The European aerospace group said it had made the “painful” decision to stop making A380 after Emirates, the biggest customer, reduced an outstanding order for 53 planes to only 14. [The Guardian]
Airbus announcement on February 14 – capital market liked it.
A History
A380 is the world’s largest passenger airliner, a wide-body aircraft manufactured by Airbus. The project was announced in 1990 to challenge the dominance of the Boeing 747.
Boeing’s 747 project had its origin in a US Air Force requirement for a large heavy-lift transport carrying up to 750 troops over long distances. Losing that contract, however, made Boeing to pursue it in high-capacity commercial jet transportation. [Air Force One, the presidential aircraft version of the 747 will be modified based on 747-8; Boeing received the contract in July 2018 – a $3.9 billion contract to build two, due to be delivered by December 2024]
Boeing’s board of directors decided to launch the 747 in March 1966, making its decision public in April, along with an announcement that Pan Am had placed its first order for 25 at $20 million each. First flown commercially in 1970 with Pan American Airways, the 747 held the passenger capacity record for 37 years.
Conceived as a response to the Boeing 747, the Airbus A380 development program was officially launched in June 1994. It is the largest jet airliner ever built and is the world’s first double-deck passenger aircraft. First flight took place from Toulouse, France on 27 April 2005, A380 completed its first commercial with Singapore Airlines on October 25th 2007 with 471 passengers on board (breaking 747’s record).
Commercial Success?
A380 took the realm and record in terms of manufacturing and engineering, but is often considered an unsuccessful commercial product. As of January, Airbus had received 313 firm orders for the passenger version of the plane, of which 234 had been delivered.
But its target was to sell 700 in total. The whole programme is thought to have cost $25bn (£19.4bn). [BBC]
Consumers like A380 but not airlines do not
The average price of Boeing’s 747-8 as of January 2018 is at $402.9 million and $403.6 million for the passenger and freighter version respectively. The current list price is up 4% at $418-419 million.
The average list price of the Airbus A380 is 10% more expansive, based on its 2018 average list price of $445.6 million.
Common concerns and considerations…
- too large, hard to fill and thus inefficient
- high fuel prices, high operating cost and environmental concerns
- airlines looking at Boeing’s new family of 777s
Now, the world’s largest passenger airliner will not be produced after 2021.
The Economics
The rising global demand in the 21st century is the underlying theme, especially the rapidly rising number of air travelers in the Asia and Middle East market.
The center of Airbus’ pitch for the A380 in the early 2000s was the notion that the core of the long haul business model would be so-called hub-to-hub flights. [AirwaysMag]
On the other hand, Boeing is pursing the point-to-point (more accurately hub-to-spoke) thesis.
Boeing’s 777X, specifically the larger 777-9X variant, offers similar performance (the A380 can fly slightly further) to the A380. And pretty much every other carrier with a hub network large enough to support an A380 has ordered either the Boeing 777X or the Airbus A350. [AirwaysMag]
The airline industry is planned and started as fragmented. Then comes bankruptcy and consolidation.
And airlines are also sharing world hubs or exploring second/third tier cities. (it’s not common for a single airline to secure the majority share of an international traffic hub – which would make A380 a wise choice/investment)
Airbus may have bet that countries like China and India will have large demand centered around one or two cities. But the reality is the opposite. They have planned ahead to spread out and made several international hubs.
First tier airports/cities in terms of size will add new members to its list. That’s how the predicted increase in demand mostly absorbed.
