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December 2, 2023
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Emirates, as is customary, places orders and makes headlines at the Dubai Air Show. This year is no exception, as the carrier has ordered 40 Boeing 787-10s, and is demanding a production guarantee for the next decade from Airbus prior to ordering additional A380s.

Positive News for Boeing:

The firm order for 40 787-10s from Emirates is good news for Boeing, who secure another major customer for this airframe. While this order has long been anticipated, the finalization cements another type in the Emirates fleet for Boeing, who have already secured a number of orders for the 777-8 and 777-9 from EK. Each of these aircraft will be utilized in missions for which they are optimized.

The 787-10 order is a blow to Airbus, as an order for 70 A350s was cancelled in 2014. Boeing has now won that competition, as the 787 and A350 are similarly sized. In an interview, Tim Clark indicated that over the ranges Emirates planned to utilize the aircraft, the 787-10 had slightly better economics than the A350 in their estimation, although Airbus might disagree. While the 787-10 has a range that is 1,400nm shorter than the A350-900, it has a smaller wing and is lighter, providing more efficiency for shorter-haul routes on which Emirates plans to utilize the aircraft.

Mixed News for Airbus

Airbus was hoping to announce an order for 36 additional A380 aircraft to Emirates. But negotiations are still underway, with Emirates demanding that Airbus continue production of the aircraft for another 10-15 years.

At current rates of less than 1 per month, the A380 order would provide another 4 years of backlog that should enable Airbus to easily continue the aircraft through 2027. One would think a 10 year guarantee would be quite easy to achieve.

But the backlog for the A380 is somewhat deceiving, as a number of order have been deferred substantially and remain at risk of cancellation over the longer-term. Airbus is counting on increasing airport and traffic congestion to fuel additional demand for the A380, but this hasn’t happened yet.

While the growth of traffic at higher rates than infrastructure in China and other areas is continuing, the question is whether this will become critical enough over the next decade to generate orders for the A380. Because smaller aircraft now offer nearly equivalent seat-mile economics with lower aircraft mile costs, the offer less risk to an airline.
If an airline can fill an A380, it is a marvelous and profitable aircraft. But most airlines are quite risk-averse and likely won’t order the A380 until they have little choice due to slot and gate constraints that make large aircraft necessary. It does make sense to consolidate frequencies at London Heathrow and utilize the additional slots for other routes, as infrastructure costs are escalating dramatically. But there aren’t that many airports with Heathrow economics – yet.

It is in the interest of both Airbus and Emirates to come to an agreement on A380 production, and we expect that a deal will get done. But whether that can be done during the Dubai Air Show is another question entirely. Stay tuned, as we expect an agreement will be reached.

The Bottom Line:

Boeing has scored a major victory for the 787-10 over the A350XWB at Emirates. Given that the 787-10 order is for 40, while the cancellation of the A350XWB was for 70 aircraft, there may be further growth potential for Boeing at Emirates.

The influence Emirates wields over the A380 program with Airbus will be tested, as Tim Clark wants 10-15 years of continuing production. Airbus would prefer not to make a long-term commitment to an aircraft that it may not be able to sell a decade from now without an expensive upgrade. Such an upgrade doesn’t appear to make economic sense given the lack of demand for the A380 from customers other than Emirates. While it is in the interest of both Emirates and Airbus to reach an agreement, both parties will need to compromise.

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