Tuesday, April 28, 2015

Aviation: 10 Years of Airbus A380s in the Skies; Reason to Celebrate?

On the 27th of April 2015 Airbus celebrated the 10 year anniversary of the Airbus A380's maiden flight. To date the Airbus A380 is the biggest airframe (in terms of capacity) available for passenger transport.

The Airbus A380 is the result of a study Boeing and Airbus conducted in 1993 to investigate the feasibility of  an all new Very Large Aircraft (VLA). Boeing stepped away from the idea of an all new VLA on concerns about profitability of the aircraft for the manufacturer. The development costs were significant with a very low probability of covering these costs.

Airbus, however, continued and in 2000 launched the €8.8 bn program. Five years later the first Airbus A380 chose the skies. 


Setting a new standard for passenger comfort

The Airbus A380 should have about 20% lower operating costs compared to the Boeing 747-400, but one of its truly strong points is the space it has that allows airlines to offer unprecedented luxury. 
Cabin's on aircraft become more and more luxurious, some airlines add it because there is demand for it but some add luxury features to show what they are capable of. 
Airlines from the Gulf Region are known for doing this and there is nothing wrong with it. The Gulf carriers are perfectly demonstrating the passanger comfort and luxury the Airbus A380 offers. From showers, to recliner seats, to private cabins, to cocktail bars: the Airbus A380 has it all.


Safety Record

To date the Airbus A380 was not involved in serious accidents. Rolls Royce engines issued design changes to the turbofans after one of the A380's engines suffered from an engine failure. A (nearly) perfect safety record is always reason to celebrate.


Market

The Airbus A380 enjoyed significant interest from the Gulf carriers, which ordered most of the mega jumbos. Gulf carriers mainly are buying the A380, because money does not play a role and the A380 allows the carriers to make the cabin as extravagent as desired. So the Airbus A380 is popular in the Gulf region, but outside of the Gulf region the popularity of the airframe fades rather quickly.  US carriers are not buying the airframe, because the airframe is too big for their network. European carriers have bought a few airframes, but refrain from ordering more aircraft due to the low load factors and the challenging times the European market is facing. Asian airlines have ordered the airframes as well but are not ordering any more aircraft, because the A380 load factors are too low. 
Airbus once said there was demand for 1700 VLAs, years later the company didn't manage to sell even sell half of that 'demand', they did not even manage to sell 25% of that demand. 
Airbus is still losing money on the production of the airframe. 
Looking at the market  forecast and the huge gap with reality, there is no reason to celebrate.


Orders

So far Airbus delivered 156 out of the 317 airframes that were ordered. If the manufacturer is able to deliver 30 airframes per year, there is still approximately 5.5 years of production for the Airbus A380. Inflow has been marginal in recent years. For a project that costed billions, a 15.5 years life span from first flight to last delivery is not a reason to celebrate. 



Emirates using its power

Emirates is Airbus' biggest customer for the A380 and is also using that position, forcing Airbus to come up with new engines options for the Airbus A380. So although money does not matter for the Gulf region, as long as you are running an airline (or any business), money does matter. As Airbus' most loyal customer for the superjumbo the carrier is expecting Airbus and the engine manufacturer to land money into a project that exceeded its budget by billions and has no positive outlook. Emirates is exploiting its position as the biggest customer, knowing that Airbus needs the orders and also knowing that Airbus' market forecast has been wrong. 

So all with all, you can celebrate 10 years of Airbus A380 in the Skies. For Airbus it will be a celebration with a bitter taste...

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