imagesPublished reports today indicate that Air France, which has 12 A380s on order and already taken delivery of 9, is having second thoughts about the last two, and may want to exchange them for other aircraft types.  Our assessment is that the market for VLA aircraft is being taken over by Super Twins appears to be coming true faster than we expected.  A defection from A380 by Air France, the flag carrier in the country where the A380 is built, is major news, and clearly indicative of how much difficulty this program is in.

The problem is simply economic.  The new technology aircraft now entering, or soon to enter service, – 787, A350, and 777X, all offer competitive seat-mile economics to A380, and much lower aircraft mile costs with lower risk, as an airline has fewer seats to fill to break even.

Unless there is a compelling reason, such as the inability to gain adequate take-off or landing slots at a congested airport, airlines prefer to fly smaller aircraft that they know they can fill on a daily basis.  Because every week has a Tuesday, with lower traffic flows, it is safer to size an aircraft for routine loads, and be in the position to turn away business on peak days while raising prices.  Capacity control and discipline in the industry works, and with three major global alliances, is now easier to institute.

A number of current A380 orders are in jeopardy.  Earlier this year, Lufthansa cut its orders from 17 to 14.  Virgin’s orders for 6 have cancellation provisions that are likely to be taken.  Hong Kong Airlines’ order for 10 now appears  to be dubious, as does Air Austral’s order for 2.  And of course, the Kingfisher order for 5 A380s, even tough the airline hasn’t flown for more than a year and is bankrupt, remains on Airbus’ order book.  We don’t believe the last 23 airplanes we mentioned above will ever be delivered, and consider the realistic backlog for the aircraft to have shrunk from 259 to 231 at this writing.

The A380 will soon need an overhaul – new engines and a stretch – to make this airplane an economic leader again.  But in examining the market, the engine manufacturers are unlikely to put capital at risk to develop and certify engines for a program with a dubious market outlook.  Airbus is faced with the conundrum of either funding development of a derivative itself, with the hope that congestion and airport constraints emerge more strongly than they exist today, or find that the order book for their flagship will continue to decline.

I love the A380 – it is comfortable, quiet inside, and spacious.  But the market is simply not there. At a production rate of 25 aircraft per year, the current backlog of 231 aircraft likely to be delivered could keep the line going for 9 years, without further cancellations.  But if we were gamblers, we wouldn’t bet that production will still be underway in 2022, unless John Leahy can pull a rabbit out of a hat.

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