Airbus cuts A380 production to 1/mo (Update)

July 12, 2016, © Leeham Co., Farnborough Air Show: Airbus will lower the production rate of the giant A380 from 18/yr to 12/yr, effective in 2018, the company confirmed after the French newspaper La Tribune first reported the news Tuesday evening Paris Time.

In January, LNC in its annual production rate forecast projected the A380 rate coming down to 12/yr by 2020. More recently Leeham Co. LLC told clients Airbus needed to figure out how to achieve a break-even at one a month (12/yr) and bring rates down sooner.

Leeham News made this production forecast in January, predicting the A380 production rate would have to come down to 1/mo by 2020 The competing 747-8 rate was forecast to come down to 6/yr by 2018. Both rates are coming down two years earlier than forecast.

All this was based on the current backlog and customer quality.

Lower break even needed

In a press release issued after La Tribune’s report, Airbus aid it’s achieved break even at the rate of 20/yr in 2017. The company “targets additional cost reduction initiatives to lower the breakeven further,” it said.

Airbus is sticking to its plan to maintain production of the A380 until future traffic demand catches up to the size of the airplane. In the Global Market Forecast issued Monday by Airbus at the Air Show, the company is sticking with its long-held belief that the Very Large Aircraft market will support 1,500 Airbus and Boeing passenger and freight aircraft during the next 20 years. Boeing’s forecast, also released Monday, is a fraction of the Airbus forecast.

In a statement, Airbus Commercial CEO Fabrice Bregier said, “We are establishing a new target for our industrial planning, meeting commercial demand but keeping our options open to benefit from future A380 markets….”

Will there be a charge?

Airbus did not say if it will take a charge to the program. Officials are meeting Wednesday morning in London with investors.

The move was long seen coming. While some critics, such as consultant Richard Aboulafia of the USA’s Teal Group, believe the A380 is “dead,” Airbus believes the future airport constraints and congestion will prove demand for the aircraft.

Boeing’s competing 747-8I is doing poorly as well. Boeing insists the 747 has a future, but now talks of it as a freighter, not a passenger model.

 Recognizing reality

The move recognizes reality of the current market, driven by necessity. It also gives Airbus time to decide whether to re-engine the airplane at a later date, a persistent request from Tim Clark, the president and COO of Emirates Airlines.

Airbus has been unwilling to commit to an A380neo. More recently, Clark expressed concern that Airbus will simply keep producing the airplane.

This rate reduction answers the question, at least for now.

The A380 may face additional challenges, however, should Boeing decide to proceed with a third member of the 777X family. The plane, already dubbed the 777-10 (though not by Boeing), would seat about 50 more passengers than the 777-9. Boeing is doing studies on the prospective -10 now.

Airbus Press Release

Airbus Targets Delivery of Twelve A380 Per Year From 2018

 

  • Airbus expects future traffic growth to drive demand
  • A380 only solution for sustainable growth

London, 12 July 2016 – In line with the current order intake, Airbus has decided to target 12 A380 deliveries per year from 2018.

“With this prudent, proactive step we are establishing a new target for our industrial planning, meeting current commercial demand but keeping all our options open to benefit from future A380 markets, which we consider in the environment of ongoing aviation growth and constrained airport capacity as a given,” says Fabrice Brégier, Airbus President & CEO. “We are maintaining, innovating and investing in the A380, keeping the aircraft the favourite of passengers, the airlines and airports – today and in the future. The A380 is here to stay!”

Airbus reached breakeven at 27 aircraft deliveries in 2015. The company will continue to improve the efficiency of its industrial system to achieve breakeven at 20 aircraft in 2017 and targets additional cost reduction initiatives to lower breakeven further.

With passenger traffic doubling every 15 years, the A380 is the one and only solution for sustainable growth at congested airports. Today, 18 global leading airlines have ordered a total of 319 A380s so far, building their brand with this flagship aircraft. The 193 megaliners that have been delivered to 13 operators serve over 100 routes on an ever expanding global network. Today every three minutes an A380 takes off or lands. In 2016, 14 aircraft have been delivered so far and underlines a stable production performance with the backlog standing at 126.

The 193 A380s in operation today are serving 38 of the 55 global aviation megacities (47 of which are either growth or schedule-constrained). The number of megacities will rise to 93 by 2035, serving 2.5 million daily passengers and 95%+ of long-haul traffic.

Passengers love the A380 and the aircraft is clearly the passengers’ aircraft of choice. Independent studies show that 60 percent of passengers make an extra effort to fly on the comfort-leading double-deck mega-liner. Airbus is supporting this distinctive travel behaviour through a new, unique IflyA380.com booking assistant launched at Farnborough Airshow this year. Operated in full partnership with the A380 airlines around the world the website enables passengers to prioritize and select the A380 when making their travel arrangements.

Airbus expects that based on the flexibility within the wider Airbus programme ramp up environment and also opportunities within other Airbus Group Divisions, the impacts on employment will be mitigated.

39 Comments on “Airbus cuts A380 production to 1/mo (Update)

  1. Well, given Leeham’s and others’ predictions this doesn’t come as a great surprise.

    I still half wonder what the current operators think they’re going to do if Airbus announce closure of the production line. I can’t imagine Emirates have got anything like a workable plan for their business post-A380. They’ll pretty much have to buy more simply to keep the production line open and their large (and probably indispensable) fleet flying.

    • Well we don’t have a super sonic transport any more either.

      We still are alive and breathing.

      You don’t get what you want all the time.

      Emirates will make do with 777/A350 or 747 (if it is still available) if the A380 is stopped.

      At one time you had fuel stops, As long as everyone has fuel stops field is level.

      • As poor as the sales have been for the 747-8, it still could have a life as the 747-8F, the A380 is a one trick pony. Take Emirates away and the bottom falls out. They could fine with the 777X by increasing frequency on some routes and better matching planes with loads.

        • Take Emirates away from the 777X is pretty the same than from the A380 (by the way when Emirates buy 150 777X, that is half of the total orders, it’s a big endorsement for the Boeing widebody but when Emirates buy 142 A380, that’s a bad sign for Airbus). And you can’t increase frequency as much as you want, in Dubai or London for example.

          • True enough. I guess you would have to fly to Northern Ireland or Scotland (if they are still part of the UK!)

            If I was that narrow cast with Emirates and I was Boeing I would be worried.

        • The 747 is also a one trick pony. The passenger version has been an utter disaster despite Boeing projections back in the day. LH and other operators must be gnawing their teeth.

          • I sure get tired of the one trick pony phrase, can’t we be more original?

            Maybe LH is perfectly happy with their 747s, have you asked them?

  2. Hello Scott and Bjorn.
    No big surprise.
    One question : Will it still be with txo engines suppliers?

    Bonne soirée

    • Well, GE/P&W have effectively given up on rolling out upgrades to the current fleet of engines. RR are still updating the Trent 900, and this was reportedly instrumental in Emirates choosing RR for their last batch of 50. I can’t see GE/P&W getting back into it because:

      1) They’ve said they’ll do no more
      2) Corporate pride will cause them to be reluctant to invest in updates unless something un-ignorable happens in the A380 market space.

      Trouble is I don’t think that GE have been very smart at this of late. They’re not on A350, reportedly because they thought it’d flop. However it’s sold 802. I know that A350 and 777X are not comparable aircraft, but RR have 1604 sales on A350 vs GE’s 612 sales on 777X. The A380 market is definitely taking a rest, but as this article points out global aviation cannot expand as it has previously without the A380. That pressure alone will pretty much guarantee that something A380-ish will keep happening, and GE are now definitely not the obvious choice. RR *claim* that over the past 5 years when in competitive head-2-heads vs GE on 787, RR have won 60% of the time. Now that’s along way from being market leader, but it suggests that GE’s engine isn’t as appealing as the Trent-1000.

      To me this all adds up to an engine manufacturer relying a little bit on exclusivity deals on 777X and US airlines ordering American engines by default. They still make very impressive engines of course, but I wonder about their strategy.

      • I don’t think GE is too worried. Remember, they have over half the 787 market. And the ONLY reason the Trent 900 won over the GP7200 is because RR promised to deliver better fuel economy, not that it is a better engine right now, and that RR will go all in on an A380NEO. GE/PW didn’t see the business case and that’s it.

        GE is positioned pretty well. Would they like to be on the A350? Sure, but they have a cash cow in the 777 and to have to battle RR for every piece of the A350 would suck resources.

        You also conveniently forget that RR isn’t in good position right now:

        http://www.reuters.com/article/us-rolls-royce-hldg-deals-idUSKBN0TW0W520151213

        Profits shrinking in 2016, talk of the UK government nationalizing the nuclear business, big investor pressuring to sell marine unit; things aren’t too rosy for RR. Add to the fact they are not on the narrowbody aircraft anymore (GE/PW have that locked up) and they are under assault on the business jet front, too.

        • Rolls only got into the submarine reactor business when Rickover rejected the first choice , Vickers. This was back in the late 50s and some technology was to be transferred from Westinghouse. Westinghouse are long gone from the jet turbine business and their civilian reactor business is now owned by Toshiba, US navy reactors being made by GE and Betchtel.
          There are some stories that Rolls smaller reactors ( SMR)derived from its submarine work could be used for power generation
          “Rolls has submitted detailed designs to the Government for SMRs capable of generating 220MW, that could be doubled up to 440 megawatts on plants covering 10 football fields, a 10th of the size of a traditional nuclear power station. “-Telegraph UK

          • @DukeofURL,

            There’s been a few of these local-nuke ideas. Toshiba has a concept for a small pebble-bed reactor in the basement of a skyscraper. It’s quite a neat idea – uses gaseous helium for coolant, is entirely passively regulated, it can’t run away, doesn’t need post-shutdown cooling, and the waste output is far smaller than a conventional nuke. What’s not to like! Gives a whole new meaning to the phrase “I’m just going down to the basement to stoke the boiler”…

            Given the dire state of the energy generation strategy in the UK at the moment I think we’ll have to do something like RR’s SMRs, and quickly. For a country that basically invented civil nuclear power generation, we’ve managed to completely screw it up over the past 50 years. Having to ask the French and the Chinese to pay for it? Oh dear oh dear oh dear.

        • @Neutron73, That article is now somewhat out of date I think. Since it was written RR’s share price has gone up about 25% (I looked up Jan 1st to now), so they’re clearly doing something right at the moment. The wider business clearly has issues, but I think the Aero engine part is doing quite well – they’ve certainly got a very fat order book.

          As for 777X being a cash-cow, well I think Boeing need to sell a few more before it equals the 777 classic family.

          One thing I wondered about Boeing/GE; the reason the 787 has two engine suppliers is because airlines refused to buy it if there was no engine choice. They didn’t like getting stung by GE on the 777. With the 777X Boeing have kept the exclusivity deal with GE. So how keen are the airlines to get stung once again by GE, and will that ultimately dampen 777X sales in the long run? Time will tell.

      • It is easier for a GEAE CEO to become the Boeing CEO than the GE CEO, hence GE has been focused on Boeing for some time. I also think GE is making a mistake letting RR be alone on the big Airbus aircrafts. It can happen that the carbon fiber A350 series outsell the alu+carbon 777 and Boeing will work hard to make serious money on the 787 with the A330neo chasing its neck just getting closer and closer in performance and its wing design getting more efficient by the day. Airbus might have enough cash after the A350-2000 development to do both an A322neo to compete with the Boeing MoM with a new carbon wing and the A380neo stretch.

        • Agreed that exclusives are not good for anyone.

          With McNneanry gone hopefully that comes to an end.

  3. Weak point with traffic forecasts is nobody knows what sized aircraft will carry the 400+ pax. Airbus´s forecasts for over 400 pax planes is pretty much on track, but 15 ears ago nobody foresaw the hundreds of B777 and even A330s carrying over 400 pax.

    Sooner or later middle class incomes will rise, I expect a push for more comfortable aircraft to arise and B773/8 sized aircraft to drop back under 400. The rising number of retired travellers will also push better seats, a lot of them can´t take long haul in current economy and buy business off peak seats using miles and lowest prices to get near economy prices in many cases, killing revenue for expensive space. Or they just don´t fly.

    I also expect uncertainty over how close CASM of the B777-X and A350-1000 will go to the A380. Then there is the possibility of a larger A350, possibility of a larger A380, questions about what A380 NEO options are available (nothing at the moment worth doing I think) all push any possible orders off into the future.

    Then there is the World economy, USA is the only place doing well and that is only going to a handful of people, that doesn´t generate growth.

  4. Let’s hope there is a late big order for this bird just like the A330, when Airbus announced a production cut. Not holding out though.

  5. “keeping the aircraft the favourite of passengers, the airlines and airports – today and in the future. The A380 is here to stay!””

    I thought this was pretty funny, though a .333 batting average is quitge bood in Baseball!~

    Airports: Like they really care (well other than A380 re-models cost them a lot)

    Airlines: Hmmm, I guess we could add ANA as the one new buyer in (10 years?) All of 3 (and cheap)

    Passengers: So fare (pun intended) very happy.

  6. Pretty much looks like a race to the bottom with the 747 in the lead.

    Boeing has experience with low production rates so may be in better position to handle it.

    I do agree with Leeham (I am sure that will make Scotts day!) that freighter production is not going to sustain it.

    New engines might get it some pax benefits as well as freight. GenX+ might be a low cost re-engine option that pays significant benefits.

    Reality seems to say no and a fine aircraft will be gone. I won’t miss the A380, functional but not elegant. 747 was still elegant.

    the -8F was the best looking Jet of all times I think.

    • 757, sitting high looking like a bird or prey. Over powered like my former Pontiac GTO. I let my age slip out with that admission.

  7. And subtract the orders never to be from the order book.

    MA will quit flying it soon, so subtract one main carrier (arguably the worst move MA ever made and the cost has pushed them into the toilet and they were grasping at straws when they were far from their days of glory)

    BA gets the used A380s at the price they want.

    • Surely you know it was the loss of two 777’s in tragic circumstances which led to the negative perceptions about the airline and the reduction in traffic which meant the MA 380 routes werent economic.

      • MA was in trouble well before the 777 losses.

        It made a bad situation worse.

        There was a lot of disagreement that buying A380s was in MA best interest, last gasp effort to prove they were still a player when in fact the torch had been well passed.

  8. At a slight tangent, in reality I think there are three freighter markets.

    Oversized cargo, can only be carried by AN-124s and 747s. I don´t really know how big the market is but I guess well under 200 aircraft. To fill this is about 30 124s, 70? 748Fs, hundreds of 744Fs and hundreds os 744s available for conversion if needed. No lifeline there. Air Bridge order probably related to politics, customer relations and insurance against parts problems for 744s in the event of further sanctions.

    Airline freight business, rapidly going to all belly cargo and that what isn´t to 777Fs. Plenty of operators looking to convert their old pax planes to freight if needed so really no market at all.

    Parcels carriers, seem to like used NBs (lots of smaller destinations) and smaller WBs. I guess FedEx only got new 767s as it was a deal they couldn´t refuse. Now why don´t the parcels carriers want to replace all those old DC-10s with 777Fs? Well, Leeham has been writing for a while about, collapsing wide body prices 773s about to come onto the market, not to mention cheap 772s and A330s coming off lease as well.

    New freighter orders look as likely as money growing on trees.

    • Well you need to keep in mind that a 777F and a DC-10 said in the same breath is an apples and oranges. Its being replaced by 767F

      The direct comparison is the MD11. FedEx has a split fleet between 777 and MD11 and looks to keep it for some time.

      • Sort of guilty as charged, with any growth you would expect 777s to replace DC-10s, not 767s. Anyway, it doesn´t change the point that the freight market isn´t going to bridge the 777 classic to X gap.

        • Agreed on the production gap not being filled by F orders.

          767 is the closest fit to DC10 capacity wise. A300/310 as well.

          Rather than up gage the trend is to match existing.

          777s are supplementing the MD11s, Cargo is not that much more but they can make non stop trips (if that works, seems to be mixed, some but not lots, tend to stop at the same refueling places to carry more cargo)

          Interesting field of balance. Only UPS flys 767 cross Pacific regularly, but they make it work.

  9. That buys Airbus about ten years until 2028. Then it is GTF time!

    By then, see how the world market pans out, and it may be favorable for the spacious A380. Will the world embrace the 17″ seat for 10+ hour flights, or will the hundredth monkey notice that 18″ is better? The A380 and A350-1000 are the benchmark for longhaul economy comfort.

    Airbus, Embraer, and Bombardier have all chosen new fuselage cross sections for wider seats. Boeing needs to offer the standard 18″ seat or 20″ cc for armrests and aisles on all future designs.

    • “Airbus, Embraer, and Bombardier have all chosen new fuselage cross sections for wider seats.”

      I don’t know. They (we) might be piling in 11 across in a 777-10x economy minus by 2028. The A380 truly would be a giant (and possibly too heavy) bus at that point. The 777x has the thrust, the economics and more up to date technology to be the tin can of the future for high volume.

    • Ted: I come up with 80 orders left after subtracting the Virgin, mysterious order of 10, Amedeus 20 etc.

      8 years and how even is the Emirate orders?

  10. This is a reply to Matthew. GE is the best engine maker. You can deride them if you like. All the electricity you use are GE turbines. They have more technology than UTC Pratt and Rolls Royce. They are also more reliable. A350 sold 802 in 12 years. 777X sold over 300 in 2.5 years. Remember they are both twin engines so no advantage to one over the other.

    • I took delivery of the firstA330 200 with GEEngines We did the first engine change 6 hours after delivery 11 engine changes on a fleet of eventually 4 aircraft in the next 3 years S ound like we made the right choice of engine manufacturer to you? AJK

    • I hate to correct Mathew, but there are a lot of various power sources out there and GE is far from the only one.

      They supply what is called Aero Derivative, so does RR. There are also a lot of specific built turbines for power generation. AT least 6 main makers (which also includes GE).

      GE has no claim to any better than anyone else on good engines. They also have had the failures.

  11. A 12 aircraft production a year can be sustained by Emirates alone for a long time to come. This simply can sustain their replacement needs until congestion sparks a renewed interest (if ever).

  12. Airbus announced an A330 cut but production will be raised again.

    I guess the early announcement is a hint for costumers Airbus will rather cut production rates than selling cheap aircraft.

    The first airlines with second hand A380 will put pressure on airlines without A380.

    With A321neo production Airbus can wait for A380 orders.

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