Point of view: Killing the A380 an act of kindness

Airbus’s decision to shut down the A380 programme has been a long time coming, but the blow is more to the European manufacturer’s pride than its pocket.

Right now, Boeing is knocking spots off its rival in terms of cash generation and shareholder returns. The capacious A380 – a hit with passengers though not with airlines – made Boeing’s 747 jumbo seem rather diminutive. From 2021, without this symbol of Europe’s industrial might, it will seem more ordinary. Arguably, that’s a good thing.

The A380 isn’t an important source of revenue and it doesn’t make money. Putting it out of its commercial misery is the kind thing to do.

The financial costs of exiting the double-decker programme look manageable. Airbus’s fullyear profit suffered a net €463 million ($522 million) hit from the cancellation, but it expects a neutral impact on free cash flow over the next three years.

Revenue drivers

By announcing the decision now, incoming chief executive Guillaume Faury can focus on more important revenue drivers such as the single-aisle A320 and the wide-body A350, which together make up about nine out of 10 Airbus deliveries.

Including the A380 and A400m charges, Airbus still managed to generate €5 billion of operating profit in 2018, which isn’t too shabby. The company is targeting a 15 per cent increase in adjusted operating profit and €4 billion of free cash flow, a one-third improvement. The 5 per cent rise in Airbus’s share price yesterday brought the stock to within touching distance of a record high, suggesting investors too are looking to the future rather than mourning the engineering triumphs of the past.