American Airlines announced that it is switching its orders (previously US Airways) for the 276 seat A350-800 to the larger 315 seat A350 -900 model.  It is no secret that Airbus has been working its customer base to trade up to the larger model, as the majority of sales for the have been for the larger versions.  It would appear that Airbus wants to cancel the A350-800 and potentially introduce a larger A350-1100 to compete with the 777-9 in the 400 seat arena.

After American’s switch, only 61 A350-800 models remain on order, with several additional customers likely to also switch to the larger model.  The two largest remaining customers, 12 for Alitalia and 10 for Yemenia, might not be in a position financially to purchase the aircraft.  Add five for the defunct Kingfisher that remain on the books, and only 34 are left.  With leasing company orders for 8 more, and likely to switch, Airbus needs to switch only 26 firm orders to the -900 to be able to cancel the program.  In North America, Hawaiian remains an A350-800 customer for 6 aircraft, but are likely to follow American’s lead and switch.  That would leave only a handful of to convert, a no-brainer for Airbus.

A350Xout

Why cancel the A350-800?  There are several reasons Airbus should cancel the A350-800.

  • First, it is competitive with but does not beat, the and 787-9 in terms of operating economics.
  • Second, it cannibalizes the market for the A330, as the 276 seat A350-800 is positioned between the 253 seat and 296 seat A330-300 in size.
  • Third, it provides long range that most airlines don’t require for 90% plus of their routes.
  • Fourth, the A350-800 is significantly more expensive than the similarly sized A330 models.
  • Fifth, it doesn’t have enough volume to justify production, and Airbus doesn’t need more A340 low production models to sap profitability.
  • Sixth, and perhaps most important, it frees development capital that Airbus could use to either develop a larger A350-1100, or use for an A330neo program to keep that program viable for another decade.

If Airbus cancels the A350-800, what else should they develop?

Airbus has two choices that make sense.  Airbus could close the large seat gap between the A350-1000 and A380-800 with an even larger version of the A350, following the market trend moving towards larger twin engined aircraft, as orders for the competing Boeing 777-9 illustrate.  The second choice is the development of an A330neo which remains intriguing to several key customers, as we discussed in our report on that topic in April, 2012.  That report is available at no charge in the featured downloads section at the top right margin of this page.

The choice between these two models is a tough call.  Boeing has outflanked Airbus in twin-engine wide-body capacity, with smaller 787s and larger 777s surrounding the A330 and A350 families.  An A330neo, with lower capital costs, could compete effectively with the 787, while a larger A350 could outperform the 777-9 economically.

Were the decision up to us, and we could only choose one program, we’d close the gap between the A350 and A380.  Because the A380 itself will need refreshing to remain economically viable as smaller match seat-mile economics; an A350-1100 makes sense for the market as a bridge between smaller models and the A380.

Stay tuned, as decisions are expected next year.

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