Airbus Floats Shutdown of A380 Superjumbo as Orders Stall
(Bloomberg) -- Airbus SE publicly questioned the future of the A380, saying its flagship aircraft program risks being shut down if the manufacturer fails to win a crucial order from the plane’s main backer, Emirates of Dubai.
Emirates is the only airline with enough capacity to take enough planes to keep the program alive, Airbus sales chief John Leahy said Monday in an online presentation. Discussions are ongoing, he said.
“I believe we can find a solution with Emirates in hopefully the not too distant future,” Leahy said in an interview with Bloomberg TV. “But we do need a strong base that only a big operator like Emirates can provide.”
Airbus has struggled to rack up sales of the superjumbo, which it argues will be needed to help increase passenger traffic at the world’s busiest airports. The company was forced to slash production rates in July to try and stretch out the order book. Emirates, by far the biggest operator of the plane, scuttled a deal to buy 36 of the planes in November, leaving Airbus hanging and raising doubts about the future of the program.
Airbus wants Emirates to order enough planes to sustain production at six a year over the next 10 years, giving the planemaker scope to sell two or three of the superjumbos on top of that to eke out a profit on the program, Leahy said.
The company produced 15 in 2017, will hand over 12 this year and just eight in 2019. Airbus can produce as few as 6 of the planes a year with “reasonable efficiency,” commercial aircraft chief Fabrice Bregier said, adding that a formal decision to drop to that level hasn’t yet been made.
The plane’s future has been in doubt for several years. As far back as 2014, Chief Financial Officer Harald Wilhelm said the program could be killed if demand didn’t pick up.
The final 2017 order tally for all aircraft, announced Monday, highlights the challenges facing Airbus as the company prepares for a wholesale overhaul of its leadership team. The planemaker, run from Toulouse, France, outsold rival Boeing Co., widening its lead in orders. While Airbus has had success selling smaller planes, demand for widebodies has waned -- especially hitting the biggest plane in its commercial lineup.
The four-engine A380, introduced in 2005, is so big that some airports had to expand runway facilities in order to accommodate the 550-seat plane. While it’s used in the world’s biggest airports including London’s Heathrow and New York’s JFK, the industry as a whole has moved toward smaller planes going point-to-point, reducing airlines’ dependence on bigger hubs.
More business from Emirates is key to attracting other buyers of the A380 and ensuring jets sold now would hold their resale value. With a list price of $446 million, the plane is one of the most expensive and least flexible for airlines to deploy in their fleets. Without new orders, it becomes impossible for Airbus and its suppliers, which include Rolls-Royce Holdings Plc, GKN Plc and the General Electric Co.-United Technologies Corp. venture Engine Alliance, to make a profit.
Airbus also gave an update on other aircraft:
- COO Bregier predicts Airbus will surpass Boeing in plane deliveries by 2020
- Bregier: ‘Huge potential’ to lift A320neo order rates to 65 or 70 a month in longer term
- Sales chief Leahy: Airbus expects to win more orders this year than planes delivered, including three widebody deals in next two months
- It would cost little to lift A350 production rate above 10, as long as new sales included the largest -1000 variant: Bregier
While the A380 struggles, Airbus is outselling Boeing on smaller single-aisle aircraft like the A320 family. The company announced a bonanza of orders in late December, and said on Monday that it sold more than 1,000 of the planes in 2017. The achievement is especially notable since Boeing refreshed its lineup last year with the 737 Max 10, a direct competitor.
Leahy, the outgoing chief salesman, said Monday he’ll stay on for several months after handing over the job to his successor, Eric Schulz, on Jan. 25. Chief Executive Officer Tom Enders said last month he plans to step down in 2019. Bregier will leave in February. He said Monday he plans to seek a job at another company.
©2018 Bloomberg L.P.