only hailed as a symbol of Iran's determination to compete economically, with no tomorrow. Overall, they are terrible news for Airbus and the lessors having the A380 in their portfolio.
Certified by regulators to carry up to 856 passengers in a single class layout - although the average is closer to 550 - the superjumbo was the European aerospace group’s multibillion-dollar bet on the future of air travel. Airbus concedes its timing was off with the A380, which lists for $433 million but almost always sells at a discount. The financial crisis hit just as production was picking up in 2008, and soaring oil prices made airlines reluctant to buy the four-engine behemoth. Perhaps the biggest Airbus success with its plane was to largely sucked the life out of “The Queen Of the Skies“, Boeing’s jumbo and its last update “-8”. In many occasions, Airbus group acknowledged it will never recoup the $32 billion it spent on development. The next concern is when Airbus will reduce monthly production from the current 2.5 per month to one, the program will fall back into the red even slashing the production rate will buy it time for a reinvention: As usual in the business, “The crying happens when it’s losing money“. Axing the A380 outright is hard to do, 10 years is perhaps a too short time to determine its fate. Besides the embarrassment of admitting defeat on the program, Airbus would need to write off factories across Europe and redeploy thousands of workers. Airlines and lessors would see the resale value of their A380s plummet, and the plane’s demise would leave airports worldwide questioning the wisdom of facilities constructed to accommodate it.
A decade after it first took to the skies with the promise of revolutionizing commercial aviation, and even passengers are fascinated by this giant of the skies with the strangely graceful "whalejet" still turning heads when it flies overhead or taxis past, the Airbus A380 has so far failed to deliver and speculation will continue to mount about whether Airbus Group can continue to produce it from a shareholder value stand point as the quarterly results are the subject of increasing scrutiny... Overall, since the initial A3XX feasibility study back in 1993, the manufacturer continuously faced ‘a decision over the near to midterm on the future of the A380’. Even customers are prepared to pay a premium or its cabin layout potential almost unlimited, the A380 was clearly not a game changer what the recent twinjets are to bypass many of the traditional airline hubs with ultra-long non-stop flights…
At the end of the day, one serious option could be to "discontinue the product" to anticipate the global needs of a better-connected and more sustainable world, to lead the air transport in the year 2050 and beyond. If still convinced that the cycle will turn ‘one day’, the only remaining option is to invest further in an even more larger version, capable of supporting a larger payload through newer, more efficient engines, and redesigned wings. The A380-900 NEO will not be a nice to have but a necessity considering only the growing population and its demographic profile, and to respect all aspects of the environment. But would it be money well spent? As the industry leader, Airbus Group will have to pave the way and the A380 was for sure a key learning curve to be ready for the next generation of aircraft. In other words, the legacy of the A380 and what is inspires in the future is a real measure of how profitable it is for the entire industry...