Aviation,  Economics,  Featured

Airbus A380: We told you so – 11 years ago!

When love breaks down

The lies we tell

They only serve to fool ourselves

How unromantic can the Europeans be? Airbus has chosen to end its love affair with the A380 on, of all days, Valentine’s Day.

Outgoing CEO Tom Enders announced the demise of the A380 and at the same time diverted our attention to Emirates’ order for 40 A330-900 and 30 A350-900 planes.

All it took were six paragraphs to admit the failure of the USD15 billion programme and an assurance the superjumbo “will still roam the skies for many years to come…”

According to Airbus the last A380 will be built in 2021. It has a catalogue price of USD445 million. As of end-January 2019, just 234 units have been built.

Up until today Airbus had steadfastly maintained the economic viability of the A380 even when there were ominous signs over the past few years indicating airlines were not interested in a four-engine, fuel-guzzling mega aircraft.

Airbus’s sales mantra to airlines had been: it takes an A380 to compete with an A380. The reality was there never was a big market for the A380 to justify squandering billions into such a programme.

A380 vs A380

We predicted the failure of the A380 programme well before it made its entry into service (EIS) with Singapore Airlines (SIA) in October 2007. The aircraft was built to cater to a very niche market. It had a good chance to succeed with airlines that were financially strong. In other words, airlines that were consistently profitable.

Not many airlines are profitable.

Additionally, aircraft leasing companies weren’t keen on the A380. If the lessors have little or no appetite for an aircraft type, there’s a very good chance the plane isn’t going to be successful.

In March 2007 we cautioned Malaysia Airlines (MAS) over its plans to acquire six A380s and recommended the flag carrier to cancel its orders. It was patently obvious then that the airline didn’t need the A380s and bought the giant flying whales because of hubris.

SIA was the launch customer for the A380 and the first aircraft landed at Changi Airport on 17 Oct 2017 amidst much fanfare. Go back in time and watch our lively and occasionally heated debate about the A380 with SIA’s then PR chief here.

The following month, at an industry event in Bangkok, we presented to a group of aviation professionals an analysis of the A380, and concluded Airbus was not going to make money out of it and that the project will fail. Read it here.

A380 white elephant

Naturally Airbus didn’t take to our comments kindly and we found ourselves at the receiving end of a colourful outburst (in his hotel suite) from John Leahy, without doubt the best aircraft salesman ever.

What Leahy said to us in private we can’t repeat here but suffice to say he held a vastly different opinion when it came to the A380.

And he held on to his views until his retirement just over a year go. We saw where he was coming from, and respected his case, and we dare say no European sales person could have sold that many A380s to begin with!

Indeed, it was an American – and a very astute one at that – who successfully peddled an economically underperforming European plane to airlines the past decade.

So persuasive and shrewd was Leahy, he could have sold ice to the Eskimos! But the irony was that Leahy failed to convince a single US carrier to buy the A380.

Why the A380 failed…

The idea for the A380 was conceived in the 1990s, during an era where the Boeing B747 was the equipment of choice for airlines that fly intercontinental routes. In fact, the B747 was the only choice then.

The B747, which celebrated its 50th anniversary recently, made excellent profits for Boeing over the years. Airbus felt it, too, ought to get a slice of the pie. Hence, the A380 was born.

However, the reality of the world today is that more fuel-efficient mid-sized planes, like the Boeing B787 Dreamliner and Airbus A350XWB, are better able to optimise passenger loads.

These newer, more economical aircraft also allow airlines to move away from the hub-and-spoke model. Most people want to fly directly to their destinations, which aren’t always the big, congested airports such as London Heathrow, New York JFK or Chicago O’Hare.

What this all means (more advanced technology, better engines, route fragmentation) is airlines aren’t interested in superjumbos anymore. Thus, we are seeing intense competition in aircraft that seats between 250 and 350 (or even 400) passengers.

Airbus A380 trolley

When the A380 was being built 20 years ago, the Boeing B777 had already been widely accepted as the twin-aisle airplane of choice amongst many airlines, especially the B777-300ER variant with its superior economics and range.

Weight is also a major issue with the A380. Unlike the A350XWB and the B787 Dreamliner (both using over 50% carbon fibre), the A380 uses just slightly over 20% of composite materials. Large parts of the plane are still made of metal.

The birth of the astonishingly agile and versatile A350XWB, which entered service in December 2014 with Qatar Airways, effectively killed the A380. Fortunately for Airbus, the A350 is on course to be a major cash cow in the coming decades.

Last A380 to be made in 2021?

We highly doubt this.

Airlines that are now saddled with the A380s – especially Emirates, with over 100 in operation – will find the going rough, if they haven’t already.

Two ex-SIA A380s are currently being dismantled not far from Toulouse, as the owners (German fund manager Dr Peters Group) couldn’t find a buyer for the 10-year old planes. Here’s the report (it’s in German. PM us if you need a translation).

Quite a few people (mostly Europeans) are going to take a hit from the closure of the A380 project. German retail investors have sunk about EUR1.6 billion in a total of 21 A380s via closed-end funds.

A closed-end fund is a pooled investment fund with a manager overseeing the assets (A380s). The A380s are leased to SIA, Air France and Emirates.

Last week Air France said it wasn’t going to renew leases for its A380s  when they expire. So it looks like more aircraft will be chopped up for scraps.

It’s a safe bet that the last A380 will likely be made well before 2021. Emirates will in all probability convert their A380 orders to more A330neos and A350s in the near future, which would be a really wise move.

Meanwhile, for those who have not had the A380 experience, fear not. There’s plenty of time to find one near you and hop in for a once-in-a-lifetime ride. If all else fails there’s still this iflyA380 love at first flight site lovingly maintained (for now) by the folks in Toulouse.

Bon voyage.

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