24 April 2015
Airbus wanted to beat Boeing. To get beyond 50% of the market, it needed some serious product line investment. The A380 offered the biggest investment they could make before their ownership went fully public. It also offered the biggest psychological statement about beating Boeing in its (former) core jetliner market.
Unfortunately, Airbus chose to attack what is also the least important segment (5% of the total market, at best). Aside from a limited pool of up-front customers, the A380 is al- most irrelevant in today’s market environment. This is a two-per-month segment. Very simply, route fragmentation and airline right sizing are clear realities. Even the Asia market is being transformed. The 777/787 and A330/ 350XWB are doing great, and together all the smaller twin aisle jets have racked up well over 3,500 orders since the A380 was launched. Production rates on these planes haven't diminished, while A380 deliveries are staying around two per month (this is no longer due exclusively to production reasons — the majority of A380 customers have requested some kind of deferral).
Accordingly, this program has not inspired a lot of passion on the demand side. It’s the only new aircraft ever launched with major carriers denying that they need any. Lufthansa will take 14, but its actions left few doubts that this was a political decision. Singapore provided the launch order, but then effectively cast doubt about its importance, canceling plans for an A380 MRO business strategy. Japan remains a real problem case. And nearly half of the order book is for Emirates, which seems to have decided that Dubai will be the future aviation center of the world. If the Emirates orders, and those incredibly speculative Amedeo orders, are removed from the equation, this plane attracted just 164 orders over its life thus far.
That's a commercial disaster. However, that Singapore order ensured that the program received a go-ahead. The result has been financial carnage. Meanwhile, it's becoming abundantly clear that efforts to keep the A380's weight down have resulted in some significant technical problems. Fixing the bracket cracks was expensive, and the problem speaks to an aircraft that quite frankly isn't technically all that great.
Two Unpleasant Things to Remember
Despite the order book and our Production Forecast numbers, A380 pricing has by most accounts been awful. Since the first round of customers comprises the very people who could require a plane in this class, there are few reasons to believe that pricing will improve. It’s also very strange to discuss program breakeven points (originally 250 aircraft but now 500+) without any context or discussion of pricing.
Even if the weight problems come to nothing (in terms of the aircraft’s operating economics), it’s difficult to see how the A380 can offer significantly better costs than the 747, particularly the new 747-8. Per passenger weight is worse on the A380, and much worse than on the 777 or A350XWB. The A380 engines use older technology than the GEnx and Trent 1000/1700. A380 belly cargo limits are an issue too. Given this weight, and the A380’s status as a largely metal design, it might be too obsolescent to take advantage of any post-2020 large aircraft market. The 777-9X and A350XWB-1000 will likely prove too competitive from a seat mile cost standpoint to let the A380 keep a respectable niche.