Thank you and goodnight

Lauren Eldershaw
By Lauren Eldershaw February 14, 2019 10:40

Thank you and goodnight

The A380 program will now shutter upon the final Emirates delivery in 2021. This brings to an end little over 15 years of production.

I can recall when crowds lined the banks of the A1 outside Paris to catch a glimpse of this fabulous aircraft. Much like the Concorde some 50 years previously, the A380 will go down in history as an icon of civil aviation that in the end just did not make commercial sense for many airlines. That is of course where the similarities with Concorde cease, but one cannot help but think that Airbus, Engine Alliance, Rolls-Royce and all those suppliers and MROs are somewhat hard done by this morning with this news – the aircraft can be economical and is very highly regarded by passengers. It just does not have the secondary market promised, but then again neither does the 777-300ER as many are starting to find out.

The A380 is an aircraft that airlines should purchase and then run into the ground over 25 years much like the great 747-400, then the economics are solid, the only problem is you have to fill it, and as the once mighty Emirates is now finding out, it is no easy task. Indeed, fleet managers the world over looked at the A380 and wondered how on earth they would ever fill all of the seats and so the A350 and 787 took the orders – the safe orders. Emirates now understands that cutting frequency destroys its model and therefore even it must go for smaller aircraft to keep frequency and economics intact. MROs who invested heavily in the A380 will not see the return they require. Engine Alliance, Rolls-Royce and Airbus have never broken even on the program. Airports too who designed entire satellites for the A380 and widened runways etc will be lamenting today’s news.

Indeed, when I was very vocal about the folly of the A380 program some 15 years ago, I stated that it would most likely see around 300 orders over the decade, but it would require over 1200 for the program to break even for the manufacturers. Those numbers more or less stack-up in today’s overall view of the endgame at 2021 and that means a huge loss for European tax payers (remember that rather large loan?).

But let us be honest: How can anyone in this day and age make a profit on a machine that is built in four different countries where the wings have to be barged and driven at night through (sometimes tiny) streets to the final assembly line?

The big worry now for the A380 operator base is cost of parts and maintenance. Airbus says that it will ensure parts supply remains strong, but it’s likely that major MROs will end up being limited to those who have the A380 in service with parent airline fleets and that will mean increased costs. We have already seen an A380 broken down for parts, maybe more will follow. But which banks are going to finance and A380 now? Are ECAs going to continue backing the aircraft to the extent seen over the past five or ten years? Will Korean investors still be interested after today’s news? Emirates only needs to dump a few aircraft onto the market to suppress parts values for some considerable time to come, such is the limited global fleet and operator base. The A380 will most likely resemble the curve of the A340 series, and it may not be too long before RR and EA are offering 4 for 2 engine overhauls on the type to keep interest in the A380.

Today, more frequency with smaller aircraft has won over less frequency with ultra large aircraft. A decade ago I would have stated that the A380 was greener because of this, but fast forward to today and the environmental credentials of the 787 and A350 turn that argument on its head. I still see a need for A380 aircraft at ultra-congested airfields such as Beijing, however.
It is a sad day for commercial aviation for sure and the only silver lining I can find in all this might be that investing in housing along the route that the wings take to the final assembly line might be a real winner as those houses are about to increase in value substantially.

Only time will tell what the future of the A380 looks like but mulling over the A340 recent history looks like the best model to follow.

Lauren Eldershaw
By Lauren Eldershaw February 14, 2019 10:40