The end of the A380 affair

Adored by passengers for its roomy seats and quiet flight path, the world’s largest airliner is being laid to rest after Airbus decided to close A380 production after 12 years in service due to weak sales.

Airbus’ decision to halt production of the 550-seat A380 superjumbo last Thursday has been spurred by a dearth of orders by airline bosses unwilling to back Airbus’s vision of huge jets to combat airport congestion.

Emirates Airline signalled the final curtain for the A380 programme with a $21.4bn deal for 70 Airbus aircraft – 40 A330-900 aircrafts and 30 A350-900 – on Thursday. More than half of all A380 orders were from Emirates Airlines.

Sheikh Ahmed Bin Saeed Al Maktoum, chairman and CEO, Emirates Airline and Group, said the decision to move away from the A380 came “after many months of discussions” with Airbus and Rolls-Royce.

“Emirates has been a staunch supporter of the A380 since its very inception,” said Sheikh Ahmed.

It is with a heavy heart that Airbus would have made the fraught decision to lay its flagship plane to rest. The A380 was more than a plane: it was an icon, an emblem of a new age of mega capacity travel.

At its launch, spirits were high as Europe ushered in what it saw as a new era for aviation. Former British Prime Minister Tony Blair called the A380 a “symbol of economic strength” while Spanish premier Jose Luis Rodriguez Zapatero called the rollout “the realisation of a dream”.

But in the end, the numbers didn’t add up for global airlines. Punting on filling up the huge capacity A380 planes – along with each empty free seat burning money if not sold – was simply a risk too far in an increasingly volatile, slim margin aviation market.

“The burn rate of A380s is huge,” said Martin D Martin, founder of Dubai-based aviation consulting firm, Martin Consulting.

“The amount of fuel burned, along with the 260 people needed at each turnaround just for maintenance is staggering. For the many airlines who previously cancelled orders for the A380, it was a case of common sense and the introduction of newer, more flexible models like the Airbus A350 and the Boeing 787 Dreamliner.”

Martin said the A380 was unveiled at a time when global aviation markets were less aggressive and there was less competition. “At that time, there was an obsession with capacity, not flexibility – which is where the market has now gone.”

The aviation expert said there was ‘a lot of hype’ around the initial launch and the size of the A380 played into the Arab ‘bigger is better’ mentality.

“There was great hype at the time, but in the end, when you’re running a business, you need to consider the mounting costs in an increasingly cost-conscious age. The A380 can take more passengers than its competitors but it is also incredibly expensive to operate.”

Flexibility matters

Global air traffic is soaring but this has mainly generated demand for twin-engine jets svelte enough to fly directly to where people want to travel, rather than four-engine jets which force passengers to change at hub airports. Saj Ahmad, chief analyst at StrategicAero Research said, “Airbus’ termination of the A380 programme left Emirates with a very hard decision.

By selecting A330-900neo’s and A350-900s, both powered by Rolls-Royce engines, as well as reducing its future commitments to the A380, Emirates has effectively reduced its exposure to the giant jet and arguably introduced more fleet flexibility – this is critical with its deepening relationship with flydubai in its pursuit to expand and capture efficiencies across its growing fleet.

“Given that Emirates leases all its A380s, it has shielded itself against a new defunct programme and an asset whose values will only decline as time goes on.”

Ahmad added, “Critically, there will be further impetus now to expand the 777X order – not just to replace the existing fleets of 777-200LRs and 777-300ERs, but also with a view to providing capacity uplift for when the earliest A380s in its fleet come off lease.

“For Airbus, this deal will have been a very hard pill to swallow given the immense costs associated not just with producing the A380, but also to close it down. It will also have had to endure significant financial challenges to make the A330-900neo and A350-900 elements for Emirates attractive too.”

Ahmad said the ‘writing has been on the wall’ for years and with airlines wanting more capable twin engine jets like 777, 777X, 787 and A350, the inflexibility of the A380 coupled with its ageing engine technology meant it was never a great fit for many airlines.

He said, “The long haul capability of modern twin engine jets like 777 and 787, for example, highlights how Boeing was right not to invest in an all-new rival to the A380.”

Testament to the growing global trend for nimble planes, the second largest airline in the UAE, Abu Dhabi-based Etihad Airways, said on Thursday it has agreed with Airbus and Boeing to restructure a “large portion” of its orders, in what appeared to be a major cut in long-haul jet orders.

The airline said in a statement that it has committed to take delivery of five Airbus A350-1000s and 26 A321neos plus six Boeing 777-9s “over the coming years”.

Wes Schwalje, COO of Dubai-based research firm Tahseen Consulting said, “The A380 is a testament to humanity’s quest to push the limits.

“It is a sad day for aviation, but this is a good lesson in market validation that is likely to lead to innovation planes which might focus on taking the things that passengers love about the A380 and incorporating them in smaller wide-bodies planes.”