Just A Matter Of Time?

Few analysts believe such drastic action will be taken anytime soon but there is universal agreement something has to be done to reinvigorate sales at a time global airlines are clearly opting for smaller long-haul twin-aisles such as the Boeing 787 and Airbus A350.

Whether that will be a revamp that includes new engines, creating an A380neo, is currently being hotly discussed in Toulouse. What is apparent is that top officials at Airbus itself are a long way from throwing in the towel, even though Airbus chief executive Fabrice Bregier concedes “it’s true the market hasn’t developed as much as we’d have liked… this plane was probably launched 10 years too early. ” Still, he added, work is already being done on ways to make the A380 more attractive economically by adding seats while preserving the comfort of the plane. “Longterm, the question will be how to improve its performance by working on aerodynamics and motorisation.

But we will not do that until a goodbusiness plan can be found. That is not the case now and we have no intention to spend indiscriminately. ” Bregier said there was no intention of abandoning the A380 because of an order slump for the double-decker.

“We are working on the evolution of the aircraft and I have said there will be aerodynamic and engine options, just as there are across the portfolio, but we must launch them at the right time and when we believe there is a business case. ” Airbus’s ever-bullish chief operating officer – customers, John Leahy, dismisses any suggestion of retreat. “We constantly talk to our customers and there have been rumors out in the field about whether we are going to look at new engines on the airplane, new aerodynamic improvements on the aircraft. These are evolutionary changes. They are part of the system of keeping an airplane alive for up to 40 or 50 years and this program will be around 40 to 50 years from now. No doubt in my mind about that,” he declared.

In the years leading up to the A380’s first flight on April 27 2005, Leahy, the manufacturer’s top salesman, was in full flight. Among his suggestions were the possibility of airlines having on-board shopping malls, showers, games rooms and even an aquarium with tropical fish on the bulkhead at the rear of the

Airbus spent around US$25 billion to develop the A380.

plane. Of course none of these were adopted by airlines more intent on using the space for revenue-earning passenger seats, apart from Emirates Airline’s First Class shower and Etihad Airways’ ‘The Residence’ three-room appartment.

Nevertheless, this was a true leviathan of the skies, certified to carry as many as 853 passengers in a single-class configuration. Not surprisingly, that was an option no-one was keen on experimenting with, although Emirates feisty president Tim Clark did once order a study of a one-class, low-cost service between Dubai and Adelaide which concluded it was feasible and would be profitable. He did not, however, take up the idea.

Most airlines now operate the aircraft in a three or four class configuration of up to 544 seats.

The A380 has an overall length of 72. 72m and a wingspan of 79. 75m.

With a range of up to 8,200nm (15,200km), the huge tanks carry 320,000 litres of fuel and the aircraft has a maximum takeoff weight of 575 tonnes, while maximum landing weight is 394 tonnes. Customers have a choice of two engines, Rolls- Royce Trent 900s or the Engine Alliance (Pratt & Whitney and General Electric) GP7200.

Work on what was to become the A380 had actually started as far back as mid-1988 when a group of Airbus engineers led by Jean Roeder began a secret study on the development of an ultrahigh- capacity airliner (UHCA), both to complete its own range of products and to attempt to break the dominance that Boeing had enjoyed in this market segment with its 747 jumbo since the early 1970s.

The A380 was certainly a groundbreaking aircraft when it appeared on the scene. The first aircraft was delivered to Singapore Airlines on October 15, 2007, entering service on October 25, 2007 as flight SQ380from Singapore to Sydney. Emirates was the second airline to receive the aircraft, launching services between Dubai and New York in August 2008. Qantas followed on September 19 2008, with an inaugural flight between Melbourne and Los Angeles in October 2008.

Airbus spent around US$25 billion to develop the A380. Analysts say it will never recoup all of that, although it is now making a profit on each aircraft sold.

Even before it entered service the A380 had already trodden a rocky road. Deliveries were two years behind schedule, the result of a plague of production issues that cost Airbus tens of millions of dollars in compensation to airlines. It also had problems keeping the aircraft’s weight down to the level carriers had been promised. The primary production issues involved the 530km of wiring in each aircraft. Airbus cited as underlyingcauses the complexity of the cabin wiring (98,000 wires and 40,000 connectors), its concurrent design and production, the high degree of customisation for each airline, and failures of configuration management and change control.

In essence, the German and Spanish Airbus facilities were using different computer software than the British and French sites and when the wiring from different sources was brought together in Toulouse they didn’t fit together. It was a monumental gaff that led to the departure of then EADS (Airbus’s parent) chief executive Noël Forgeard, Airbus chief executive Gustav Humbert and A380 program manager Charles Champion.

The problems didn’t end after deliveries began. In 2012, small cracks were discovered in supporting ribs inside the A380’s wings. Although there were no safety issues it was an embarrassing and costlydesign error that Airbus has had to correct on aircraft already in service.

There was also the dramatic explosion of a Rolls-Royce engine on Qantas flight QF32 as it departed Singapore on November 4 2010, the aircraft saved by the professionalism of the crew in overcoming unprecedented multiple systems failures to guide it safely back to Changi. This incident was hardly the fault of Airbus itself and although it was a public relations triumph for Qantas and the standard of its pilots it presented a bad image for Airbus, particularly when the British engine-maker was slow to react, leaving Toulouse to take the heat.

Clearly, the A380 has won a place in commercial aviation skies. Customers like it, not only because of the space but a result of the smooth ride it gives passengers. The issue is not its status as a technologically advanced member of

The forecasts about traffic growth and market saturation haven’t exactly panned out. BRUNO DELILE

the world’s airline fleets, it remains Airbus’s failure to sell it in sufficient numbers. There have been just 317 ordered and no airline buyers for two years. The sole new customer in 2014 was Dublin-based leasing company Amedeo, which has had trouble finding a single carrier to take any of the 20 jets it ordered.

At latest count Airbus had delivered its 159th A380, passing the midpoint, an event that usually occurs later in the lifespan of a major aircraft program. Total sales are less than a third of the 1,228 very large aircraft Airbus projects airlines will need through to 2033 in its latest global market forecast. No US airlines have ordered it, and only one Chinese airline, China Southern, has ordered five, even though that country will be the world’s largest aviation market in coming years. Without the Gulf carriers – Emirates, Etihad and Qatar have ordered 250 of the 317 purchases – the A380 would have been a total financial disaster. Airbus’s new A350, which entered service with Qatar Airways earlier this year, has already secured 780 orders.

But when it comes to the very large jet it’s not only Airbus which is suffering. Boeing’s 747-8 Intercontinental, the latest version of the iconic Jumbo, has fared far worse than the A380, with the Seattle planemaker having to cut production to adapt. It has won just 51 orders for the aircraft, which can seat about 460 passengers and lists at US$357 million. The list price of an A380 is US$428 million although, as everyone knows, no airlinehands over that much cash. Industry insiders suggest discounts of as much as 50 per cent have been offered in an attempt to boost sales. It is a clear indication that the strategic thinking of airlines is far removed from the forecasts Airbus has made on the very large aircraft front.

None of this fazes Leahy. He dismissed suggestions that the A380 is reaching a tipping point and predicts there will soon be new orders. “I prefer to see the glass as half-full,” he said. In a promotional video released to celebrate the tenth anniversary of first flight, he pointed out there are now 13 airlines flying the A380. “We have sold over 300 aircraft and about half of them have been delivered. In fact one airline, Emirates, has 59 A380s in operation today… every four minutes an A380 is landing or taking off somewhere in the world. That’s every four minutes 24/7 an A380 takes off or lands somewhere in the world. ” Ever the optimist, he says 2015 “will be a very good year for A380 deliveries and orders”, adding Airbus is in talks with “several airlines”. One reported interested potential customer is Turkish Airlines, said to be looking at 20.

Leahy is even confident of American orders. “I think it’s just a matter of time in the US market.

The 747 hasn’t played very well in the US market. But as the US airlines move more into Asia and more into those big hubs we see around the world they will need the A380 and then of course the passengers will demand the A380.

Traffic is doubling every 15 years.

This has been happening since the dawn of the jet age. It will if anything accelerate. Parts of Asia are doubling every 10 years.

“People say ‘well there are areas of the world like Africa where you will never use an A380’ but I beg to differ. There are A380s flying to South Africa as I speak. The A380will be flying on every continent with virtually every international major airline. It’s just a matter of time. ” It doesn’t alter what must be of serious concern to Airbus…no-one appears to be rushing to sign up for its flagship product. Only three new carriers – Etihad Airways, Qatar Airways and Asiana Airlines took delivery of A380s last year. Airbus itself also canceled an order for six destined for Japan’s Skymark Airlines, a low-cost carrier that was in financial trouble. Garuda Indonesia has dropped plans to buy the plane, deciding it is too big for its needs. There have been persistent reports that Malaysia Airlines and Thai Airways International – both currently navigating financial turbulence and downsizing – have considered dumping some of their A380s. Virgin Atlantic, with options for six, remains undecided about whether to proceed. Delta Air Lines took a 49 per cent stake in Virgin in 2012 and its chief executive Richard Anderson has declared the aircraft is “by definition an uneconomic airplane unless you’re a state-owned enterprise with subsidies”.

Current customers have also trimmed orders. Air France postponed

At least one analyst believes the best years may still be ahead for the A380.

the last two of 12 A380s it had ordered and Lufthansa scaled back its order to 14 from 17. Bruno Delile, Air France’s senior vice president for fleet management said there are a limited number of routes on its network with enough daily traffic to justify the expense of such a big aircraft. “The forecasts about traffic growth and market saturation haven’t exactly panned out,” he added.

Locally, Qantas has 12 A380s in service but has deferred orders for a further eight. Ostensibly these aircraft will be delivered late this decade, but there’s much scepticism Qantas will ever take delivery of these aircraft.

What seems likely is that any new surge of orders will depend very much on Airbus making a decision to update the aircraft and proceed with an A380neo at an estimated design cost of US$2 billion. Most pressure to do so is coming from the A380’s biggest customer, Emirates. Its president, Tim Clark, says he doesn’t understand why other carriers have not lined up for orders because the aircraft is perfect for slot-constrained airports such as London’s Heathrow.

He wants a combination of a reengine, weight reduction and aerodynamic improvements. “I would hope the improvement would be in the range of 10-13 per cent,” he said recently while also touting the ability of Rolls-Royce to make the engine for the neo. Rolls-Royce chief executive John Rishton has said the engine maker would be interested if Airbus was to commit. The dilemma for Airbus is whether to proceed with such a high cost project for a single customer, no matter how important it is in the order book.

Airbus president Bregier has reiterated it will take a decision solely on hard numbers. However, there is also a political dimension.

If the A380 program were to come to an end it would mean the loss of thousands of jobs across Europe. Inthe meantime, Airbus has assembled a team of employees from within sales, marketing, engineering and design to lobby existing and future customers of the aircraft, including those who may buy it second-hand. The company said the “new organisation will enhance our ability to respond to market trends and customer needs quicker, by developing and deploying complete solutions faster, in order to explore and open up new market segments”.

At least one analyst, Ernest S Arvai, partner at US-based aviation consultancy AirInsight, believes the best years may still be ahead for the A380, saying it is ideally suited for routes to slot-congested major airports, and for airlines that can fill the aircraft, as a hub-and-spoke aircraft for long-haul operations.

“To date, each of these markets is small relative to the industry as a whole, but are projected to grow substantially over the next decade. There are currently 42 cities with 10,000 or more long-haul passengers per day, but this is projected to grow to 90 cities by 2032. These mega-cities have airport constraints yet 90 per cent of all long-haul traffic is between them. The market will demand larger aircraft in the futureand the A380 is well positioned to accommodate that growth. ” Arvai does point out the A380 is not for everyone, and AirInsight doesn’t expect a rapid neo announcement to suddenly generate demand for hundreds of new aircraft. “But demand could double quite easily from the existing 317 firm orders for the program and generate new momentum as carriers select and deploy the A380 on routes for which it makes economic sense. ” Not everyone agrees. Richard Aboulafia, a vice president at aerospace research firm Teal Group, says smaller twin-engine widebodies such as the 787 and the A350 may well be the death of the A380. “I don’t think it lasts more than a few years into the next decade,” he suggested recently. He said the fundamental problem is that Airbus made the wrong prediction about travel preferences and people would rather take direct flights on smaller aircraft than on larger planes. “It’s a commercial disaster. Every conceivably bad idea that anyone’s ever had about the aviation industry is embodied in this airplane,” he said.

That may be an extreme view and, even without a neo decision, Airbus has been moving to try and make theaircraft more economically attractive to customers. It is encouraging existing and prospective buyers to use denser configurations, seating 11-abreast instead of 10 in economy, while still exploiting the cabin’s size to keep luxuries such as bars that distinguish the plane. Airbus has lifted standard seat capacity to 544 (previously 525) and has worked with Qantas in that area. Singapore Airlines is refurbishing its 19 A380s to add premium economy seats. Emirates now has some A380s flying in a two-class layout for 615 seats, eliminating its first-class berths.

In assessing the A380’s first ten years there can only be one conclusion: as an aircraft it has been an enormous technological success but as a commercial product it has failed to reach its potential. Whether it does in future will depend on Airbus’s ability to convince potential customers its view of aviation’s future world and the need for very large commercial jets is correct. Right now, it doesn’t appear to be succeeding.

Ultimately, its future won’t be in the hands of Airbus management but with the group’s shareholders and they will make a decision based on whether it is making money or not.