2014-07-29_9-36-41[UPDATE: Bloomberg News]

Today’s news about its cancelled order at first glance looks like very bad news for Airbus.  Clearly the cancellation is disruptive for Airbus, but they must have reached the end of their patience.  Skymark has made $255m in payments so far, but cannot secure the rest of the finance to pay for the aircraft on order.

So now what?  Actually the situation Airbus faces may not look as bad as seems.  Firstly Airbus has known about the Skymark situation for some time.  Since Airbus terminated the deal, would seem they have the upper hand. After all they say  “Airbus is reserving all its rights and remedies” and they have $255m banked.

Moreover, the Airbus sales team have no doubt already identified potential customers for two “bargain” A380s.  There are reports British Airways is extremely pleased with the aircraft and is seeing 98% load factors. They likely want to accelerate deliveries because the aircraft is a money maker (as Emirates has always said).  Conveniently the aircraft have Rolls-Royce engines.  Since the Skymark airplanes (there are two close to completion) do not have yet, a switch to British Airways is plausible.

There is another potential customer in the wings – Turkish.  This airline is on a growth tear only eclipsed by the Gulf carriers.  has been open about its interest in a VLA. Both Boeing and Airbus have courted the airline.  Would Turkish appreciate a “bargain”?  Not a tough question really, is it?  For Airbus is a good thing the aircraft moves from a weak customer to a strong customer.  British Airways and Turkish are both better customers for their flagship.

9888

As unpleasant as the Skymark news is, these things happen. Customers change their minds (A350XWB at Emirates in 2014) and then may change them again (A350XWB at Emirates in 2015?).   The airline business is subject to shocks and an absence of finance is one of those shocks.  Skymark was a risky bet from the original order.  Indeed if banks won’t lend the money to Skymark would seem the concern is with the airline, not the airplane.

The A380 is not in some kind of new jeopardy.  As we noted in October 2013, Air France was having second thoughts about the last two A380s had on order.  Here we are, nine months later, and Air France/KLM announced good second quarter profits.  Perhaps the airline now wants those A380s.  This is a business with big ups and downs.  Airlines historically have ordered airplanes when times are good, with deliveries often timed for the next down cycle.  With different economic cycles in Asia, Europe, and the Americas, and growth in the BRICs and emerging countries, the market has begun to change, and  aircraft deliveries must follow the new realities of the market.

Please follow and like us:
Pin Share
%d bloggers like this: