Rumors of the A380’s death have been greatly exaggerated. The super jumbo aircraft will continue in production for another decade thanks to an Emirates order announced today. The MoU covers 36 aircraft – 20 firm and 16 options – with delivery starting in 2020.
The new order, combined with a trickle of existing Emirates orders, allows Airbus to maintain production of the type at 6 per year into the 2020s; obviously longer if the options are picked up. That is good news for the airframer as it continues to seek out new markets and airlines where the type can succeed. Chief Operating Officer Customers, Airbus Commercial Aircraft John Leahy believes that the commitment from Emirates will support other orders as well:
This new order underscores Airbus’ commitment to produce the A380 at least for another ten years. I’m personally convinced more orders will follow Emirates’ example and that this great aircraft will be built well into the 2030s.
In many ways there is a “chicken and egg” conundrum around growing the order book. No one airline wants to be on the hook for keeping the production line alive or worrying about spare parts and support decades down the line. Emirates made very clear through the second half of 2017 that it would not buy the additional aircraft without some guarantees from Airbus. It seems that those needs have been met.
It is also worth noting that Emirates will take the new aircraft into its fleet but not all will be net adds. Some will replace existing, older A380s. Singapore Airlines also replaced some of its oldest A380s late last year so the move is not unprecedented, though the lack of secondary market for the aircraft is a concern for Airbus, airline operators and lessors.
Some of the new A380s we’ve just ordered will be used as fleet replacements. This order will provide stability to the A380 production line. We will continue to work closely with Airbus to further enhance the aircraft and onboard product, so as to offer our passengers the best possible experience. The beauty of this aircraft is that the technology and real estate on board gives us plenty of room to do something different with the interiors. – HH Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group
The reference to further aircraft enhancements could mean the A380plus developments will fly. That study, released during the Paris Air Show in 2017, calls for a new winglet and other cabin densification options to lower operating costs and improve profit potential on the type. Emirates is already flying some A380s in a 2-class configuration for higher capacity; making these other changes could further improve cost performance.
Emirates’ President Sir Tim Clark has not been shy about other ways he believes the carrier can adjust its marketing and sales processes to increase revenue on the A380 fleet. As ULCCs enter the long-haul markets that Emirates has thrived in the carrier will respond with things like paid seat assignments or limited baggage allowances to further improve yields. Some of those tweaks could extend to the premium cabins as well. Much of that depends on improvements to the carrier’s computer systems and integrating the flydubai operations into the larger Emirates network.
One major open question for the new order is whether it brings the A380 program to profitability or not. Running the production line at 6 per year is challenging on that front and the development costs were also significant. Yes, this move keeps the line open such that new potential sales can be sought. Alas, that remains a very niche market and the forecast for airports requiring the largest aircraft to address congestion continues to slip.
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What a load of PR they have been doing. They push out ‘A380 production going away?’ then this….they already knew.
Well, they knew in the sense that if the line stayed alive it would be because Emirates ordered more. But that was not a certainty. Emirates has pushed very hard on getting guarantees from Airbus around secondary market value and changes/improvements to the offering to reduce costs. Those bits took time for Airbus to deliver on.
And it is not a certainty that making those decisions is a profitable choice on the A380s for Airbus. This move could be argued as selling a few more at a small loss in hopes that a larger, more profitable order comes along in the next few years. It is all a gamble on whether the major airport congestion issues really do manifest broadly enough and whether hub-and-spoke carriers are the solution to that.
It’ll be fascinating to see what these planes look like at delivery. I’m betting not exactly like we see today.
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