Air­bus push hinges on Emi­rates

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - BEN­JAMIN KATZ

Air­bus SE is work­ing on vi­tal sales cam­paigns aimed at ex­tend­ing the life of its flag­ship A380 su­per­jumbo jet, with outgoing mar­ket­ing chief John Leahy seek­ing to se­cure or­ders by the Dubai Air Show in Novem­ber, peo­ple fa­mil­iar with the mat­ter said.

Key to the push is a re­quire­ment for 20 jets worth $8.7 bil­lion at lead­ing A380 air­line cus­tomer Emi­rates, with fol­low-on or­ders from Bri­tish Air­ways owner IAG SA, Ja­pan’s ANA Hold­ings Inc. and Thai Air­ways In­ter­na­tional PCL also in the mix, ac­cord­ing to the peo­ple, who asked not to be named as the talks are pri­vate.

Air­bus may not feel that it can pro­ceed with the smaller sales, likely to be for five to 10 planes apiece, with­out the Emi­rates deal

to bol­ster the back­log, the peo­ple said. In the ab­sence of new or­ders the com­pany is set to pare out­put to less than one A380 a month, most likely sound­ing the death knell for the jet amid a dwin­dling order back­log, and could de­tail the en­vis­aged cut in an earn­ings up­date this week, they said.

A spokesman for Air­bus de­clined to com­ment ahead of the fi­nan­cial re­port, which the Toulouse, France-based com­pany has sched­uled for Thurs­day.

The dou­ble-deck A380 is the world’s largest jet air­liner and air­ports have had to up­grade gate fa­cil­i­ties to ac­com­mo­date them. A ver­sion of the A380 flown by Emi­rates seats as many as 615 pas­sen­gers.

Boe­ing has al­ready said

that it could end pro­duc­tion of the ri­val 747, where the rate has been re­duced to just one plane ev­ery two months, so that the cur­rent back­log will last al­most four years.

At the same time the jumbo is also of­fered as a freighter, giv­ing it a wider po­ten­tial mar­ket than the pas­sen­geronly A380.

Land­ing a life-ex­tend­ing deal for the A380 would help cap the ca­reer of Leahy, 66, who an­nounced in May that he’d be step­ping down af­ter 23 years as mar­ket­ing boss and more than $1 tril­lion in sales. The Amer­i­can re­mains adamant that fast-grow­ing mar­kets will fa­vor the A380 in years to come if it can be kept go­ing, and is hold­ing off on his de­par­ture to fo­cus on the Emi­rates talks, one per­son said.

Emi­rates is eval­u­at­ing an up­graded ver­sion of the su­per­jumbo un­veiled at the Paris Air Show in June and

dubbed the “A380 plus.”

The de­sign adds fuel-sav­ing winglets, which com­bined with an al­ready-an­nounced lay­out re­vi­sion car­ry­ing 80 more pas­sen­gers would shave 13 per­cent from perseat costs, though Tim Clark, the air­line’s pres­i­dent, said he doesn’t need ex­tra berths.

Air­bus’s head of pro­grams Di­dier Evrard said in May it would de­cide by the end of this year whether to re­duce pro­duc­tion of the A380 — which has a list price of $436.9 mil­lion — to fewer than 12 jets a year. A fail­ure to get the Emi­rates deal done could see out­put fall to a less than one A380 a month, a fig­ure re­ported by France’s Chal­lenges mag­a­zine Thurs­day.

The plane­maker may still be forced to cut the A380 rate even with a fol­low-up order from Emi­rates if the air­line opts to take the jets at a later date be­cause of over­crowd­ing

at its Dubai hub, though Clark has sug­gested the planes would most likely re­place older su­per­jum­bos com­ing off lease from 2020.

Even the move to one plane a month, known as “rate one” and cur­rently due to take ef­fect from 2018, was widely viewed as the be­gin­ning of the end for the strug­gling A380 pro­gram when it was an­nounced last year, though Air­bus says that it’s able to break even at that pro­duc­tion level on a per­plane ba­sis.

The com­pany has handed over 213 A380s to date, in­clud­ing 28 last year, to 13 cus­tomers.

Of the re­main­ing 104 still listed in the of­fi­cial back­log, as few as 57 could ac­tu­ally be de­liv­ered, ac­cord­ing to Jef­feries an­a­lyst Sandy Mor­ris, rep­re­sent­ing less than five years of pro­duc­tion at one plane a month. That in­cludes 47 for Emi­rates.

AP

Bri­tain’s Prince Wil­liam (left), his wife Kate, the Duchess of Cam­bridge, and As­sem­bly Line Vice Pres­i­dent Olaf Lawrenz tour the cock­pit of an A320 jet Fri­day at an Air­bus fac­tory in Ham­burg, Ger­many. Air­bus is work­ing on a new sales cam­paign to in­crease or­ders of its much larger A380 su­per­jumbo jet.

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