Over the summer I made the controversial claim that the Airbus A380 is a failure. Let’s just say plenty of people disagreed with me in the comments.
As a passenger I like the plane. I love flying Singapore’s A380 in first class for sure, there’s nothing yet in the skies like the Emirates shower. And the Etihad Residence should top even that.
In August I wrote:
There are no buyers in the U.S., South America, or Africa. They’ve barely penetrated China or Japan.
In 7 years Airbus has delivered only 138 planes to 11 airlines.
Word is the plane is being discounted by 50% off list. While aircraft manufactures don’t really sell for list, that’s still a significant discount and early buyers generally get ‘most favored nation’ status where future discounted sales entail rebates to early buyers who may have paid more.
There’s clear mission-specific purpose. The plane allows British Airways to reduce Los Angeles flights from 3 to 2, saving a slot at Heathrow. But how many places does something like that work? London Heathrow is an archetypical airport for A380 operations. So is Tokyo Narita but neither JAL nor ANA is flying the plane. New York JFK might be, but no US airline has made the move. The only airline whose strategy is centered around the aircraft is Emirates but they’re hardly doing so for clear economic reasons, desperate to find places to send the plane they’re throwing it at cities like Dallas.
Now Airbus admits they may end the program.
Airbus Group NV (AIR) raised the prospect of discontinuing its A380 superjumbo as soon as 2018, the first admission that it may have misjudged the market for the double-decker after failing to find a single airline buyer this year.
They expect to break even on the marginal cost of production (not recouping any of the plane’s $25 billion development costs, and not showing a profit even then) for 2015 – 2017. They do not expect to break even on an operating basis in 2018, and expect to have to offer new engines or discontinue the program.
There were no new airline customers in 2014. They added only a leasing company that hasn’t yet found an airline to operate the planes they’ve ordered.
Japan’s Skymark cancelled 6 planes. Air France wants to cancel its last two orders.
And the excuses begin — it’s the fault of Airbus for its marketing and being too flexible.
Chris Buckley, Airbus’s Executive Vice President, Europe, Asia and Pacific, said the company has been “at fault” in the way it marketed the aircraft, letting carriers customise the interiors in whatever way rather than pushing the high-density credentials of the double-decker.
An engine upgrade, which Emirates wants to see (and Emirates is 40% of the A380 order book), would cost Airbus ~ $2.5 billion. Without new customers for the plane they’re at a crossroads.
I’d love to see more A380s — because it’s a great ride, because many airlines put a fantastic product into the plane, and because it often goes out with so many empty seats it makes awards quite easy. None of which makes it a good move for airlines or the aircraft manufacturer.
- You can join the 40,000+ people who see these deals and analysis every day — sign up to receive posts by email (just one e-mail per day) or subscribe to the RSS feed. It’s free. You can also follow me on Twitter for the latest deals. Don’t miss out!
Funny…I remember talking to a friend from GE who worked with Boeing on the 787. I remember him just smiling when folks would talk glowingly about the a380. He confided that they had looked at the market and felt the a380 was a stupid idea before it ever flew. Instead, Boeing went for the more flexible 787…even as they were mocked for letting Airbus “best” them. Looks like they will be smiling all the way to the bank…for years now.
…and then Boeing made the 748. But I suppose they did that vs a clean-sheet knowing they would lose less money.
Ultimately, there are too few routes where the plane is “needed” to justify an additional fleet type with new training, separate crew (flying and reserve), new supply chain of spare parts, etc. Another fleet type is very expensive! And the 777, 777X, 787, and a350 are all very efficient planes, with CASM not too much worse than the superjumbo without the capital expense and need to fill more seats (usually by selling cheap tickets).
Perhaps Airbus can figure out how to make a viable freighter from it, but freight typically has a payload problem more than a volume or range problem.
As a passenger, its fun to fly on the a380. Though airlines have been cramming seats into them in Y, and I find boarding 400+ people a little chaotic.
its not easy to find F in Emirates using Alaska miles. plenty of econ and some J but very rare for F
9/11 and the great recession didn’t exactly help them either.
With A380’s selling so cheap surely there will be someone rich and dumb enough to buy one or two and try a business model no one else has? I agree that high density operations should in theory make sense, since operating costs are about the same as 747, but seating capacity is much higher..
Airline passengers voted with their wallets and they voted for point-to-point flights and not hub and spoke. This plane only works if your hub is Dubai and you are the only player in town. The super twins put the final nail in the A380 coffin. Airbus bet on hub and spoke routes and lost.
@Noah Boeing built the 748 at a much, much lower cost than the A380 (I’d guess single digit percentage), from which they’ve managed almost half as many orders. The 747-8 will continue to be profitable for Boeing as a freight aircraft, if nothing else. Though perhaps the passenger version was not as successful as they hoped, I’d be willing to bet it’s still profitable (though hard to know how many 747-8 orders would’ve been for 777, so who knows).
In any case, the A380F will never happen.
Took my first A380 flight on Asiana this past week in F from ICN to LAX, using UA miles (booked back in January before the devaluation).
It was a sweet ride up front. Got a tour of the entire plane by one of the flight attendants. Y sure looked cramped (but it was pretty full).
4 of the 12 F suites were occupied.
Yes, many have mentioned the sweet ride. That does not directly enhance profits and profits rule this world.
I remember Boeing making their case that the 380 would be a flop and they were right on the money. I also remember Boeing started talk about a faster aircraft, somewhat faster than typical but still subsonic. That idea did not resonate with airlines and they are the ultimate consumers of aircraft.
There has been some talk about very large aircraft saving slots at slot limited airports. We need someone with real knowledge to help understand if this is true and will remain true. I do know that Heavy aircraft often require greater separation from typical single aisle aircraft. At some point someone will realize this is just wasting slots.
The A380 is fun to fly in part because it is often fairly empty upstairs. If an airline actually filled the 94 business-class seats on the upper deck, to me that would be more like cattle-car economy even if the food is good. I don’t see how the FAs would be able to provide the usual level of personal service.
I actually love flying on the 747-8. I know there are not a lot of them, but I flew them recently on Lufthansa in the upper deck. It also looks cooler than the A380 in my opinion, and it isn’t quite as many people, which does make the plane easier to fill, doesn’t it? I’m actually a bit surprised it wasn’t a bigger success.
50% off list is typical, Boeing does it, Airbus does it, I’m sure Bombardier and Embraer are around the same, so that point means absolutely nothing.
@charles
It is basically a wash due to the super status that requires more separation between landings, but Airbus is working to get the separation reduced. That would be nice, but won’t save the plane.
It’s all about what you consider a failure. From a pax perspective, it’s a huge success — especially premium pax. From a financial standpoint for Airbus (and for most airlines), it’s a huge failure. It’s too bad, but I think Airbus let its ego get in the way of reality. Boeing went the conservative route and seems to have been the wiser of the two in this case.
I’ve been studying the economics of the A380 the past month because of Emirates decision to launch several new routes with it to the USA. As Gary notes, these routes seem pretty nutty, given that few other airlines seems to be able to make this aircraft work for them on the truly busy transatlantic routes. Since Dubai is a small market, Emirates claims they make money loading up their A380s with connecting passengers; again, this is almost universally considered a bad business strategy because, in general, you obtain much higher yields from transporting nonstop passengers (hence the popularity of the smaller Boeing planes to launch more nonstop routes). There’s also industry hostility to the A380 because it doesn’t efficiently carry cargo compared to the competing Boeing aircraft (I think the double-decker configuration dramatically reduces cargo space).
I don’t think the industry likes to talk about it, but one of the other big problems with the A380 is that it has so many seats. So airlines wind up competing with themselves to fill it. This means lower yields.
Emirates claims these problems don’t affect them, and they can fly this plane profitably on long-thin routes to the USA. I can’t see how they can be right about this and every other airline wrong. But they claim they get their books audited (the gov’t of Dubai owns the whole airline) and that everyone who doubts their profitability is wrong. It’s certainly an interesting situation since logic would suggest that if you could make the A380 work in tiny Dubai, it should work elsewhere.
@iahphx – they’re both right. The Middle Eastern carriers operate on more connections than other carriers. Sure, non-stoppers will generate better returns, but when your hub is DXB, UAH, or DOH, there are only so many non-stop customers to go around.
They’re making their money in connecting passengers, and to do so, they need high volumes. It’s almost as if the A380 is optimized for them, whereas it doesn’t fit the U.S. carrier model.
I just got done with another round of internet trolling on the site regarding the A380. People have an incredibly strong stance on the aircraft for reasons which will forever elude me. Hopefully VFTW has kinder readers!
Remembering that it can take 10 or more years to bring a new commercial aircraft into service from its initial design, much can change in the world…as it has for the A380. At the time, the success of the B747 suggested larger planes would provide greater efficiencies. And international hubs could provide a means of economic diversification of the Gulf emirates…copying the model KLM started after WWII channeling customers bound for Asia and Africa from NAmerica through AMS. Being a small country with a very smaller population, to be a world airline it needed to draw customers from many other countries, and not rely on just those wanting to visit Holland. Its empire provided base airports on most other continents, so the transit model was born. CX and SQ successfully refined this model for many of the same reasons KLM designed it, but focusing on drawing customers to/from destinations around the Pacific rim headed to places beyond their home cities.
So it was only natural for the emirates to copy this model too. Virtually no local population to fill their planes and little to attract visitors, they figured volume would be the key, and volume would lead to price advantages. The B747 was big but long in the tooth, and the B748 hadn’t been green lit, but Airbus saw a niche to build a replacement for that successful plane, and up the anti with greater capacity and range. It was perfect for the new gulf airlines — who had unlimited access to capital to buy the planes and build the mega-airports needed at their hub cities — and for other carriers who had high demand long-range routes (not to mention BA, AF and LH were pretty much committed to buying these planes since Airbus was their countries’ baby…and they did have a handful of routes that could suck up the number of passengers needed to fill the planes in all classes, as well as some gate/slot restrictions at their home airports).
The other thing that worked well for the likes of Emirates was the limited service slots they were granted in many cities. Rather than daily flights, they were granted 3/4 days a week, so the A380 could handle the same loads as likely to be generated on a daily service flown by B777s.
So they ordered A380s, but midway through the development of that aircraft, the aviation world changed and though Boeing went ahead with an enhanced version of its Jumbo, it was finding success with the newer versions of the B777 and a market niche for a smaller plane with longer range and great operating efficiencies, the B787. Many airlines saw in these two aircraft the ability to serve more secondary and tertiary markets with cost-effective point-to-point service, giving them a competitive advantage against airlines offering the international hub model.
I suppose the A380 can be looked upon as a success on one level, meeting a particular need that was not as universal to the airline industry as original thought. Much like Concorde, a change in the times has rendered it less practical than it was deemed to be when the program was launched. It will be interesting to see, in five or so years, how this plane is being deployed, and how its major user(s) the emirate airlines, adjust to market changes.
The 777X will further siphon off potential A380 sales…not to mention A350 sales. Airbus will be forced to respond with the A350-1100. It will be forced to swallow a poison pill as the 777x/A350 market is more valuable than the A380/747 but building the A350-1100, or whatever its model designation, will further deplete A380 sales. Airbus, in effect, will put another nail in the big bird’s coffin.
The A380 works for certain routes, so long as you can fill it. I think many of the A380s are flying partially full and thus have limited profitability.
Just as the 777 killed the A340, the 777X will help kill the A380. Airbus may have the honor of hammering in the final nail with the A350-1100. There will just be too few orders, or reasons, to keep the A380 in production. Eventually the two-holers will simply go around or otherwise bypass stops in the middle east. The Emirates model will eventually become obsolete, if it’s not already.
In other news, R.I.P. Antonov
On another topic…My feeling is Boeing has an opportunity now to clean sheet a 737/757 replacement and make a strategic jump past Airbus while killing two birds with one stone. The 737 MAX is maxed out. Even taking into account Airbus’ 1 year head start, the A320NEO seems to be outselling the 737MAX. When the engineering is finished for the 777X, the 737MAX and the 787-1000 it will be time for something big, especially since it lost out on the LRSB…and unlike the 767 tanker, it won’t get that one back.