The A380 story

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By admin April 28, 2015 19:36

The A380 story

Ten years ago I stated that the A380 program would never break even after receiving a cost breakdown for the program. I and many others wondered why Airbus was wasting so much R&D spend on a four engine aircraft that is not ideal for cargo applications due of the inability of the nose to open given the design.

Roll forward a decade and what have we had? The A380 really is a traffic driver. It has performed very well indeed where deployed by most airlines and is a premium traffic driver that no other aircraft can match. The A380 does give airline managers a headache on the matter of configuration. Get that wrong and the aircraft will create losses at speed. But those that have got the balance correct (close to all operators at this time after a few mistakes) have seen fantastic premium passenger growth on their chosen routes and most operators have seen a trend of passengers seeking out A380 flights over 777 options within the same five hour schedule window. The A380 has also allowed many airlines to create new products such as the Korean Airlines duty free shop, which has created strong additional revenues for that carrier. The aircraft has also proved itself to be a real hit with investors, primarily due to the quality of the airlines taking the asset it must be said, but also because the value of the asset allows for investors to get their teeth into a clean clear-cut deal on a single asset with a clear exit window timeframe. Deals by Doric, Magi Partners, Credit Agricole and UK Export Finance (to name but a few) have been increasingly impressive in their exceptionally unique takes on financing the A380 at very low cost. We have never before seen such a wonderful diversity of aircraft financing options for any other aircraft type in aviation history, again much of that comes down to the sheer size of the asset value and the quality of the customers.

The A380 also proved that it is a strong beast and maybe a lucky one – the Rolls Royce Trent 900 engine blowout on a Qantas A380 over Batam Island, Indonesia on November 4, 2010 may well have brought down most other aircraft types.
But with 317 orders booked from just 18 customers with the aircraft in-service with just 13 operators at this time – the A380 remains in a precarious position as an ongoing program in the eyes of many. A problem for the A380 is the 777X program, but cost per passenger stats remain in the A380’s favour – An airline just has to be very sure that they will fill it.

The global financial crisis was perhaps the single most important event that affected the A380. The sudden and dramatic tail-off in passenger traffic convinced many airlines (including all the US airlines) that the A380 was simply too much of a risk in a world where aircraft load factor can go from 85% down to 70% in a matter of months. The US majors are gambling that they can beat off the A380s of the Middle East and Asian majors with twin engine aircraft that are easier to fill and have more application/deployment options. They are playing it safe, but it seems that at the moment they are losing traffic to the A380s of their overseas competitors. It will be interesting to see if Malaysian Airlines can sell or lease its A380 aircraft. At the moment we are informed that the A380 is for sale or lease, if Malaysian is not able to divest the A380 in some way then it will have to make use of it somehow. It will also be of interest to see how the aircraft is performing for Thai Airways during this quarter when passenger numbers are much reduced on long-haul routes. These two areas could be a very good indicator for many future customers considering the type but worrying about load factor risks.

We are now fast approaching the first windows where the A380 will come onto the secondary market. If other airlines looking to take mid-life A380s are able to finance the aircraft successfully, we could see a huge boost for the type overall with maybe many waverers such as THY convinced that ordering large numbers of A380s is a viable option after all.

Will we see an A380-900 or Neo? Eventually yes there will be something but in the here and now the A380 has over 90% share in the very large jet market and it is turning into a virtual monopoly for Airbus that it can then exploit with variations – An A380 family dare I say.

Airbus, having spent a fortune bringing the A380 to market, might as well go for it and upgrade the aircraft with Rolls Royce to create something that puts a very large gap indeed between it and the 747-8. One wonders if a Paris Air Show announcement is on the way in two months’ time……?

Meanwhile Boeing is seeing renewed interest in the 747-8F as the global air cargo market rebounds from a long slump, CEO Jim McNerney says. Airfreight volumes leapt 12% in February, but much of this is due to the Lunar New Year and poor weather in the US leading to congestion in US ports. March should show if air freight is on a return to health.

admin
By admin April 28, 2015 19:36