A380 struggles despite Doric order at Paris Air Show

The surprise MOU announced at the Paris Air Show by specialty firm Doric Leasing for 20 Airbus A380s does little to build confidence in the aircraft’s long-term sales prospects.

Doric finances A380s for the airlines already operating them, such as Emirates and Singapore. There are several other special purpose companies that have also financed the behemoth, but no legacy operating lessor has ordered the airplane since International Lease Finance Corp. was a launch customer-and ILFC swapped these in favor of the more marketable A320 family.

The backlog, through June, of firm orders looks like this:

Emirates 55
British 12
Etihad 10
Hong Kong Airways 10
Qatar 10
Qantas 8
Lufthansa 7
Asiana 6
Skymark 6
Virgin Atlantic 6
Kingfisher 5
Singapore 5
Air France 4
Korean Air 4
Transaero 4
Air Austral 2
Thai 2
VIP 1
157

Source: Airbus, June 30, 2013

Virgin Atlantic continues to push out its A380 order, with entry-into-service now scheduled for 2018, and according to the Bloomberg article even this future date seems iffy.

Kingfisher’s order, of course, is as good as gone. So, probably, is the Hong Kong Airways order unless the Chinese government for some reason steps in and reassigns them to other carriers within China mainland. The government, as Readers will recall, previously curbed HKA’s growth.

One could argue about the quality of a couple of the other customers as well.

Airbus previously said it has open slots in 2015 and that it will reduce the production rate slightly. The Doric order helps, but hardly supports the business plan. Including this MOU, and the shaky orders above, Airbus has now sold 282 A380s since its launch in 2000.

Boeing, of course, has done far worse with the 747-8I. Just 40 orders have been placed, including VIPs, with a current backlog of 24. Boeing has a mere 12% of the Very Large Aircraft (Passenger) market.

We’ve previously written that launch of the Boeing 777-9X, nominally at 407 passengers (vs a nominal 467 for the 747-8I and 525 for the A380) will threaten the viability of both VLAs. The 9X should have the same seat-mile costs without the capacity risk.

This undoubtedly is why Airbus is now offering a coach configuration of 11 abreast vs the roomy 10 across. This adds about 40 more seats to the airplane, lowering seat mile costs in the process but squeezing passengers in the process.

The Airbus business case relies on the obvious fact that current airports basically can’t grow and new ones basically aren’t being built, therefore the VLA is the only way to grow traffic at highly constrained airports.

We believe there is merit in the argument, but continued fragmentation by smaller, very long range aircraft continue to nibble away at the VLAs.

Airbus’ only hope of selling 630-650 more A380s over 20 years (essentially its forecast of 50% of what we believe to be a highly inflated projection of 1,300 VLA-Ps) is to maintain its near-monopolistic market share of this sector. We see this lopsided share continuing. We don’t see the 747-8I increasing its market share; rather it will be squeezed between the 777-9X and the A380. Airlines tell us the 747-8I is too costly in the configuration they would prefer. We believe the 747-8I will remain a niche within a niche sector.

And we think Airbus will be hard-pressed to hit 630 sales by 2031. But neither do we expect Airbus to discontinue the airplane in the foreseeable future.

We think Airbus needs to develop an “A350-1100” to match the size of the forthcoming 777-9X, but our market intel tells us Airbus worries this would cannibalize A380 sales. But it would be the better bet.

Airbus also faces an aging A330 line that needs either replacing or an extreme makeover by 2022; and the prospect that Boeing will be coming forward next decade with replacements for the 757 and eventually the 737.

Some hard decisions need to be made by Airbus, particularly as Tom Enders drives the company to be more commercially-focused: prestige of having the world’s largest airplane, or a new strategy to fill product gaps and to meet, or beat, Boeing with new designs.

We think the answer should be obvious.

86 Comments on “A380 struggles despite Doric order at Paris Air Show

  1. I think your analysis sums up the situatiuon in the LA/VLA-market very welll.
    Best case scenario for the A380 until 2020 is to become a modest cash creator, the program itself will probably not break even in the foseseeable future.

    I think the A380 existence is justified, not necessarily as business case but as product. Airbus needs to maintain its seat cost advantage compared to newer B777X proposals. We remember that the B747 had its best times 20 years after EIS, and that initial sales were largely driven by its range capability (and prestige).

    One little sidenote.
    You write:
    “This undoubtedly is why Airbus is now offering a coach configuration of 11 abreast vs the roomy 10 across. This adds about 40 more seats to the airplane, lowering seat mile costs in the process but squeezing passengers in the process.”
    Fact is:
    Boeing gets a respectable amount of its “20% advantage per seat” of the B777X by adjusting standard seat abreast from 9 to 10. Despite the 4inch internal growth in cabin width (which is not yet confirmed), the effective seat width will be around 17.2-17.4inch, up from currently 17inch in 10-abreast. An 11-abreast A380 would provide 16.9-17inch seat width. Internal stretch may also be possible.

    Apparently, standards in economy know only one direction, and we stingy passengers are all at fault!

  2. Airbus also faces an aging A330 line that needs either replacing or an extreme makeover by 2022; and the prospect that Boeing will be coming forward next decade with replacements for the 757 and eventually the 737.

    Not sure what to make of this, because on the other side of the pond, Boeing faces a 767 line that is as good as dead, and a 777 line that they’re already in the progress of launching an extreme makeover for, with only one of the proposed makeover models (the 777-9X) generating much interest in the market. Plus the prospect that Airbus will be coming forward next decade with replacements for the 757 (which just might an even-more-enhanced A321NEO) and eventually the A320. To not even mention the fact that NEO has been consistently outselling MAX by a 60:40 ratio, and appears set to continue to do so.
    So to me, the situation doesn’t seem too bad for Airbus, and generally, both manufacturers are keeping each other nicely on their toes.

    As for the A380 – the fact that no legacy Leasing company has orders for it to me doesn’t mean very much, really. I vividly remember one of Scott’s first posts about NEO, which was basically slashing it for the fact that lessors and financers hated it.
    http://leehamnews.wordpress.com/2010/12/09/lessors-banks-in-blistering-critique-of-airbus-neo/
    I’m not suggesting that the A380 will sell as well as NEO, just pointing out that the stance of legacy lessors towards a certain type doesn’t say much. Doric certainly seem to have been able to make the A380 business work for them so far. Also, ILFC only ever ordered a total of 21 747s over the whole life of the programme, the first almost 20 years after the type was originally offered; they also never ordered more than 3 at a time, suggesting that they only ordered the planes when they already had customers for them.

  3. Presumably Airbus could make good efficiency gains by downsizing the A380-800 wing (it was mostly designed for a larger -900). Or introducing the -900 model which should have really good economics providing it is filled and Emirates will buy enough of them.

    Does anyone have any idea how good the A380 looks as a freighter? Boeing sold over 300 new build 747 freighters.

    • Roger :
      Presumably Airbus could make good efficiency gains by downsizing the A380-800 wing (it was mostly designed for a larger -900). Or introducing the -900 model which should have really good economics providing it is filled and Emirates will buy enough of them.

      They recently said that they would look at the -900, but not before the end of this decade. Which makes sense – the -900 will cater to very few customers, considering the -800 is already quite big for most airlines. So Airbus probably want to sell more -800s before launching a -900 which then sells only to, say, EK and CX.

      Roger :
      Does anyone have any idea how good the A380 looks as a freighter? Boeing sold over 300 new build 747 freighters.

      It’ll probably be better-suited as a package-carrier than a plane for large and heavy cargo, but at that, it should be pretty good. Two issues: a) How do you load the upper deck without requiring external equipment and thus limiting the number of airports you can fly to? b) the new-built freighter market isn’t doing well at the moment. So Airbus have no urgency in revisiting the A380F – when they do, they at least are dealing with a frame that already has the freighter built into it to a point, as the A380 was designed with an A380F in mind from the beginning.

    • Well, in IMO the A380 wing is to small for the stretch. An 85m long A380-900 (-/1000) should have a span of around 95m (i.e. incorporating 2 x 7.5m “777X-type” folding wingtips). If Airbus also would choose to increase the area of the wingbox by an A346-type 3-frame chordwise insert, in addition to the 15m increase in span, they might as well go the full monty and develop an A350-type composite wingbox for the A380. The larger wing should use the leading and trailing edges of the current wing, and since AFAIK the movable surfaces of a wing accounts for about 70 percent of the total costs of developing an all new wing, the total costs should not be prohibitive. In addition, Airbus should IMO not do the A380 upgrade before the engine manufacturers can offer engines having at least 15 percent better TSFC than the current engines.

      An A380-800 stretched by 3 frames through the above mentioned wing chordwise insert, should have substantially less thrust requirements than the current frame (i.e. engines in the 60000lb thrust class). In fact, that engine thrust class should be just about the right range for a new regional A333 replacement aircraft based upon the fuselage of the A350 coupled to an all new A330-sized wing. Hence, there’s no need to develop new state-of-the-art engines unique to the A380.

  4. The two deck design of the 380 seems to preclude its use for bulky heavy cargo. It also cannot front load unusual objects like the 747-8f. Packages can be carried in virtually any plane, so it is cheaper to use a twin rather than invest in a quad that is more expensive to operate and purchase and is constrained by some airports.

  5. Boeing only sold 160? baseline 747-100s. A380 was never going to be an overnight hit. Airbus built it knowing that by being first there would be no business case for a competing aircraft in the foreseeable future, meaning they know they own the VLA market for the next 20-30 years. They didn’t even try to make an optimal aircraft, concentrating instead on a stretchable one.

    A330 is light for its age and size. I guess Airbus can compete with the 787 at the moment by discounting, in the long term it looks to me like they don’t know themselves whether an updated a330 or a light a350 will work best, looks like both options are on the cards but I would be surprised if they both got built.

    • Exactly my thinking re the A380. Got to remember that in the early 90s, when the roots of the A380 really go t started, the 747 was throwing off cash for Boeing, allowing it to prosper right down the range. I’ve always seen the A380 as an attempt to secure that advantage for Airbus over the longer term and, as importantly, deny this to Boeing (since, absent some enormous tech advance, no investors would agree to develop a similarly sized competitor). I suspect ETOPS developments hit Airbus from under the radar (hence the misstep with the A340) and that this has put cahsflow far behind what they expected but I think that the hub capacity restriction has similarly gone under the radar now and will move back to Airbus’ favour at some point. As for the -900, I see Airbus waiting until tech has moved enough and enough -800s shifted for them to re-engine into the -900, with whatever other tweaks make sense. I think Boeing’s big mistake, rippling through to today, was to fail to develop the stretched 747 back in the late 90s, as this would have headed the A380 off at the pass and boxed Airbus in at the top.

      • I am not so optimistic about A380 but time will tell.

        Yes, I strongly agree that Boeing should have produced or make a good plan for a stretched 747 so as to kill off the market of A380 as much as possible.

        747-8 is never intended to be a competition of A380 anyway. It is a plane to damange the A380 project and completely burry any hope of a cargo version of the plane. That means taking away around 150 or 160 of the much needed orders from A380.

        747-8I cannot break even by itself but adding 747-8F means they can balance the book. If they have nothing better to do, that’s not a bad move.

        I believe the next generation of aircraft won’t look like what we see today. They will be flying wings. There was a haox back in 2005/2006 on this but Boeing is slowing making test aircraft of that direction.

        We know the advantage of such aircraft and we see them commonly applied to UAV. I think we will see one in twenty years and Boeing will be making it.

        I am not sure if they will use it as a replacement for 737 or they will launch it against A380. Commercially speaking and if this new flying wing works, it is better to launch it to replace 737, thus launch a blow against AB’s cash cow A320.

        It will sound far better to launch it A380 and kill off the last 10 years when A380 might actually turn out profit though.

  6. I was getting concerned about the lack of Airbus stories in the press. It’s been all Boeing of late. Bravo to Scott for balancing the books. Even though its the same old A380 line. Guess if you keep saying the same thing, people will eventually believe you

  7. Lets not confuse the sales numbers of A380 with twin aisles. The are double to structure, engines, seats, price and labor. I think Airbus internally sees an A380 equivalent to 7 A320. The prices the world big airlines pay for it are I gues typical for a spec beating, silent, benchmark passenger satisfaction, VLA without competition.

    The 777X launch is taking long IMO. So long I start doubting the wild enthousiasm among airlines Boeing is talking about. The recent A350-1000 orders and options of BA, CX and UA don’t seem encouraging to me. What if AF/KL, JAL, KA and ANA order A350-1000s? Nothing to see here, walk on? There seems to be a total lack of critcal looks at the 777X among the media, unlike the A350(-1000). Airlines executives having doubts are ridiculed / ignored. Time for real market dynamics IMO.

    • good point! major concern I see for the 777-9 is: Airbus launches the 350-1100 or however you call it – stretched to 79,9m just 18 months later. Being a new plane it is inevitable, that that has the better economics than the 3rd version of the 1990s 777.

      This might become the 777-300ER vs 340-600 play with reversed roles.

    • “Lets not confuse the sales numbers of A380 with twin aisles. The are double to structure, engines, seats, price and labor.”

      The A380’s list price is only 25% higher than a 77W. What is double is the number of units sold and the gross margin that Boeing earns relative to the A380 since the latter entered service. Maybe things will change next decade.

      “The 777X launch is taking long IMO.”
      I agree. Airbus should get a big head start if the A351 EIS in 2017 comes to fruition.

    • Airbus claims the a350 is a 25% improvement over the 773, Boeing claims the 779 is a 20% improvement. Both these claims are open to question but if they are exaggerating equally the 779 will have a similar or worse CASM to the a350. Even in the best case scenario it looks to me too much like a comparison between the 773 and the 748, similar CASM but one is bigger than the other, and we saw what happened there.

      If Boeing are going to spent $5B-$10B they need to start with a clean sheet of paper.

      • The GE9X should have a 5% SFC advantage over the Trent XWB which should help to reduce the drag from the extra OEW the -9X will carry around. For some operators a 10 abreast Y, a 9 abreast C, and a comfortable 7 abreast J with more cargo volume and weight capabilities will mean more revenue over a 9Y/8C/6J A351 cabin. CASM may be close, but for some operators the 9x will be the logical choice while for others it will be the 351. For many it will mean both.

        If the 777-9x vs the 351 is as poorly matched as the 748 is vs the 77W, it deserves to not even be launched. If that is your point then I agree.

        Clean sheet will not be necessary if they can get 100+ launch orders and feel reasonably confident to get 300+ total orders with just a ~$5 Billion Investment. A clean sheet will cost 3X that amount and how many more units would they be able to sell? Easy choice IMO.

  8. easy, easy: The 380 is a 30 year+ project. If the 380 cannot generate enough orders in the next economic upswing we must be concerned. Otherwise, we must acknowledge that there are no cancellations, unlike 747s in recessions. It might be advisable to check 747 orders in recessions, they were usually below 10 per year – only to recover during economic upswings. Makes 1500 747s in the end.

    The 380 upgrade makes sense, as the wing is big enough, it is cheap and generates an immediate revenue. The 380-800 with 50 more passengers is the first step, the 380-900 probably comes only in 10 years. BTW, Qantas has increased passenger numbers in its 380s and Emirates is increasingly configuring them more densely. (now at 3rd layout)

    As to what the schedule is concerned. As a 330 neo doesn’t make sense anymore, I expect Airbus to go after the 320neo and 350-1000 with the regional 330 and the MTOW (and thus capacity) improved 380. Then either comes some “322” or the 79,9m stretch of the 350. Optimized 350-800: no. In the meantime they can sell 330s over price, before cutting production to half.

    I do not expect them to found a new family between the 320 and 350 or between the 350 and 380.

    As I expect the NEO to outsell the MAX considerably and especially if the current bonanza – with too cheap aircraft finance available due to low interest rates – comes to an end, I expect Boeing to be forced to launch the 737 successor just after the 777-9x.

    The main challenge for both manufacturers for the next years though is not developing new models but process focused: bringing costs down, delivering safe and mature planes, and bringing production of 787 and 350 to something between 13 and 15 per month, which is totally unprecedented.

  9. Scott: out of curiosity, what would you see as encouraging A380 developments? Orders from a specific carrier/set of carriers? Other leasing companies picking it up? Something else entirely?

    • Development of the A380-900 and an A380neo (GP and RR currently are “last” generation engines) to cut fuel burn might help. But in the end, the VLA market is a niche, and it is shrinking. Boeing will exit with the 748 (probably after 747-200s replaced as Air Force One) and the 777-9X (and suggestions of a longer 10X, though we don’t know if this is serious) killing the 748.

      • Scott: have you heard anything about the 777-10x other than the suspicious ‘no comment’ that ‘a presenter’ gave at PAS? I am not sure the MLG/Rotation Angle will work out and I suspect they will wait until the -9 is in production and successful before they do anything else.

        • No additional data.

          Certainly would require taller landing gear at the very least. Maybe the old “Airbus taper” at the tail, too. 🙂

  10. On the topic of hubs, there was an interesting article over at the subscriber section of FG during the past couple of weeks.

  11. Remember there were orders for the 380F at the start of the programme, more or less shelved by Airbus themselves.They obviously saw a market,that may still exist, as most airfreight is for normal sized cargo rather than outsize which is probably catered for better by the AN124.
    The much vaunted nose loading feature of the 747F has in fact a maximum height limit that is lower than the side door, so apart from the convenience factor, it is only useful for exceptionally long items.
    I have previously postulated that Delta would be one of the first to buy used 380’s, and from my contacts here with Virgin guys, the “buzz” word internally is “Delta”, so the existing A380 order may well fit a long term requirement

    • Some years ago (~2008) Lufthansa was in the press with interest for a “1000 seater”.
      Same from some other European biggies. ( no idea if this was to be an upgauged A380. probably. )

    • But in that case, why would Airbus expend the time, money and resources to certify the 380 as a freighter when it cannot compete with known features of a 747-8f and its only advantage is carrying lots of small things that can be carried by twins which fly more frequently and are cheaper to utilize, purchase, and maintain?
      You would need a gigantic number of packages to fill an a380f and it lacks the ability to take care of large heavy cargo. Shippers need capability in addition to efficiency. The 747-8 program is going to be saved by the freighter. The a380 is going to have to stand and fall on the passenger version.

      Now if you could remove the structural support to the second deck, reinforce the floor, and figure out a way to tail load or front load long objects…

  12. Rudy Hillinga Why is filling out these two lines a new equirement every time I write somethingScott?

    Let’s face it friends, the A380 has sold 300+ units so far, or the equivalent of
    appr. 500 747s and thus about the same number of units in the same time
    period of 12 years after launch!
    Why, because by the time the 747 was the right size a/p, it was too late for any
    competitor to come up with a competitive a/p, because of the cost of inflation
    on the development cost and the same factor will apply to the A380!
    So, just accept the fact that Boeing missed the boat on this one, big time!
    I reported this before, but I will say it again: In Nov. of 1997, I went to see B.
    CEO Phil Condit and urged him to at least assume that Airbus would succeed
    and launch the A3XX as it was still called and consider the effect such a de-
    cision would have on the 747 program and his “Famous last words” answer was:
    “Rudy, I’ll give you my personal guarantee that Airbus will NEVER (be able to}
    launch the A3XX!!! Again, that was in November of 1997!

    • They have not sold 300 A380s. 300 A380s equaling 500 747s implies that the A380 is 66% bigger than the 748 but it is less than 30% bigger by any metric you choose. Its list price is less than 30% more than a 77W and its margin is lower.

      As a consumer I am glad that the A380 exists. It is great to fly on. As an investor I would be putting my money elsewhere.

    • Later when I tell bed time stories to my grand children I might just tell that story. By now, how can I ever forget it? 😉

  13. Chris Austria wrote:

    ” major concern I see for the 777-9 is: Airbus launches the 350-1100 or however you call it – stretched to 79,9m just 18 months later. Being a new plane it is inevitable, that that has the better economics than the 3rd version of the 1990s 777.”

    The way I see it Airbus needs a new engine to launch an A-350-1100. Just as Boeing needs to wait for the GE-90X engine, but it is already in development. The current 3 versions of the RR Trent-XWB engine do not have enough thrust for the A-3511. That engine was already pushed to its maximum thrust because of the second version of the A-3510.

    • 100% agreement, though that should be feasible in the next 7 years.

  14. Richard Abulafia lays out pretty well his case that the A380 is a mistake and a dog.
    Ahttp://www.richardaboulafia.com/shownote.asp?id=381

  15. Airbus’ only hope of selling 630-650 more A380s over 20 years (essentially its forecast of 50% of what we believe to be a highly inflated projection of 1,300 VLA-Ps)

    This year, I’ve been looking at the Airbus forecast from their expected market share. So, I like that that 50% is doing the rounds here. At the current sales rate, they may sell another 400 hundred. But these are at poor global economic times rates. The A380 has been in service largely in depressed times. Still, the promise of the 777-9X could keep at that rate indefinitely. But it’s still half of the 1,300 of the original business plan, when it started declining. At best, the business plan was for no more than 800 Airbus-built aircraft over 20 years. Of course, the financial crisis in the Western world, which followed the collapse of Lehman Brothers (one of the earliest financiers of the 747), and which is now finally extending to the Chinese economy, probably extended that a bit.

    But, it doesn’t matter how much I sugar coat the situation. It’s a weak market. There is today far more choice for reaching any point on Earth at reasonable seat-mile costs, than was the case when the Boeing 747 first flew.

    Richard Aboulafia: July 2013 Letter

    • For e.g. EK, AF/KL, AA and some other big 773ER operators the 777-9X would be a 2 row stretch, from 2021. For airlines that would keep the 777 at 9 abreast too.

      I don’t understand the folks that fall so easy for the game change retorics of the Boeing commercial folks. If the 8x isn’t so hot the 9x become a one trick pony. Contrary to the 787 and 350.

      It seems airlines aren’t knocking on Boeing doors other then for creating some negotiation power when ordering A350s. (I won’t show top 10 777 operators XWB purchases table..)

      Paris 2011 would have a good 777x launching moment, EIS 2018.

      • But, you need to be careful here. At the same time there’s talk about a 10-abreast 777X, there’s talk of an 11-abreast A380. Also, if the 777-200LR went first, the 777-300ER would have been even more shocking than what it turned out to be. There will be some one trick pony’s – the 777-300ER was one of those. But really slap bang on the sweet spot. We just cannot know where the sweet spot for the large twins is going to be yet.

      • Noticed the “Mini Jumbo” meme introduced in the last month ( and a half +) to give Boeing the needed separation from the pleb A350 to “slot into” ;-? Smoke and Mirrors. nothing changes.

        Re Aboulafia:
        IMHO his likenings are as subtly ( or not so subtle ) off reality as the predictions he links to these side tales.

      • “Paris 2011 would have a good 777x launching moment, EIS 2018.”

        GE is bound to produce an engine that beats the SFC of TrentXWB by 5%. Though they have been working on the design for some time, I doubt that result would not be attainable in 2018.

      • “For airlines that would keep the 777 at 9 abreast too.”

        There will not be many 9 abreast 77Ws out there. Its already the most popular format and AA and NZ are ripping out their 77E seats to fit them with 10 abreast as well. Many of these airlines will have to drop in capacity to buy the A351.

        “If the 8x isn’t so hot”
        EK has indicated that it is ‘as popular’ as the 777-9x in their aircraft planning department. It will be a 77W with 77L legs/cargo (payload not volume) with 15-20% seat cost savings. The 351 will beat it at most routes but above 6knm and/or on hot days in the Middle East (lots of days), the 8x will do things that no other airline can do. Payload/range is as important as CASM for many fleet planners.

  16. In a rational world, neither the A380 nor the 747-8 would not have been built. They will never earn an ROI that would justify the enormous outlay. But political companies do not always make rational economic decisions.

  17. edit: In a rational world, neither the A380 nor the 747-8 would have been built.

    • Air travel will nearly double by 2030 and quadruple by 2050. Hence, only in an irrational world will larger 748/A388 sized planes not be needed to cater to the phenomenal growth of the industry.

      • Only if the demand is hub-hub. Plenty of capacity in smaller city airports, and their growth rates outstrip the mega cities. There is a cost to capital, and even if the A380 sells 1,000 units 2020-2030, it will not recover the funds sunk years ago.

      • No, hub-hub and hub-point!

        P2P works well for continental LCCs, while P2P intercontinental is still a sideshow.

        So, never mind how many A380s might sell in the future; according to you Airbus will never ever recoup their investment; and even if the production level would be tripled, or even quadroupled a decade hence, in order to cater to unprecedented demand, the A380 is a lost cause, it will always be a drain on Airbus’ resources, and it should never have been launched – Period!

        BTW, which city airport, exactly, has a higher growth rate than, for example, DXB? And would those “city airports” mostly be located in the United States?

        Not much room to spare, that is, in Asia.

        Air Traffic Growth Overwhelms Asia’s Airports

        http://www.aviationweek.com/Article.aspx?id=/article-xml/AW_09_24_2012_p40-494727.xml&p=1

        Phenomenal growth in passenger traffic across Asia, particularly from low-cost carriers, has fueled demand for bigger airports. The authorities, however, have failed to address this need, leading to flight delays and slot constraints.

        Nearly every major capital city airport in Southeast Asia has issues with congestion. The most notable examples are: Singapore’s Changi, Bangkok’s Suvarnabhumi, Manila’s Ninoy Aquino Internatonal and Jakarta’s Soekarno-Hatta International.

        “When you start hearing stories about congestion at Changi, which is run by some of the most far-sighted people, then that rings alarm bells,” says Andrew Herdman, director general of the Asia Pacific Airlines’ Association, which represents 15 full-service network carriers.

        Much of the airport congestion is a result of low-cost carriers (LCC), which use narrowbodies, says Herdman. These smaller aircraft result in more departures. Some airport officials say the liberalization of air services, coupled with the success of low-cost carriers, has led full-service airlines to operate smaller aircraft in an effort to match the frequency of LCC flights. This too has added to the number of departures. Singapore Airlines, for example, previously only operated Boeing 777 widebodies to Kuala Lumpur and Penang in Malaysia.

  18. Woody :
    Exactly my thinking re the A380. Got to remember that in the early 90s, when the roots of the A380 really go t started, the 747 was throwing off cash for Boeing, allowing it to prosper right down the range. I’ve always seen the A380 as an attempt to secure that advantage for Airbus over the longer term and, as importantly, deny this to Boeing (since, absent some enormous tech advance, no investors would agree to develop a similarly sized competitor). I suspect ETOPS developments hit Airbus from under the radar (hence the misstep with the A340) and that this has put cahsflow far behind what they expected but I think that the hub capacity restriction has similarly gone under the radar now and will move back to Airbus’ favour at some point. As for the -900, I see Airbus waiting until tech has moved enough and enough -800s shifted for them to re-engine into the -900, with whatever other tweaks make sense. I think Boeing’s big mistake, rippling through to today, was to fail to develop the stretched 747 back in the late 90s, as this would have headed the A380 off at the pass and boxed Airbus in at the top.

    You hit the nail on the head

  19. I think Airbus didn’t aim at infinity when they launched the A380. They hoped for much more deliveries. Now they sit and wait. In the end, any competitor is so expensive that noone will build it. If you want to compete in the capacity region of the A380, you more or less end up with a similar design. For the next 15 years I hardly see any competition, only if game-changing technologies are applied in lower capacity aircraft.

  20. In London, Sydney and a lot of Asia the only “Game Changing Technology” that could replace the a380 is VTOL, or STOL. There is no more room at a lot of airports, which is why we see so many a330s on short domestic in China, Europe and Australia.

  21. Airbus must be desperate for the global economy to pick up, believe a lot of airlines are holding off purchases of the big bird until they can see a return on it, or that routes jump from being supported by a 777 to needing an A380.
    With the current backlog many airlines probably feel they can afford a wait and see attitude (compared to the A320NEO).

  22. Airbus may do what they want with the a380 but the question of the residual values of the plane after it has come off the books of the operator will linger on. Emirate indicated that once they start receiving the aircrafts from the new batch of 30 they last ordered, some of the frames currently in operation will be retired. I don’t see any of the big freight companies taking these retired frames, nor do I see another passenger airline taking the aircraft.

    Airliners want a lean mean aicraft to fly to the desired destination without having to stop at congested airports.
    Once the design lessons learned from the 787-9 start to be incorporated into the -8 and the RR TRENT-TEN becomes the baseline engine for the type, the 787-8 will become the leanest,meanest,most efficient aircraft ever.
    Boeing just need to deal with all those accessories that are proving to be a nuisance and tarnishing the reputation of the plane.

  23. Airbus is now offering a coach configuration of 11 abreast vs the roomy 10 across. This adds about 40 more seats to the airplane, lowering seat mile costs in the process but squeezing passengers in the process.

    To be fair, no more squeezed than the Boeing 777-9X, nominally at 407 passengers.

    • “To be fair, no more squeezed than the Boeing 777-9X”
      777-9x with a 4 in wall widening will yield possible 17.4″ seats while the A380 at 11abreast should be around 17″. .4″ is not much difference but it is incorrect to state that it will be less squeezed.

      • A380 main cabin width is 21’5″. Divided by 11 seats and two aisles makes an average of 19.8″.
        Current 777 cabin width is 19’3″. Divided by 10 seats and two aisles makes an average of 19.2″.

        Manufacturers figures

  24. I’m sorry, but where is the problem? They’re producing 30/yr at the moment, they might get that up to 36, and they’re as good as sold out through 2015 (i.e. for 30 months – I am ignoring the angst about 2 (two) open slots that will be sold before the year is up – anyone willing to bet a fiver on this?).

    Even taking out Air Austral, Kingfisher, Virgin, and Hong Kong, you’re left with a backlog of 135 units. Which at a rate of 36/year (which they haven’t got yet) get you to the first quarter of 2017, but with deferments etc. there’ll definitely be slots in 2016. I don’t know what the lead time on materials is, but two years maybe reasonable. So if they don’t pick up on selling those 2016 slots by early 2014, they MAY have a problem. So let’s wait until the Airbus 5th quarter is over and see where we are with A380 orders then.

    • “They’re producing 30/yr at the moment, they might get that up to 36,”

      If they are selling only 17/year for the last 10 years it will only be a matter of time before they have a problem if they are producing at 30/year. I suspect we will see a production slow down until sales pick up.

      • Irrelevant – they didn’t produce 30/yr for the last ten years. They produced 12 or less, the comparison is simply nonsensical.

  25. Airbus hosed the a380 Program – but they didn’t hose it permanently. Remember…the a380 was designed, developed and certified uneventfully and within budget. It was only after Airbus started producing it that they realized the design software they were using was deficient to the extent that it would not allow Airbus to reliably place the 100s-of-miles of cable needed for the entertainment systems, galleys, bedrooms, bars, computer carousels, etc…that are unique on each Airbus a380. In other words, if Airbus had been only installing run-of-the-mill first/second/third class seating on the A380, then they would have been fine. Boeing only wishes the 787 had problems like the a380.

    Secondly, the Airbus a380 is already paid for – financial foibles and all – it is a “Pay-as-you-go” program. Unlike the Boeing 787, the Airbus a380 is not accruing Deferred Production Costs at an unprecedented and financially-staggering rate.

    Third, even though the Airbus a380 Program was financially hosed, Airbus was still financially able to “pull-the-trigger” and launch the all-new A350 Program. Can the same be said for Boeing?

    Fourth, the Airbus a380 has no competition – and it already curb-stomped the 787-8I into oblivion. Enough said.

    So…why paint the Airbus a380 Program as being in such dire straights when the circumstances don’t warrant it?

      • Easy is about the how. ( and imho it is not easy, it requires a lot of press agitation applied in heavy rotation. )

        That doesn’t answer the why. The why is about Boeing needing all the playingfield leveling they can get.

      • if you produce more than you receive in orders eventually you run out of orders. I do not understand what is nonsensical.

        • The 10 year window for comparison of production to orders is nonsensical, when the first wasn’t built until 6 years ago. I don’t understand what’s so difficult to accept about this. But if you insist, then I presume you will also agree that over the last 10 years they took in about 20% more orders than they have built planes, so hey presto, there isn’t a problem. You seem to want to have it both ways.

          • The point is orders vs VLA forecast, and that the pace of orders falls far short of the Airbus forecast for 20 years. Since 2000, the Airbus VLA forecast has been consistently around 1200-1300 VLAs “for the next 20 years.” Actual VLA orders (including Boeing) hasn’t come anywhere close to this pace.

            As for 20% more orders than they have built, the current book-to-bill rate falls below the production rate.

          • I agree on the last point, but the past ratio is irrelevant in this regard, I think. At 30 units/yr they also don’t need many orders to achieve a 1:1. I’d wait for the fifth quarter before calling time on the A380 🙂

    • “the Airbus a380 is already paid for”
      They have to pay their vendors for the right to lose money on everyone they sell. This program is not paid for and will not be for still a few years.

      “Third, even though the Airbus a380 Program was financially hosed, Airbus was still financially able to “pull-the-trigger” and launch the all-new A350 Program. Can the same be said for Boeing?”
      If you pull up EADS financial statements vs Boeing you will the situation is quite the opposite. Boeing is better capitalized. EADS may have more access to Government money than Boeing does not but Boeing is better off in terms of the balance sheet.

      • The a380 Program is “Paid For” up to this point and time. Like I said, it is a “Pay-as-you-go” program – which will soon breakeven on a cash-per-unit basis. And…as far as Boeing’s Balance Sheet goes – don’t drink the Koolaide. The Boeing 787 Program has accrued over $21 Billion in Deferred Production Costs (DPC) and NRE that do not show up on the books. If the NRE and DPC had been acounted for in the years accrued, then Boeing would be showing staggering losses right now. Worse…current losses indicate that the 787-Production Learning Curve is a disastor – and that losses on this program will continue for a very long time. I’ve done my own calculations, and they pretty-much match the UBS analysis (and they make the breakeven analysis done by Javier look absolutely positive!).

        The a380 program has troubles – but nothing like the 787 Program. The 787 seems to have started out as a High-Dollar Investment Vehicle (HIV) and then gave Boeing the gift of being an chronic Aircraft Income Depletion Scenerio (AIDS). It’s the best I can say about it.

        Can you show me some figures which say I am wrong?

  26. Also, let me add that the a380 will break-even on a cash-per-unit basis soon (within 180 units) and then start earning some money for Airbus (even though it won’t be raining money by any means!). And most important, the financial pain inflicted by past a380 foibles will be in the past. So…it can be said the a380 won’t make a mint for Airbus any time soon, but it won’t be hurting them either – no matter how many they produce after 2015.

    Meanwhile, the a380 will be unique and with no competition. Sooner or later, maybe a huge market will develop for such an aircraft. If it does, the a380 will be there – ready and waiting.

    • Well said, I agree. I am glad that it exists and if the market improves it could be in a very good spot.

    • Well that’s not quite correct. I would presume that if they ended up selling no more than 10 or so a year the overhead on the personnel and the production facilities would kill the programme stone-dead in no time at all. They need to sell a reasonable number to keep suppliers in the programme and continue to break even.

    • they said, the line is only then positive, when they produce 30+ per year. I wonder though, how Boeing can sustain their 747 line. I assume, they are hoping for more freight orders in the next upswing and accept losing money this year and the next,

  27. Is it possible that an aircraft can be too big in today’s and tomorrows airline world? What if an aircraft can be made that will seat 1500? Imagine the time needed to herd this number of passengers for enplaning and deplaning and what of baggage claim waiting times and other necessary functions, re-booking passengers from a cancelled flight, security screening and the like. Just the fact that airports the world over are constrained by the size of terminals, the number and size of runways and that ever present gremlin, rising but mostly failing economies and soaring fuel prices. I think the A380 is a very narrow niche aircraft that will never become the seller that some imagine. What are the costs to park something like this for perhaps protracted times due to low ridership and how low can an airline price seats just fill an aircraft? Many airlines went belly up with high load factors but low yields. The large twins make the most sense as they can be assigned to many other routes where as the A380 has a very few routes that it can be assigned to.when ridership falls because when ridership falls, it usually falls on other routes in this interconnected world.
    I think its very possible that the large size and limits of commercial airliners has been reached. Air travel today is very stressful and the limits of human patience has been reached.
    Frequency over size will prevail as it offers more solutions and less money losing problems.
    Just my take on this subject.

  28. Andreas, stating it is produced at 30 per year, is sold out for 5 years, has good prospects in terms of existing as well as new customers, meets its performance targets and has realistic options to adjust & improve, would be short sighted. Because unacceptable for some that hoped and predicted otherwise for more then a decade.

    About the oversimplified hub – spoke strategy, I think more then 80 per cent of international airtraffic start, end or both at the twenty biggest global hubs. Maybe the fact hubs are where most people are has something to do with it..

    • Quite. I live in London, I travel regularly to IST/ESB, IAD, FRA, less regularly to TSE, AMM, NRT, BSP, PEG. If I travel longer trips (beyond 3 hours), plane quality is a major decider for my choice, with widebodies given preference, and anything preferred to a 777 or 747, because they are too noisy. For narrowbodies I don’t care, although I prefer the funkier varieties (F100, E-jets) Regular choices are AMM – BA after the refurb on the A320 with Club World, TSE, LH or BA via ALA. IST – THY on a widebody. IAD BA, NRT ANA. PEG, 738 of course. 🙂

  29. Jimmy :
    The a380 Program is “Paid For” up to this point and time. Like I said, it is a “Pay-as-you-go” program – which will soon breakeven on a cash-per-unit basis. And…as far as Boeing’s Balance Sheet goes – don’t drink the Koolaide. The Boeing 787 Program has accrued over $21 Billion in Deferred Production Costs (DPC) and NRE that do not show up on the books. If the NRE and DPC had been acounted for in the years accrued, then Boeing would be showing staggering losses right now. Worse…current losses indicate that the 787-Production Learning Curve is a disastor – and that losses on this program will continue for a very long time. I’ve done my own calculations, and they pretty-much match the UBS analysis (and they make the breakeven analysis done by Javier look absolutely positive!).
    The a380 program has troubles – but nothing like the 787 Program. The 787 seems to have started out as a High-Dollar Investment Vehicle (HIV) and then gave Boeing the gift of being an chronic Aircraft Income Depletion Scenerio (AIDS). It’s the best I can say about it.
    Can you show me some figures which say I am wrong?

    Here are some figures that show you are wrong, at least with regard to the 787 learning curve.

    The following 787-8 unit cost data was taken from Aspire Aviation articles which, in turn quoted numbers from Credit Suisse reports. The unit cost data includes the engines.

    LN-7 unit cost: $400M (earliest non-flight test plane delivered to ANA)
    LN-66 unit cost: $220M
    LN-75 unit cost: $200M
    LN-100 unit cost: $160M

    The unit cost reduction represented by the last 3 points, LN-66, LN-75, and LN-100, is absolutely amazing and is closely fitted by an impressive 41% learning curve. This is pretty much opposite of the “disaster” that you claim. To boot, Boeing achieved this cost reduction on frames that required no rework and when the rate was between 2.5/month and 5/month. Further rate increases will only improve efficiency.

    Obviously, a 41% learning curve is not sustainable over the entire remainder of the program. A least-square fit of the last three cost points (LN-66, 75, 100) that also intersects the first cost point (LN-7) yields a 19% learning curve for the overall program so far. This curve over predicts the cost of LN-100 by about $18M. Boeing’s stated goal is to achieve an overall program learning curve of 25%. This goal, once derided by analysts, looks doable in light of the latest numbers, because the overall 19% learning curve includes the earlier “slower” learning from LN-7 to LN-66 when time intensive rework and change incorporation was required.

    If I recall correctly, Javier’s 787 break-even analysis assumed a 16% learning curve, which was the level achieved by the 777 program. Boeing is already doing better than that with the 787, so if anything, Javier’s analysis is turning out to be overly pessimistic, which is why I think the 787 program will break even right around or slightly after the accounting block number of 1100 units.

    As for the A380, the overall financial success of the program, defined as whether or not sales will cover ALL of the program costs, does not depend on whether or not the program is “pay as you go”.

    • While I agree that the overall success of the programme will be measured against all programme cost, at this point these costs are ‘sunk’, so they shouldn’t matter for decision-making about the programme. From here on it is pretty much a pay-as-you-go, with production-related overheads. As long as the programme covers the direct cost of each frame and the remaining production overhead, it will at least not be a drain on Airbus’ finances, and if it just makes a bit of money it contributes positively. While many people seem to think that Airbus or Boeing for that matter should cry over spilled milk, there’s no use. Airbus have mopped theirs up and got a new bottle. Boeing is still cleaning the kitchen, but will eventually finish that too.

  30. FF :
    A380 main cabin width is 21’5″. Divided by 11 seats and two aisles makes an average of 19.8″.
    Current 777 cabin width is 19’3″. Divided by 10 seats and two aisles makes an average of 19.2″.
    Manufacturers figures

    I took the width of the current 10-abreast, which is about 248inch at armrest level. The curvature of the side wall makes it impossible to use the entire cabin width at shoulder level (your quoted 255inch).
    Generally my comment was aimed at showing that the seat width Airbus is thinking of is already essential part of the B777X business case.

    Combined with some other changes to the cabin layout a 600-seat A380-800 doesn’t seem unrealistic, especially when the first class is kicked out. 3-class with business, premium economy and economy (11-abreast). Underfloor lavatories and crew rest are already on offer.

    • Aisles are 20 inch. They don’t vary depending on the cabin width.

      So distract 2 x 20 (or more) inch aisles of the cabin width and divide the rest it by the number of seats in a row.

      Armrests are about 1 inch wide, 13 for a 10 abreast cabin.

  31. Reading the R. Aboulafia letter, on word regarding the resale value: why would an airline sell an A380 if it actually needs its capacity? Sure, a shiny new B777-9X will have a 3-5% fuel burn advantage, but that possibly won’t compensate the zero finance cost a paid aircraft has. The lack of resale opportunity will in the end motivate the airline to continue using their aircraft. Still: Aboulafia raises some good points when he stresses the importance of aircraft finance for the current market situation.

    • The resale values matter because they help determine the cost of of financing. Low resale values mean higher financing costs. Sure, future depreciation will be minimal but airlines have financing costs now.

      • Wouldn’t that only apply if the loan is secured on the plane? If the financing comes out of the balance sheet of the operator (which I would presume to be the case for blue chips), then the asset value should be immaterial.

      • Possibly, but in that case they would have to include the (reduced) asset value of their planes on their balance sheet and they would lose out that way. Or am I missing something?

  32. FF :
    Possibly, but in that case they would have to include the (reduced) asset value of their planes on their balance sheet and they would lose out that way. Or am I missing something?

    LH’s total assets were EUR 28bn in 2011. Whether 10 A380s are worth USD 50m more or less isn’t quite immaterial, but it’s also not earth-shattering.

  33. Jimmi, many good points, the sunken costs are mostly already in the books, but

    Third, even though the Airbus a380 Program was financially hosed, Airbus was still financially able to “pull-the-trigger” and launch the all-new A350 Program. Can the same be said for Boeing?

    yes, given their gains (which would not be so high if you used Airbus bookkeeping methods) and continuous cash flow would allow them to start another programme.

  34. I make decent money, stateside, from A380 bits and pieces – produced here in North America – Wonderful and informed discussions above. Wish I had read it a month ago. The commercial life for the A380 is going to be decades going forward – tho at volumes less than Airbus would like. I find it encouraging that Airbus has captured such a large % of this niche VLA market – from comments above. It took years for me to start making any money on this project. I am glad that Airbus will start generating some cash from the A380 – in the next year or two.

  35. I am an aerospace mechanical design engineer, versed in Airbus procedures and Catia V5, and work as a sub-subcontractor, in Bristol, home to a slowly shrinking Airbus base.
    340, A380 and A350 wings.
    Work ebbs and flows, but for the past year it has been all ebb.
    Airbus is concentrating on manufacturing and assembly problems and product and process improvements. Elsewhere, there is some activity in the aircraft interiors sector.
    What would hurt western aerospace, is if China started whacking out their own half price version of an A320.

  36. Pingback: Odds and Ends: Contrary views of Mulally; Cathay considers 420-seat 777-9X; Long haul flight log; a walk in the park | Leeham News and Comment

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