The trouble with four engines

Victoria
By Victoria June 13, 2013 14:03

The trouble with four engines

One thing is for sure, Paris next week is all about four engine aircraft. Demand for four engine aircraft has been thin during 2013, and the launch of the 777X is expected to further dent demand for the 747-8 and the A380. In such an uncertain economic environment you have to ask – are two engines better than four? Well no according to Emirates who have just replaced 777-300ERs with A380s on their DUB/LAX route. Emirates is doing well and is an exception to the norm at this time. Boeing and Airbus have four engine aircraft on the mind this summer as they both try to keep their large passenger aircraft programs rolling forward through the economic downturn to gain on the other side.
The Boeing 747-8 seats 467 passengers in a three-class configuration and has a list price of $352 million. While the Airbus A380, carries 525 passengers in a three-class configuration and has a price tag of nearly $390 million. These two models represent the only remaining in-production four engine passenger aircraft. The oil price boom and the financial crisis and its continuing impact on economic growth has shifted the playing field completely and airlines are reticent to take a gamble on trying to fill these large aircraft when they can hedge their bets with smaller, more cost-effective two-engine aircraft that are easier to finance and fill. That said, spending over $300 million on an aircraft is hardly a short-term bet and those ordering the A380 and/or 747-8 are looking at long-term growth on prime, constrained routes.
It is not just passenger demand that has seen airlines drawing back from very large aircraft, it is the significant fall and flat-lining of cargo demand that has tipped the scales in favour of smaller aircraft. 2012/13 was a particularly bad year for the A380 and 747-8. Virgin Atlantic Airways again delayed its order for six A380 on account of weak global economic conditions, and Turkish Airlines reduced its estimated order number for the A380 to six from the earlier indicated fifteen. In early 2013, Boeing lost an order for five 747-8 freighters from DAE Capital and has deferred deliveries to other customers leaving Boeing with just 59 unfilled orders for the 747-8 program. But even those orders are uncertain as airlines just don’t want to take the planes right now. Boeing, at the time of writing, had at least one whitetail 747-8F sitting on the tarmac at Everett waiting for a buyer after Atlas cancelled its order and there are three other 747-8s de-registered from their owners sitting in the Arizona desert at the Marana Pinal Airpark following negotiated deferred deliveries with Volga-Dnepr, Nippon Cargo, and Korean Airlines. Korean Airlines has already indicated that it will defer its next two 747-8Fs until post April 2014These aircraft remain assets on the books of Boeing until delivery.
The 747-8 has been hit particularly hard by the general global stagnation in the air cargo sector and this has led Boeing to reduce production to 1.75 aircraft per month. But even that rate may prove too swift as the program needs to order parts some two years in advance and this means production slots need to be sold quickly for 2014-build aircraft to avoid more whitetails of the type.
The far more successful A380 has now found itself in the same situation, however. Harald Wilhelm, CFO of Airbus, reiterated recently that he expects to deliver 25 A380s in 2012 but that there are still some slots to be booked from 2015. Airbus brought in only four new orders for the A380 last year, compared with a target of 30, and the company hasn’t booked a purchase for the A380 this year, on a goal of 25 contracts. The company has cut back output plans as it works through changing the wing structure. Given that the A380 program also orders in parts two years in advance of delivery, Airbus is now fast approaching a juncture where it too will have to either slow the output of A380s or risk whitetails on the tarmac.

Boeing is currently working with GE on flight tests to improve the fuel efficiency of the 747-8 by 1.8% and thus bring the aircraft within range of the performance promised at the time of the program launch. At the same time the US manufacturer is looking to test design changes that should allow airlines to reactivate the fuel tank in the horizontal tail, increasing the range. This tank has not been allowed to carry fuel since 2012 when the FAA ruled that vibrations could lead to safety issues. Even so, launch customer Lufthansa is confirming in the market that it has every intention of taking delivery of all 19 747-8s on order that are yet to be delivered.
In total, Boeing’s 747-8 has collected 111 orders since its 2005 launch and of this number 27 deliveries have been made so far. Meanwhile, the A380 has received a total of 251 orders since its 2001 launch with 81 deliveries so far.
In trying to fill the slots Airbus will inevitably have to consider the thin yellow line. In the hangers of Toulouse where the A380 is assembled there has been a yellow line marked on the floor since day one marking the point where a larger version of the A380 will one day reach. The credit crisis no doubt delayed all thoughts of a stretched A380 but Airbus could be approaching the time to offer existing A380 customers something new to look at. One thing is for sure, even though the A380 seemingly has no secondary market, it does have a core customer base, sound trip economics and a developing specialist lessor for the type.
The 747-8 on the other hand currently has none of these things, mainly due to its later launch. The program is also relying on the freighter version with cargo customers that cannot fill the aircraft they have in the skies now let alone spending on larger types in these hard times. The opening of the nose on the 747-8F has been its saving grace and if not for this ability to load unusual cargo at speed the type may well have bombed already.
The 747-8 and A380 programmes will do well and have a bright future but much hangs on orders next week – Refer to Airline Economics Paris Air Show issue for more colour on this matter which occupies the attention. Click here for the digital version
http://viewer.zmags.co.uk/publication/79c873e3

Victoria
By Victoria June 13, 2013 14:03
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