Airbus Terminates Production of A380
(Source: Forecast International; issued Feb 14, 2019)
by Douglas Royce
Airbus will terminate production of its flagship A380 widebody in the wake of a decision by Emirates airline to cancel 39 of its remaining orders for the type. Emirates now plans to take delivery of only 14 more A380s over the next two years and will instead order 40 A330-900 and 30 A350-900 twin-engine widebody airliners.
“As a result of this decision, we have no substantial A380 backlog and hence no basis to sustain production, despite all our sales efforts with other airlines in recent years. This leads to the end of A380 deliveries in 2021,” Airbus Chief Executive Officer Tom Enders said in a statement announcing the decision.
Airbus will start discussions with its social partners in the next few weeks regarding the 3,000 to 3,500 positions potentially impacted over the next three years. However, the ongoing A320 ramp-up and the new widebody order from Emirates airline will offer a significant number of internal mobility opportunities.
Airbus previously announced plans to deliver only eight A380 aircraft in 2019. The decision followed years of declining demand and a shrinking backlog for Airbus’ biggest airliner. The A380 has long been a niche product, with its primary markets in Asia, the Middle East, and Europe. Fleet sizes tend to be small; only three airlines – Emirates, Qantas, and Singapore Airlines – have ordered more than 20 aircraft. Most customers have ordered fewer than 10.
The A380 must be flown with high load factors to be cost-efficient versus smaller twin-engine widebodies, so the A380 is suitable for use only on highly trafficked routes.
Airbus believes that airport congestion and increased travel between large, distant city pairs will eventually force airlines to buy super-jumbo airliners in order to maximize traffic through large airports whose slots are typically in short supply. So far, the airlines have coped with slot constraints by moving to larger seating capacity in twin-engine aircraft rather than buying very large airliners like the A380 and Boeing 747-8I. Airlines often can avoid big-city bottlenecks by operating from secondary airports or flying direct on less highly trafficked routes. The market has not developed the way Airbus expected it to when the A380 program was launched.
In standard configurations, the Airbus A350-1000 seats 366 passengers and Boeing’s revamped 777-9X will be able to seat more than 400 passengers. While not entirely removing the need for the A380, the development of these new models has minimized it.
Airbus executives have resisted letting the program die given the prestige they attach to building the world’s biggest passenger jet. However, Airbus management is currently in flux. Airbus CEO Tom Enders is scheduled to depart in a couple of months; and with Emirates canceling so many orders, it makes sense to kill the program before new management takes the helm.
Opinion: The A380 Dream Crash-Lands
(Source: Deutsche Welle German Radio; issued Feb 14, 2019)
The end of the Airbus A380 is not the end of European aircraft manufacturing. It is the result of mistakes that were made many years ago. Now Airbus has to learn the right lessons, says DW's Henrik Böhme.
A week ago, Australia's Qantas canceled their order for eight Airbus A380 superjumbos. But the real nail in the coffin came from the Persian Gulf when Emirates airline, the largest A380 customer, told the manufacture that it would reduce its order from 162 to 123 aircraft. They would only buy 14 more and that was it.
In the end it was a commercial decision to stop building the prestige plane; in another three years it will all be history.
Naturally it won't all be over tomorrow or even in three years. The giant flying bird won't suddenly disappear from the sky. In fact, it will attract the attention of passengers at airports for many years to come just like the famed Boeing 747 jumbo jet still does.
Yet fascination is one thing, economics another.
Too big, too expensive
The Airbus project was controversial from the start. Heads have rolled over the years, and the European project almost fell apart because of such simple things like cables that were too short. But in the 1990s many believed in the giant plane, because it was becoming clear that more and more people would be flying.
Sure, the number of passengers is steadily increasing, but people are not constantly flying back and forth between the big hubs like New York and Singapore. And making an airport fit for the A380 was a costly affair for operators. In the end only a few airports now have the capacity to even handle the giant plane.
For airlines though other cost factors played a role. First there is the purchase price of around €381 million ($430 million). Despite the fact that airlines were usually able to get a discount on the sticker price, the A380 was never a bargain.
Then there are the expensive maintenance and running costs. The four engines eat up a ton of kerosene, a fuel that has gone up in price. In reality, it only really paid off when the plane was filled to capacity with paying passengers. Airbus did have the idea to make a new more economical model of the plane with only two engines, but that would have devoured another €10 billion in development costs. The idea was dropped.
Surely everyone saw problems coming down the road. Yet in this case you have to give it to Airbus' big competitor Boeing. They were smarter and learned to listen better to their customers. They decided against a continuation of their jumbo jet program and instead focused production on a number of smaller, more economical aircraft with great comfort for long-haul passengers.
Thus, the Dreamliner, Boeing's 787, became a bestseller. Airbus has since followed in their footsteps and is trying to hold their own with the Airbus A350. So far there is a great demand for this plane. Just like for their medium-range model A320. These jets are now the bread-and-butter business of the European group.
Reaction from workers to the A380's demise has been muted. They have enough work since they already went through big cuts a year ago when Airbus slashed around 4,000 jobs due to the sharp decline in A380 sales.
The good news is that things will continue for Airbus, and a lot has been learned from the A380 project. Most importantly the weaknesses of a project with such a complicated supply chain with different production locations and complex logistics have come into the spotlight. As has the fact that you have to react early to customers' wishes.
Ironically, since the end of the A380 has already been hinted at for some time, the share price has had time to adjust. Since the beginning of the year, the stock has increased by 30 percent. Sometimes flights of fancy and crash landings are closer to each other than we think.