Trouble In The Gulf: Emirates Is Delaying A380 Deliveries

Emirates is the world’s largest operator of the A380. So far they have a total of 87 A380 aircraft in their fleet, with a total of 142 A380 aircraft on order. Emirates has almost as many A380s as all other airlines combined, which is pretty amazing.

Emirates has been a huge advocate for the A380

For years there have been rumors of Airbus cutting production of the A380 due to lack of demand, though Emirates has been campaigning for them not to stop production. Seemingly they’re the only airline that’s actually thrilled with the plane.

Perhaps their desire for A380 production to continue has to do with the fact that they’ve mostly funded the project, so they want to see the aircraft advance, rather than be discontinued.

Up until now Emirates has basically been taking delivery of the A380 as quickly as they can, and they’ve been putting the plane on some unusual routes, like Dubai to Doha, which is just a 40 minute flight.

Emirates-A380-First-Class-01

Emirates is delaying some A380 deliveries

For anyone who was doubting the financial pressure the Gulf carriers are under, here’s a pretty clear sign. Emirates is delaying delivery of 12 A380 aircraft by at least a year. Per a press release from Airbus:

Following an agreement reached between Emirates Airline and Rolls-Royce and a consecutive agreement between Emirates Airline and Airbus, the Toulouse based aircraft manufacturer is to adapt the A380 delivery stream with six aircraft deliveries postponed from 2017 to 2018 and six others from 2018 to 2019.

Airbus re-confirms the target to deliver around 12 A380s per year from 2018 as announced earlier in July 2016.

Further fixed cost reduction initiatives will be accelerated so the impact on break-even in 2017 is minimal.

What this means for Gulf carriers

In and of itself this might seem minor, but it reflects a major trend we’re seeing from the Gulf carriers. Clearly they’re forecasting weaker global demand for air travel, while also being under immense financial pressure from their respective governments. For years the “big three” Gulf carriers were run primarily with the purpose of bringing people to the UAE and Qatar, with financial performance being of secondary importance.

However, it seems the Gulf carriers are largely being cut off by their governments. So I suspect we’ll continue to see huge cuts across the board — just lately we’ve seen Emirates start charging for many economy seat assignments, Etihad lose patience with their equity partners, and Qatar making significant cuts to their soft product.

To go hand-in-hand with Emirates delaying delivery of A380s, they also recently fired many of their cabin crew recruiters, which shows that their growth will substantially be slowing down.

Expect a lot more changes over the coming years, this is just the beginning. I wouldn’t be surprised to see further significant delays in aircraft delivery.

Comments

  1. Nice to see the Gulf carriers having to run like businesses for a change rather than being simply “chosen instruments” for their respective governments. It was fun while it lasted, but Lucky is right. This is only the beginning of a period of radical changes for these carriers. The Western carriers learned the hard way, dumping cheap seats in the market is not a sustainable option.

  2. Perhaps they grew too quickly? I still remember flying EK back in 2006 when its only destination in the USA was JFK. For a few years I was an EK gold and DXB-JFK flights were almost always full so the likelihood of getting an op-up from economy to business was quite high.
    It will be interesting to see if they’ll terminate any routes to the USA that aren’t profitable.

  3. As I have mentioned here before..
    The unsustaiunability by the Gulf carriers of ordering so many A380’s is reminiscent of a
    CEO gone wild with Uncle Dubie’s bank account..I also mentioned that the British Airbus Sales Associates, would do well to plan an exit thorough the desert, by ‘turbocharged’ camels.

  4. Ram, they have a bunch of 777’s as well

    I kinda like that they fly so many A380’s. Often Emirates run the only A380 into secondary airports.

    Moreover the plane would probably not be viable but for Emirates. And personally I love the A380

  5. The key factor here (as indicated also in the press release) is that the Rolls-Royce engines are not performing according to expectations (all previous A380 for Emirates had Engine Alliance engines GP7200), hence the delay.

    Also not to be forgotten – not every incoming A380 is an additional one. Given the lease terms and Emirates’ approach to operating one of the youngest long-haul fleets in the sky, we will start to see both A380s and 777-300ERs being replaced with new models with expiring leases. And given today’s low interest rate environment, getting new jets can actually lower operating costs significantly.

  6. The game of stranggling each other neck till one is knockout of the ring has a limit. Not an if but when.

  7. Emirates is one of the world’s largest financial black holes which is sustained by financial sleight of hand. It isn’t sustainable forever. One day they will have to write off most of their A380 fleet which is still carried on its books at full value, and then the game will be up. Great for the traveling public while it lasts.

  8. Always thought that the A380 was a vanity project and only survived through Emirates. Airbus should be thinking now of stopping it, before Emirates cancels it. Great aircraft but out of step with current thinking, i.e. two engines are better than four. The great passenger increase has not appeared as yet and so it seems Emirates are correct to cut back. When will it be canceled? Airbus should be ready sooner rather than later. I bet they are thanking themselves for not going down the “stretch” avenue with the A380.

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