Airbus A380 Production Could End, And Why Emirates Is Pissed

From a passenger comfort standpoint, the Airbus A380 is my favorite plane in the sky. I’ve reviewed first class on every airline that operates the A380, and for the most part the experience is simply incomparable. If you haven’t yet read them, check out my reviews of A380 first class on Air France, Asiana, British Airways, China Southern, Emirates, Korean Air, Lufthansa, Malaysia Airlines, Qantas, Qatar Airways, Singapore Airlines, and Thai Airways.

Qantas-First-Class-A380-01
Qantas Airbus A380

The A380 is by far the quietest commercial aircraft in service, and also has some awesome amenities that most other planes don’t, from showers to onboard bars to double beds and fully enclosed suites.

Qatar-Airways-A380-First-Class-077
Qatar Airways Airbus A380

However, it looks like the Airbus A380’s days may be numbered. It looks like by next year Airbus will have to decide whether they want to discontinue production of the A380 around 2018, or whether they want to invest an extra two billion Euros in the aircraft, without any guarantee of future return.

Via Bloomberg:

Airbus Group NV 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.

While Airbus will break even on the plane in 2015, 2016 and 2017, that outlook doesn’t hold for 2018, forcing the company to either offer new engines to make the A380 more attractive or discontinue the program, Chief Financial Officer Harald Wilhelm told investors at a meeting in London today.

In its seventh year in operation, the aircraft that cost $25 billion to develop threatens to become a costly misstep. While popular with travelers, most carriers prefer smaller twin-jet models that are more fuel efficient and can access more airports. Emirates is the only stand-out sponsor, having ordered 140 units, while other airlines have either backed off or are struggling to fill the two decks of the jumbo.

“Airbus will be obliged to make a decision one way or the other in 2015,” said Yan Derocles, an analyst at Oddo Securities in Paris, who estimates an engine upgrade may cost Airbus 2 billion euros ($2.47 billion) because of work required on the wing.

Singapore-Suites-Class
Singapore Airlines A380

The A380 doesn’t offer a unique value proposition for the airlines

As much as I love flying the A380, it’s no surprise that the plane isn’t doing very well.

On a per passenger basis there are much more fuel efficient widebody twin-engine aircraft which have a similar range. From an airline’s perspective, why would they pay more to have less flexibility?

Not only does the 787 have a lower per passenger operating cost, but it allows airlines to fly in markets where a 500+ seat plane might not be able to succeed. It’s much easier to maximize yields on a plane with ~200 seats than in a plane with ~500 seats.

So while we like it as customers, that’s sort of where the benefits end.

Qatar-Airways-787
Qatar Airways 787

Why Emirates is angry about this

The one airline which can’t get enough of the A380 is Emirates, as they have a total of 140 of them ordered, which represents about 40% of the total A380s on order. Their CEO, Tim Clark, is miffed at the prospect of the plane being discontinued. Via CNN Money:

“We are on the hook for this plane,” said Emirates President Tim Clark. “I get pretty miffed when we have put so much at stake,” he told Reuters.

And Emirates’ frustration at the prospect of the plane being discontinued is well founded. If the plane is discontinued rather than improved, they won’t have anything to replace it with, and there aren’t really any comparable plans in development.

The reason the A380 works so well for Emirates is because their business model centers around offering passengers one stop service between major cities in the world that can’t typically be reached nonstop, via Dubai. They largely operate in super-mega-ultra-dense markets.

For example, Emirates operates eight flights a day between Dubai and London, six of which are operated by A380s. Heathrow is heavily slot restricted, so if it weren’t for the A380 they couldn’t fly nearly as many passengers between the two cities.

Similarly, they operate two nonstop A380 flights every day between Dubai and Sydney, one A380 flight with their joint venture partner Qantas, and one 777-300ER one-stop flight going via Bangkok. The same is true for Melbourne.

But Emirates is unique. Really unique. And that model doesn’t work for most other airlines, as they don’t operate a handful of whalejets in a single market each day.

Emirates-A380-First-Class-14
Emirates A380

Bottom line

As much as the thought pains me, my money is on A380 production being discontinued in 2018. While Emirates can’t get enough of them, it doesn’t really seem like any other airline is thrilled with them, as it stands.

What do you think? Are the A380’s days numbered?

Comments

  1. The writing has been on the wall for this one from the start. I don’t follow the industry all that closely, but even I could see this. When almost every airline in the world was already slowing the use of 747s, it made little sense for Airbus to offer something even bigger. The 777 made the 747, and eventually the A380, a financially poor option.

  2. 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.

  3. @ Mike — I’m not so sure I’d take that at face value. Their stock fell hugely after the rumor that they may discontinue the aircraft, so I wouldn’t put much weight on them saying that. They HAVE to say it in order to even have a shot of selling another one of these, since no carrier wants to order a plane which is about to be discontinued.

    I wouldn’t be quite so trusting.

  4. This is why I tell people not to wait for retirement, but travel now!!. I enjoyed my two flights in EK 1st using miles 🙂 Also enjoyed meeting you last Saturday afternoon in the lobby bar @FTU Safe Landings!

  5. I’m pretty sure the A380 has better seat mile performance than the 787 mathematically, but in a real world situation, airlines have had it better operating 2x daily full 787’s, (~400 seats) than 1 partially empty A380. (~500 seats) This news might be good for Boeing, which could score an order from Emirates on their soon to be popular (with freight airlines, once the air cargo slump ends) 747-8, a plane that cost very little to develop.

    On the topic of the Emirates DXB-SYD/MEL routes, the 1 stop DXB-MEL service goes through SIN and not BKK. Emirates also has DXB-BKK-BNE service, by the way.

  6. I wouldn’t be surprised if a few airlines that compete with Emirates also considered that by not buying the A380, they were putting a serious dent in Emirates strategic advantage for the future. Lufthansa, British, and Air France, in particular, have lost core business to Emirates and have canceled future orders. Qatar and Etihad are serious competitors to Emirates, and they only bought a few A380s…and then canceled or reduced orders. By canceling or reducing A380 orders and thereby increasing the chances for Airbus to stop A380 production, these airlines have put pressure on Emirates to find future alternatives that do not permit Emirates to compete as easily as they do now.

  7. if EK wants the A380-900 or a new engine version of A380-800, they better pony up some order assurances to Airbus. Can’t go through another $10 billion and have Emirates cancel the order last minute.

  8. “As much as the thought pains me, my money is on A380 production being discontinued in 2018.”

    In reality, however, you don’t have a clue. That’s a 100% guess.

  9. First @RDP – the 747-8 didnt cost a small amount to develop. It wasnt A-380 expensive but it still cost several billion dollars and was almost certainly a mistake. If Boeing had spent those billions on a 757 overhaul (new wings and new engine) they would have a plan with trans-atlantic range, years ahead of the A321NEO and for which Airbus would have no answer even once the A-321 comes out.

    However, this announcement might save the 747-8. If Airbus axes the A-380 project next year then they will not sell another airframe. That may force certain airlines, Emirates being the obvious example, to look towards the 747-8 for their high capacity routes. Of course, Boeing faces questions about how long they can keep the 747-8 production lines open as well.

  10. Can’t say I feel any sympathy for Emirates. They hijack routes by flooding them with half filled A380s paid for with government funds. It’s perfectly within their right to operate like that, but it does carry risks–one of which they are now very exposed to.

    The A380 and Emirates business models contradict the rest of the aviation industry, which makes the irony of this ‘miffed’ squabble all the more ironic.

  11. @ Nic — That’ll be tough for them in some slot restricted markets. If it does happen, that’s still well over a decade into the future, so let’s cross that bridge if/when they get there. 🙂

  12. There was an article in yesterday’s WSJ about Boeing reducing the 748 from 1.8 a month to 1.5 and contemplating shutting it down completely too. The majority of airlines have spoken (as have their customers) and the decision is on more direct flights between city pairs (secondary and tertiary especially) that the 787 and A350 can handle where 777s (and A330/340s) are too large. No NAmerican airlines bought the A380 because it didn’t make sense for their business models, and BA, AF and LH were coerced into buying the A380 because their governments had too much at stake in jobs at Airbus. Ironically for these carriers the plane is a mismatch since they have ended up deploying it on high density routes, but primarily to meet the demand for economy seats, while F and C/J cabins go half empty (or fill with FF award fliers).

    It’s all fine and good to sing the praises of the A380 in F. I’ve flown that cabin on QF, SQ and MH versions and have three flights on the TG whales next month. Like others here, certainly enjoyed the experience. But face it, sitting with 300 other people crammed in steerage is not something I’d look forward to.

    If this causes execs at EK to have sleepless nights, bring it on! Let them know how most other execs in the industry have felt for the past dozen years.

  13. I will go the complete opposite way it seems.

    Fuel Efficiency
    That is the name of the game at the moment. Just look at how many airlines are retiring their 747-400’s. I agree the 777-300ER is a great plane and that potentially the 777X ranges will have a place high up on the ranking of planes whilst still having good twin engined fuel efficiency. But, when you have to move a large amount of people you need a plane the size of the Heavies or Supers. The current Trent and GP engines are more than 10 years old (Trent 900 first ran May 2004). Technology (especially in fuel economy) has come far in the past decade. More fuel efficient engines could tip the balance back into the A380’s favour.

    If operating 2 small units versus operating 1 larger unit was more efficient, why do we have large busses. Would 2 minibuses not work? No…..

    Restricted slots at the airports.
    This has been discussed but taking it a bit further using London as an example. London has too few slots. No one living underneath any proposed new flight path want to accept an extra runway or even extended operating hours. There are very few options and existing airports like Manston in Kent, SE England (an old military airport that played a vital role in the Battle of Britain) are being closed. Commercial operations at Manston were seized earlier this year. So the potential to add capacity is very limited (and reducing). Thus the slots will become more expensive and eventually it could potentially become prohibitively expensive to operate 2 B787’s if you can operate one Super or Heavy.

    I believe there is enough demand (maybe even a need) for a very large plane. I cannot see the 747-8 filling that gap as a fuel efficient alternative to the A380 and considering orders (119 vs 318), the A380 seems a clear favourite and is established.

    I agree with Lantean, first the Concorde now the A380!

  14. I have always hated Emirates’s business stategy. I feel like they take too much business from other airlines by having the gov pay for it.

  15. What’s with the hate of Emirates? They’re profitable, and aren’t just buying these planes to spite the competition.

  16. The problem with the A380 is it’s an idea whose time has not yet come. Twenty years from now when air travel in Asia has gone through the roof, oil is at $200 a barrel, and half the world’s major airports are slot-constrained, it’ll be a big winner. Until then, however, it’s just too much plane to fill except on a few select routes.

    As for the 747-8, it’s a beautiful machine, but its days are numbered. Why would anyone buy a 4-engine plane based on a decades-old design when they can pick up 2-engine 777-300ERs at fire sale prices or wait for the 777-X? After all, Air Canada manages to squeeze 458 seats onto a 777 vs. the 489 or 517 seats on an Emirates A380. Granted, the on-board experience is hardly comparable, but in terms of moving large numbers of coach passengers the big twinjets have almost as much capacity as the A380/747-8 but with lower operating costs and more flexibility.

    @Lantean – It’s regression to the mean. Those who can afford to fly privately will. The rest of us will end up on a twinjet with off-the-shelf seats and generic service.

  17. Funny the Emirates haters, they should come to Atlanta and see how cozy is the relationship of Delta with the city government.

  18. I once heard a rumor Emirates was giving the 747 8 a shot, certainly not A380 size but the closest you can get.

  19. I wonder if the decline in oil prices will cause Airbus to rethink the decision. Particularly if they continue to decline. Maybe even Boeing will reconsider killing the 747-8.

  20. “The reason the A380 works so well for Emirates is because their business model centers around offering passengers one stop service between major cities in the world that can’t typically be reached nonstop, via Dubai. They largely operate in super-mega-ultra-dense markets.”

    I don’t completely agree. It’s only this year that India allowed A380s to its country. Even the first EK route on the A380 was DXB-JFK, premium route. I feel most of the early routings were premium routes (JFK, LHR, CDG, NRT, PVG, etc.) but EK would use its older 777s and a340s to fly to ultra-dense cities in south asia, SE asia, and Africa. When EK receives 2-class A380s (only business and economy), then my bet is they’ll use those to fly to low-yield/high-dense markets.

    Another reason EK has been successful compared to European/US airlines is its transit visa program. I’m no expert but I think almost any citizen of any country (except Israel perhaps) can get a 96 hour transit visa in Dubai. Of course, if you don’t leave the terminal, no visa is needed.

    @DavidB, I agree travelling in steerage on an A380 may not be the best idea, but I’d still much rather fly economy in an A380 with extensive IFE (like EK) than an old B747 that does 90s style entertainment of showing 2-3 movies TPAC or TATL.

  21. Why are some people talking about going backwards and ‘first the (sic) Concorde, now the A380’? There may be halting production in 2018 but the A380’s will still be flying for decades to come. It took Concorde 24 years to go from halting production to retirement.

  22. @TEX277
    Emirates is almost half the aircraft and Timmy over at EK is adamant that they will send their government subsidized A380s to the desert after 10-12 years in service (and they absolutely won’t sell them). Sure, some will be in operation in 20 years no matter what happens to the program, but the vast majority will be parked in the desert.

  23. Lucky, I am not so convinced this is true or an accurate reflection of what is really going on. Emirates is the largest buyer of A380’s by far, at around 40% of all A380s in operation. If you consider planes on order, then the figure rises to close to 50% of all A380’s ordered to date. Emirates is fully aware of this fact. This gives Emirates tremendous buyer power and a very strong negotiation position with Airbus. But Airbus also knows Emirates business model is built around the A380. Therefore, we have to allow for the fact that this might have been a high stakes negotiation tactic by Airbus to counter the rising buyer power of Emirates.

    Maybe it is not a wise tactic but a stand none the less which could give Airbus a bit better position in negotiations.

  24. I remember reading an article awhile back — one of the more random interested parties in all this is the US Air Force as it has to consider what it wants to do/when to upgrade USAF1. With a preference of a 4-engine aircraft due to the extra redundancy, the natural selection would have been the American-made 748, but they were originally worried it wasn’t going to be in production long enough for when the time came for the upgrade. The A380 is of course another consideration but perhaps if both these programs are on the chopping block they will have to make a decision sooner than later.

  25. EK is miffed because they gambled their strategy on the A380, and now it could possibly bite them in the ass. Hello tomorrow, indeed.

  26. So long as airbus dont repeat what they did with concorde (refuse to supply parts to BA) you will still see A380’s for many years to come ,they can easly last 30 years , cant see Airbus not suppling parts as Emirates and co would then almost certianly not buy anouther Airbus again.

  27. @Pat – Correct, because the US government will almost certainly require the planes to be built in the US, and Airbus has said it would make no sense to set up a separate production line in the US for only two airplanes.

  28. NO AMERICAN AIRLINES HAS BOUGHT IT. WHY? COZ IT ISN’T MADE IN AMERICA.

    SAME STORY WITH CONCORDE, THEY ENSURED THAT AIRCRAFT WAS A FINANCIAL DISASTER.

    A380 IS A FABULOUS AIRCRAFT BUT ITS A PUZZLE THE CHINESE HAVE NOT BOUGHT ANY – EXCEPT FOR CHINA EASTERN WHO ARE NOT ALLOWED TO FLY IT ON INTERNATIONAL ROUTES FOR SOME REASON;

  29. US airlines have not bought it because they can’t afford to run it. Only recently have they started making money again and the plane Is almost 10 years old with the first orders coming just after 9/11

  30. @Kris – That’s what Emirates says now, but if there’s no option to replace the A380s I’m sure they’ll keep them flying much longer.

    @AdamH – As a matter of fact, the USAF has just moved up their Air Force One replacement program, and the speculation is it’s because neither the 747-8 or A380 will be in production come 2021:

    http://leehamnews.com/2014/12/07/usaf-moves-up-af-one-replacement-reports-inside-defense/

    @Brian L – With either the 747-8 or A380, the bare plane would come off the existing commercial assembly line and then get transferred to a secure facility for heavy modification, so the bulk of the real work will be done in the US anyways. The problem with the A380 is that the political consequences of buying (and flying around in) a “foreign” plane are so severe that no US politician would ever approve it. They’ll find some excuse to go with Boeing even if the offer is inferior. Airbus knows this and doesn’t want to waste time bidding on a contract they have no chance of winning.

  31. It does seems that although the 747-8i is not doing very well in terms of orders(only two airlines are currently operating them), the 747-8F is a completely different story and we see a lot of cargo airlines buying them. Any idea why this is the case?

  32. @graham hall When you have one out of the three major airlines in China buying A380s, you can’t put that in the category of an exception. And BTW it’s China Southern who’s buying them and they are operating them on their ex-CAN route to the US and Australia, can’t call that domestic can you? :p

  33. I stand corrected viz China Southern and them flying to Oz. But strange that the Chinese are not ordering the A380s as this aircraft is the solution to the chronic shortage of seats on some of their internal flights: i know coz I have had big problems getting domestic flights when I want to fly.Japan used 747s specially modified for their domestic market, China you would have thought would have considered the same. Perhaps they asked Airbus if they could built them in China and were told no.

  34. The solution is easy …. Dubai government will probably end up buying the rights for the A380 and start producing it for Emirates and other Airlines in and out of the region. Plus, by the time this happens other Airlines will learn that people have more money now to spend and they want to travel more and the best way to answer to this huge demand will be through flying them on A380 and via Maga Airport such as Dubai Airport.

    It is a nice big plane that needs to be a little more economical and Bob’s your uncle. Hence, a bit of R&D will sort it out.

  35. Since the A380 it’s my favorite aircraft the news really got me pissed off tremendously. I have flown both economy and business (never first) on this plane with EK and in both cabins comfort standouts any other rival plane (at least with EK). Plenty of legroom space in Y class and room for some walk around during the flight. Nicer toilets with wireless water sinks and food is better, my guess is because space allows better conservation (it’s only my personal assumption).

    Airbus announcing intentions to discontinue this production was stupid to say the least. After billions spent on its development, delays, 4 CEO’s fired, I’d wait at least 20 years before any such decision and probably would invest in making it more efficient and cost effective to attract more orders.

    Said this, Tim Clark went bananas (who wouldn’t have in his shoes) and said that with some changes in terms of efficiency and cost saving Emirates could double its orders. And trust me he damns mean it with 50 airbus jumbos already flying on EK livery and another 100 in order. I’d been in the board of Airbus I would definitely propose to sack the gentleman who has blandly let the world know of the intentions of interrupting the A380 production. Even if you think about it, even if you are discussing about it, you definitely don’t make the market panic and make a client like EK lose hundreds of millions in the stock market. I’d definitely would retaliate back at Airbus for this incident.

  36. A380 is loved by Business & First class passengers, not so much by less fortunate souls. I have taken about 20 trips on this aircraft in economy and have grown to dislike it, especially when I have to transit (LAX-NRT-SIN, for example). Imagine disembarking, trudging through security, and re-boarding with 400 fellows. If premium passengers love the 380 then may be EK, SQ and others can convert the entire aircraft into premium only seats (or beds). If airlines need about 400 economy passengers on each flight to make the math work, then the 380 is doomed.
    Look at EK where the quality of service on 380s has become seriously inconsistent. Not only are you stuck with about 420 passengers but you now have grumpy FAs and toilets without hand soap. An altogether unpleasant experience.
    Most economy passengers I know hate the 380 and once the novelty of the double-decker wears off, will look for other options. As for myself, I now seek 777 or 787 when flying long-distance, especially when a transit stop is involved.

  37. Bottom line up front… The A380 was a mistake, an UGLY mistake at that. The fact that Emarites hold 140 of the 318 orders (or 44 percent) is not good news for Airbus, as the whole program is dependant one group. Furthermore, without Emirates and Amedeo (a leasing company) the plane woukd have noted netted a single new order in two years. Airbus saw the queen of the skies (747) and thought that it was a profit machine for Boeing, they chose to invest 25 billion in the A380 to compete..What they should have done in the early 2000s was develop a true large twin to complete with the 777,

    ETOPS has simply changed the game for aviation. Twin engine Planes such as the 777 and 787 and Airbus’ own A350 and A330 ceo and neo are more efficient to operate and can fly a greater number of routes then the quad jets.

    Bye bye A380,

  38. I think it’s safe to say Emirates has a back up for the A380 tanking with their order of the new 777X. Way more efficient with that plane.

  39. I flew an A340 that was new and the Attendants told me that they can never get the temperature right. I was unconfortable for 8 hours. The Entertainment system was a problem also. The Crew wanted a Boeing

  40. No one is talking about the massive white elephant in the room here, Boeing. Boeing has been caught or rather the US spy agencies red-handed engaging in industrial sabotage and spying in relation to sales or potential sales of the Airbus A380. They don’t want this plane to do well because it threatens Boeing, and they are getting the result they want. Airliners have been spooked into not buying this plane with malicious lies about the A380’s safety and not wanting to aggravate Boeing’s situation, which still makes most of their smaller planes.

  41. Being a former airline employee, I would say that it will survive a while longer. But it is a really thin market right now for this size of Aircraft. Even Boeing said the market would not support it, and they initially refused to revise the 747, but eventually put out the 747-8. As the market grows, there will most definitly be a time and place for this aircraft, but the move was too bold of one by Airbus. They let their ego and competitive juices get the best of them in ignoring reality.

  42. I am with CC above. That plane is simply too big. Forget the 1 percent of first class travelers and there is really not much left to get excited about. The A380 should have been the aircraft that fundamentally changes the passenger experience. It delivered none of that. Legroom, aisle space, toilet space, overhead compartments – tight as always. And now consider the much longer time for boarding and disembarking, the endless immigration queues, the longer waiting time by the baggage belt as most airports are not equipped to handle a A380’s worth of luggage in any reasonable amount of time. 15 hours for say, Dubai to Sydney are not a pleasant thing on any plane. And despite me flying fearlessly for 40 years I find the A380 to be as scary as hell, thanks to the violent vibrations at take-off that resemble stalling, and a whole new set of excruciating sounds typically coming from the landing gear. The A380 in my view was a non-starter from the get-go and I avoid it wherever I can.

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