Sales of Air­bus’s su­per­jumbo have been any­thing but super

▶As or­ders dry up, the fu­ture of the Air­bus su­per­jumbo is in doubt ▶“The size of the plane scares most of the air­line world”

Bloomberg Businessweek (Asia) - - CONTENTS - An­drea Roth­man

Since its com­mer­cial in­tro­duc­tion in 2007, the Air­bus A380 has brought a long-lost sense of glam­our back to travel. Its first-class cab­ins 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. Fi­nan­cially speak­ing, it’s a dis­as­ter of sim­i­larly grand pro­por­tions.

An ini­tial flood of in­ter­est from air­lines has turned into a slow drip, and Air­bus is lean­ing heav­ily on one cus­tomer, Emi­rates, for sales. 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 193 A380s—early on it pre­dicted air­lines would buy 1,200 su­per­size planes over two decades—and has only 126 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 su­per­jum­bos. As the avi­a­tion world starts gath­er­ing on July 11 for the Farn­bor­ough In­ter­na­tional Air­show in Eng­land, where car­ri­ers often an­nounce big or­ders, there’s lit­tle in­di­ca­tion any A380 con­tract will be un­veiled.

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. The com­pany only last year man­aged to start break­ing even on pro­duc­tion, and it’s ac­knowl­edged it will never re­coup the €25 bil­lion ($32 bil­lion) it spent on de­vel­op­ment. Za­far Khan, an an­a­lyst at So­ciété Générale, says the con­cern is that if pro­duc­tion slips far below 30 planes a year, the pro­gram could fall back into the red. “The cry­ing hap­pens when it’s los­ing money,” Khan says.

Ax­ing the A380 out­right is hard to do. Be­sides the em­bar­rass­ment of ad­mit­ting de­feat on the pro­gram, Air­bus would need to write off fac­to­ries across Europe and re­de­ploy thou­sands of work­ers. Air­lines 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; Dubai, for in­stance, built a ded­i­cated ter­mi­nal for the A380.

Air­bus says 10 years is too short a time to de­ter­mine its fate. While Chief Ex­ec­u­tive Of­fi­cer Thomas En­ders said in De­cem­ber the com­pany would as­sess the plane’s fu­ture “in cold blood,” sales chief John Leahy has pledged to con­tinue the pro­gram. “The A380 is here to stay,” he says. “We are main­tain­ing, innovating, and in­vest­ing in it.”

With its short snout and up­per deck crouch­ing above the cock­pit, the A380 can’t match the dis­tinc­tive pro­file of Boe­ing’s hump­backed 747.

None­the­less, the A380 has largely sucked the life out of Boe­ing’s jumbo—per­haps the big­gest Air­bus suc­cess with its plane. Since 2012, when Boe­ing started de­liv­er­ies of the lat­est pas­sen­ger ver­sion, the 747-8, it has done far worse than the Air­bus dou­ble-decker, with just 40 sold and 11 more on or­der.

Four-en­gine planes have be­come a tough sell be­cause of their high fuel con­sump­tion. Air­bus in 2011 scrapped the A340, its other four-en­gine model, as car­ri­ers grav­i­tated to smaller, more eco­nom­i­cal wide-bod­ies such as the Air­bus A330 or Boe­ing 777; and adding more fuel-ef­fi­cient en­gines to the A380, an up­grade Air­bus has pulled off for smaller planes, re­mains risky with so few or­ders com­ing in. Al­though the A380 is pop­u­lar with pas­sen­gers for its spa­cious in­te­rior and smooth flight, car­ri­ers find it tough to fill in tur­bu­lent eco­nomic times. Malaysia Air­lines learned this the hard way when, in the wake of a pair of fa­tal crashes in­volv­ing other air­craft, it couldn’t draw enough traf­fic to fill the half-dozen A380s it had bought. The air­line is try­ing to off­load two of them but can’t find buy­ers.

Lately, Air­bus has seen a hem­or­rhag­ing of con­tracts that once seemed solid. In the past two years, three A380 cus­tomers have dropped their or­ders be­cause of fi­nan­cial dif­fi­cul­ties or shifts in strat­egy. Leas­ing com­pany Amedeo three years ago an­nounced plans to buy 20 A380s, but it’s failed to find a sin­gle air­line will­ing to lease them and has de­layed de­liv­er­ies. The plane’s big­gest fan by far is Emi­rates, with 81 fly­ing and an ad­di­tional 61 re­served, which adds up to 45 per­cent of the A380s Air­bus has de­liv­ered or has on or­der. The car­rier is fret­ting about the jumbo’s fu­ture. “I think the size of the plane scares most of the air­line world,” says Emi­rates Pres­i­dent Tim Clark.

The A380 was a pres­tige-fu­eled pro­ject for Air­bus and the Euro­pean gov­ern­ments that backed the pro­gram.

The com­pany had been suc­cess­ful with its A320 sin­gle-aisle jet in­tro­duced in the 1980s, but it wanted a big­ger piece of the lu­cra­tive lon­grange mar­ket. With the man­agers who hatched the plan two decades ago long gone, the ar­dor has abated, says Richard Aboulafia, a long­time critic of the plane and vice pres­i­dent of avi­a­tion con­sul­tant Teal Group. “No­body seems to want this plane other than Emi­rates,” he says. “The A380 might just make it un­til 2020, but even that’s al­most op­ti­mistic at this point.”

The bot­tom line A decade af­ter the Air­bus A380’s de­but, its fu­ture is in doubt as air­lines shift to more ef­fi­cient planes.

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