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Jun 22, 2017

Airbus A380 Plus doesn't add up for Emirates

Airbus A380 Plus scores a minus with Emirates. This might not end well for you, as a regular sized passenger

It might be in service for decades to come, but the A380s may follow the 747s to oblivion

The thought of an Airbus franchise that no longer offers the world’s largest airliner, its A380, has started to arc up again as its largest customer, Emirates, declined to embrace the Plus package the European consortium rolled out at the Paris Air Show.

As reported by Aviation Week the president of Emirates Tim Clark isn’t buying proposals for 11 across seating in economy on part of the main deck, nor the replacement of the forward grand staircase between its two floors as options for lifting the airliner’s seat count and reducing operating costs by as much as 13 percent compared to the current  version.

The places this impasse could lead to need careful consideration. Should Airbus decline to keep the A380 on life support until demand for it returns in the coming decade the largest and most comprehensive range of airliners being produced will be from Boeing, with its 777-X series, becoming the largest capacity jet available for much of the 2020s if not well into the following decade.

Europe would lose its ‘crown’ in terms of size and diversity of passenger jet aircraft models. Whether that actually matters to its shareholders is another matter of course. In 2017 it is safe to say it matters a lot, but in another 10 years, maybe it won’t rate beside the major achievements of Airbus as a profitable and very efficient planemaker and major EU employer.

It is as clear as it can be that Emirates wants the A380 to continue, but with the benefits of the latest engine technology and to realise the potential airframe improvements that already make the A350 series a formidable and inherently more comfortable jet to operate from an airline or passenger perspective.

The A380 was designed from the outset to be enlarged in terms of capacity and even range. When the first production A380 for Singapore Airlines was rolled out in Toulouse in 2007 the attendant media heard that 2014 might be the right time to stretch the fuselage and make the jet capable of carrying as many as 1000 passengers instead of 840. Or in a multi class layout, maybe close to 700 passengers compared to around 525 today.

But the world of air transport changed. Carriers started to put more passengers into A330-300s in tight fit cabins than some of the more premium layouts of the early A380s. A similar densification strategy overtook the classic amenity of the 777s, and airlines found that there was money in hurting and humiliating people with tight seats and toilets they couldn’t reasonably endure or use.

This process is probably far from over, even if it discourages people from flying as often as they used to. Newly minted consumers in Asia and low fare inspired growth in general have become the primary source of new custom in air transport. Service standards have not only been compromised in the main economy cabins, but in the more premium cabins as well.

It is difficult to say where this might end, but it could see an end to A380 production and development, and the relegation of Airbus to a secondary role in making very large airliners.

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29 thoughts on “Airbus A380 Plus doesn’t add up for Emirates

  1. comet

    Tim Clark just killed the A380 Plus.

    But he’s just playing hardball. Airbus must have a love-hate relationship with this guy.

    Both sides seem to agree that an A380 NEO won’t happen any time soon. That’s why Clark is pushing hard for his second favoured option: wingtips.

    Airbus will be left with no choice but to succumb to Clark’s demands to have a retrofit wingtip option available for existing A380s.

  2. Deano DD

    What is Airbus doing ?

    Surely Clark and Emirates were consulted prior to 1 cent being spent on an updated A380, but it would seen not to be the case
    Perhaps Airbus just takes Emirates orders for granted and this new A380 model is targeted at new customers

    1. derrida derider

      “Surely Clark and Emirates were consulted prior to 1 cent being spent on an updated A380”
      Maybe they were.
      It wouldn’t be the first time in aviation history a major airline has said to a manufacturer “go ahead and develop that plane – we’ll buy a motza of ’em”. Then when the manufacturer has spent their money the hardball game starts – “well actually, now that we’ve seen it I don’t think we need it after all”, followed some time later by “maybe if the price is right we can squeeze in a few, just as a favour to a mate …”.
      This sort of thing is exactly why the aviation industry has a long history of breaking stockholders’ hearts.

      1. ghostwhowalksnz

        No one has spent any money over and above the schemes the manufacturers always have floating around for incremental improvements.
        Boeing has put out some small improvements on the 777-300ER, partly because they will be used on the 777X and to spice up the pot for those orders being delivered on the runout versions.

  3. ggm

    I don’t get it. Something must be missing in the story, like delay to receive the benefits, or a higher up-front cost, or more units required to be on book to achieve. As told, its insane: nobody would decline a 13% opex drop, unless the cost side meant there was no net benefit.

    So whats the un-stated story here? What part of the buy/lease cycle breaks, to make this 13% opex possible? Is the real story that he was never going to buy more, and this is just how it exposes? Or is the real story that he’s driving hard for a back-room negotiated pricepoint which he likes, and if it pushes AirBus closer to negative he doesn’t care?

    1. ghostwhowalksnz

      More passengers means they can charge more money for an airliner. Emirates would probably like to pay less to carry the numbers they carry now.
      Im thinking Plus is about those planes coming off lease, an easy way to increase their ‘depreciated value’ a bit more ? Int that what happens to a flat thats a bit tired, make over and on sale ?

  4. Mark Skinner

    The A380 program has two functions. One is as discussed here, namely to sell the aircraft. The other, which is harder to see, is to crowd Boeing out of the market.
    This is important, because it’s not just whether the A380 makes a profit, but also whether it can stop Boeing getting market share and the ability to spread its costs over a large range of aircraft.

    So, for example, twenty years ago, Boeing had dominance in most of the aviation market segments. This gave it all sorts of advantages in terms of commonality of parts and training when selling to operators with diverse fleets.

    With the A380 driving the B747 from the skies, the A320/321 nibbling at the B737, and the A330 and A350 nibbling at the B787 and B777, Airbus has created a whole lot of spaces it would be hugely expensive for Boeing to go. In terms of the B737 or replacement, Boeing’s going to have to do something, but whatever it does, Airbus can now pare prices to make sure Boeing’s profit is squeezed. In terms of a large aircraft, Boeing would be competing for a few planes against a competitor who can restart a production line within months if it were mothballed.

    As an individual model, the A380 may be a loss leader, but in forcing Boeing out of the sky in that size category, and nibbling away with the A350, Airbus has Boeing by the nuts.

    1. derrida derider

      Yep, and the beauty of it is that the A380 finance costs are all ultra-low interest long term loans (early part – soft loans from government, late part – immediately post GFC). So by now Airbus will not be hurt much if they do have to mothball it and just keep it as a threat, unless they’re rash enough to put new money into it (eg a full monty A380NEO).

      Though I think the production economics are such that Airbus will likely prefer a small trickle of the beasts coming off the line rather than actually mothballing it; they’ll be happy then to sell that trickle to Emirates for peanuts with older ones as trade-ins. Are you a newly minted billionaire wanting to play the “my dick is bigger than yours” game with the other billionaires? Or are you, say, an overambitious smaller airline concentrating on a single heavily trafficked route and game to leverage yourself to the hilt and try some predatory pricing to gain control of that route? Well Airbus can now give you a great deal on a huuge low mileage one-owner jet only ever used in a dry climate, with easy finance arranged (asterisk – “TAP only. Terms and Conditions apply”).

      But it’s a finely balanced game Airbus and Emirates played at Paris – it’ll be interesting to see who wins it.

      1. Tango

        I think we can do without the sexual innuendo thank you.

        If you want to created that sort of clap trip there are plenty of porn sites.

        1. Dan Dair

          Tango,
          I think you may have mis-interpreted…?
          ‘the “my dick is bigger than yours” game’ was a reference to which or whether a business or individual will take-on a used A380 as their corporate jet.
          For all his bravado, DJ Trumps personal private jet is ‘only’ a B757.!
          I’m sure there are a number of wealthy individuals out there who’d be keen to ‘piss highest up the wall’ by flying around in a A380-based mobile-home, when most ‘make-do’ with just a Gulfstream or a Global.?
          The kind of people for whom the term ‘ostentatious wealth’, really doesn’t tell the full story….!

      2. Dan Dair

        Derrida Derider,
        “are you, say, an overambitious smaller airline concentrating on a single heavily trafficked route and game to leverage yourself to the hilt and try some predatory pricing to gain control of that route?”

        I wonder if Virgins CEO is reading this.?
        SYD-MEL is simply begging for it.???
        A decent-sized business class & all the rest the current ‘normal’ (for an A380) economy class.?
        2 aircraft flying mirror-routes, 3 or 4 sectors each day.?
        Passengers wouldn’t get the frequency service levels, but by God you’d expect the ticket price to make all the difference.?????

        It’s not as if it hasn’t been done before. Japan used to fly bunches of B747’s on internal flights before the Shinkansen was completed.

    2. Tango

      While that has a lot of Hollywood script going for it, reaity is.

      1. Airbus felt they were diminished by the fact they did not have as big an aircraft (or bigger) than Boeing. So there was the envy factor.

      2. Boing had made a killing on the 747 as there was nothing like it range wise or capacity wise at the time and Airbus decided that model still applied.

      3. The A380 would pick up freighter orders. 1600 estimated total in 20 yeas as I recall.

      The problem is that Boeing has barely sold 1600 747s since its inception. And that was before the big twins changed the world.

      The A380 could not carry the deck weight the 747 could, and they had problems and dumped the freighter of which only UPS and FedEx had ordered (5 by a least company as I recall)

      747 is still selling freighters, it may outlast the A380!

      And the A320 series and the A330 did not just nibble at Boeing, they ate their lunch. A 321 has proven to be outstanding and something even with the Max 10 Boeing can’t compete with.

      A350 has proven to be success though its having issue with production.

      A330NEO: books out.

      Reality is that Airbus is better off with a smaller product line that is better than Boeing than an equal product line that does not sell well.

      1. Mark Skinner

        Actually tango, it’s the difference between strategy and tactics. Boeing’s activities, such as moving headquarters, outsourcing, share buybacks and union busting have not been strategies, they have been tactics.

        Airbus, on the other hand, by covering most of the range of aircraft operator needs in ways that leave its competitor little room to move has been strategic. Maybe you could make a Hollywood movie from it. However, it’s more likely to be written up in text books as a case study in the application of business strategy and tactics vs tactics alone.

        1. ghostwhowalksnz

          Why is Boeing Corp having its HQ at Chicago an issue. Boeing Commercial HQ remains at Seattle where 72,000 employees are in Washington state. Illinois where the HQ is has only 700, near the bottom of the list of states where Boeing has a presence.
          Chicago was chosen because of the various large divisions such as Defense , Space etc which employ 10s of 000s in their own right are spread through the USA and time zones come into play. A very big city like Chicago has outstanding air connections throughout the US

          1. Mark Skinner

            Hi ghost. I included the Chicago move as part of a list of tactical moves Boeing has made. The reason I did that was to illustrate the difference between strategic and tactical moves. Well managed companies need both strategy and tactics to succeed. I was not trying to make a value judgement on whether any of Boeing’s tactical manoeuvres were good or bad, merely pointing out that they were tactical and not strategic, whereas Airbus’s move into A380 production was a tactic resulting from a strategic decision to kill off Boeing’s B747 cash cow. Presumably so that Boeing would not have the cash flow to build both B787 and B737 replacement at the same time. Had Airbus not driven the B747 from the sky, the B747 would have been a cash cow financing a B737 replacement.

            Sans cash cow, there are no immediate B737 replacement funds, leaving the A320 and A321 in a good place till Boeing can come up with the money. On that basis, the A380 can lose a lot of money, but at the same time it’s cost Boeing a lot, and given the A320 a boost.

          2. Dan Dair

            Mark Skinner,
            My what an impressive train-of-thought.
            Your post implies that Airbuses loss-making (as in never repaying its development costs) A380 programme is actually making Airbus money in other areas, by preventing Boeing from clawing-back lost market share.?
            I can see that & it’s good business because they can afford it.
            (Unlike Qantas’s 2 for 1 policy against Virgin, which was costing QF money & destroying their share-price)

            I do wonder though, whether Boeing were already financially stretched before the A380 began killing-off the B747.
            Bearing in mind the length of the upper-deck on the later 747 models, I wouldn’t have thought it would have been too great a task for Boeing to make the existing airframe double-decked & simply uprate the engines for the latest-tech available at the time.?
            It wouldn’t have been bigger or better than an A380, but it might very well have given the newcomer a run for its money & seriously extended the life of the ‘old-bird’.?
            Airbus trailed the 380 for a long time & it had substantial delays before it actually entered service, which should have given Boeing plenty of time to develop a bigger 747 & gauge customer reaction to it.
            Also, the development costs to Boeing would have been minuscule by comparison to what Airbus were spending on its ‘clean-sheet’ programme…….
            but Boeing were already working on the B787 at that time, so perhaps couldn’t afford to run two projects simultaneously even back then.?

      2. ghostwhowalksnz

        “747 is still selling freighters ” Thats because its a Boeing offshoot thats buying some of them and then leasing at market rates.
        What do you mean the 380 couldnt carry the deck weight the 747 could ?
        A passenger version converted to a freighter never carries as much as a version build as freighter. A 747-400BCF carries around 100t max , similar to a 777F, while the 747-8F is around 127t, but often its volume that matters rather than weight as you can imagine air freight can be bulky but light.
        I seems clear the 150t payload of the A380F
        Upper deck 17 pallets
        main deck 28 pallets
        lower deck 13 pallets
        Comparing other planes you could probably get 2 x 777F at 200 t or 2 A330F at 75t and make more profit.

        1. Dan Dair

          Ghostwhowalksnz,
          I’m sorry but I didn’t follow your logic about making more profit on two B777F’s or two A330F’s, than on one A380F.?
          Is it because the 58 airfreight pallets you suggest as reasonable for a ‘380F, is noticeably less than on two of the other aircraft, which would of course, require two sets of crew & two sets of landing fees.
          A further explanation (possibly in words of one-syllable), would be most appreciated.! Cheers.

  5. Deano DD

    Perhaps Airbuses answer is in who they are targeting the A380 at
    A prestige super jumbo for legacy carriers ?
    With a lot of the growth in LCCs now days, why are they not proposing a dual option for both legacy and LCCs

    A NEO with a stretched body, like they originally intended rather than fancy wing tips and fitting more seats into the same space

    The A380 has always had a power to weight issue that they still can’t address which is preventing a stretched version, which could well be what airlines are looking for…

    1. ghostwhowalksnz

      Power to weight issue for A380 ?
      Thats preposterous. You dont understand that having 4 engines means the engine out requirement loses 1 out 4, leaving 3 to do the work. A twin engine has to be ridiculously over powered as losing 1 means the 1 left has an enormous job. Its the twins that have limits at ‘hot and high’ or ‘very hot’ that quads dont have.
      Squash that silly idea right now!

    2. Dan Dair

      Deano DD,
      I can’t understand where you get the idea that Airbus can’t address any P to W issues on the ‘380.?
      Bearing in mind how massive the engines are on a ‘big-twin’, I’m reasonably certain Airbus could find something more powerful than the each of the current 4 engines but less powerful than many of the 2 on current ‘big-twins’.
      Off the top of my head (without actually looking-up any performance figures), I’d suggest that the engines in the larger B787 would probably be more powerful at maximum single output than the equivalent power of what’s currently in the A380.?
      The problem for Airbus & the ‘380, isn’t the stretch, it’s being able to sell it. The A380’s still too big for the current market, why would they make it bigger, yet.?

  6. Karl

    For every positive article or op-ed about the A380 in Aviation Week & Space Technology, there seems to be at least 10 negative ones. Whereas AW&ST typically only tells half the story, it’s sister publication Air Transport World (ATW) seems to have less bias in its reporting and typically don’t leave out the essence of a news story.

    Of course, AW&ST didn’t mention what Tim Clark had to say about the A380 and the future of slot-constrained airports:

    Quote: “Clark is convinced that the steadily-increasing number of slot-constrained airports around the world will necessitate the A380 so that the maximum number of passengers can be transported using the minimum number of flight movements.”

    http://atwonline.com/paris-air-show-2017/emirates-interested-a380plus-caveats

  7. Creeper

    This is bizarre. Did they not talk to Emirates about what would work for them rather than what Airbus ‘thinks’ would work for themselves?

    Boeing seems to do something a little different in getting its major customers input on design. Eg- Southwest had major input on the 737.

    Goodnight A380.

  8. LongTimeObserver

    I agree that the Boeing product line is swayed by foreground network development practices of its North American customers, possibly because they have hired some of their local customers’ fleet and network planners.

  9. Dan Dair

    It’s just Tim Clark playing hardball.!

    If Emirates is to continue to fly from Dubai
    AND continue to serve slot-constrained airports
    AND continue to service the load-factors it has generated so far,
    it will need to keep A380’s in its portfolio.

    It may choose to expand its routes using B777’s, but it has been the case for some years that Emirates ‘tests’ a new route with B777’s & expands them with A380’s, where that route starts to warrant it.
    If all they have in the future is B777’s, how will they improve their route profitability.? Sure, you can put a second B777 on the route, but putting a 380 on it instead is more profitable.

    1. Dan Dair

      Maybe the A380+ is dead.?
      That doesn’t necessarily mean the A380 programme is too.?

      There isn’t a rival to the A380 in terms of seat-count.
      Consequently any operator that has bought & successfully utilised it’s A380’s will need to replace them with the same ar better when they retire them.?

      Meantime more & more people are flying & airport capacity isn’t keeping pace with that growth. I well remember that before the Japanese completed their excellent high-speed train network, airlines flew a great number of wholly-internal B747 flights, just to move their citizens around.

      I genuinely think the biggest problem that Airbus have to overcome is the 2nd-life/2nd user market.

      If they can do something inexpensive to make them ‘freighter-worthy’, or they can find a market somewhere as 700-800 seat commuter/package holiday aircraft,? they’ll have created a sound residual-value for the older airframes which will in-turn, keep-up the price of new sales.?

      If they can’t do that, I think they’re genuinely going to struggle.
      Sure, Emirates might make a lot of money,
      but a billion dollar aircraft with just an 8-10 year life-cycle before going straight to the boneyard, simply doesn’t seem sensible or commercially viable for Airbus.?

  10. comet

    Why would Tim Clark balk at using 11-across seating on the A380, when he quite happily squishes passengers into 10-across seating on a 777?

  11. George Glass

    Its not that complicated folks.Accountants,yield managers and engineers love the B787/A350 on longhaul just as they do the B737/A320 shorthaul. They all loath the A380 with passion.Emirates is stuck with an albatross while its load factors and profit are falling.The A380 is a dead duck.

    1. Dan Dair

      George Glass,
      Are you sure about that.?
      Apart from your very good mates at Qantas (& the poor unfortunates at Malaysian Airlines), everyone else seems to thoroughly love their A380’s.
      We already know that Singapore Airways will replace their existing fleet of A380’s with more of the same when the existing lease’s run-out.
      I don’t know of any airline operating A380’s (other than the two previously mentioned) who are unhappy with the airframes they operate.?

      Maybe Emirates load factors are falling-off a little, but I think they’re a long, long way from being in trouble. AFAIK their overall load factors are somewhat better than those of VAH, plus Emirates have got years of profitability to draw upon, should they actually need to restructure in any way.?

      Just as an aside, can you actually remember how long ago it was that you first predicted the imminent demise of the A380 on these pages.?
      It seems like 4 or 5 years to me.? Maybe it only feels longer than it really is.?

      All Airbus has to do to keep Boeing honest, is cut production down to one a month to keep the line going.
      So long as the A380 is in production, we will never see Boeing resurrect it’s B747 programme, simply because the ‘380 is so much better. Plus, the B777, excellent as it is, will never challenge the A380 for capacity, without packing them in even tighter, even when/if the -X actually comes into production.?
      Remember, a current A380 with a seating-plan which is as cramped as most existing B777’s, would accommodate around 800 people.
      AND Airbus ALREADY have the stretched version of the A380 up their sleeves.
      It’ll take them under two years to get it into production, should the market ever grow to the point where it becomes a commercial prospect.
      How long have Boeing been buggering-around since they first announced the foldy-winged -X.?

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