Emirates Balks at A380 Order Until Superjumbo's Fate Is Clear

(Bloomberg) -- Emirates, the world’s biggest operator of the Airbus SE A380 superjumbo, said it’s reluctant to place a further order for the double-decker jet until the future of the slow-selling model becomes clear.

With Airbus mulling production cuts if no new deals are secured this year, Dubai-based Emirates needs reassurances about the European planemaker’s plans for the A380 as much as it does additional cost savings, Tim Clark, its president, said Wednesday in Paris.

“I’m more concerned about continuity of production,” Clark said at a media briefing. “If they came up with what we want at the right price, knowing that we’ll need to retire aircraft fairly soon we would probably take some more. But I don’t want to be left with a pup. I don’t want to be left with aeroplanes that are headed for obsolescence.”

Airbus this week formalized plans to fit the A380 with fuel-saving winglets to help boost efficiency by as much 4 percent, dubbing the upgraded aircraft the A380plus. The manufacturer hasn’t offered to retrofit the drag-reducing, 4.7-meter (15-foot) extensions to the 95 planes that Emirates has taken delivery of, or provide them on the 45 still to come, Clark said. He added that they might be made available should he choose to buy more of the jets.

Emirates is in early talks about the purchase of 20 A380s worth $8.7 billion before discounts, people familiar with the discussions said earlier this month. Instead of adding to its fleet, the Gulf carrier could choose to keep its current superjumbos for longer by renewing leases when they begin to expire after 12 years of operations, Clark said, adding that the plane still has a long-term future with his airline.

No Engagement

Clark also gave a lukewarm response to Airbus’s efforts to make the A380 more attractive to operators by adding as many as 80 new berths to the 550-seat model, saying he won’t be taking up the option of eliminating its ocean-liner staircase or moving to an 11-abreast layout in economy class. 

The comments reflect Airbus’s challenge with the plane, as even the model’s biggest fan isn’t convinced by the changes. The executive called on Airbus to do more to market the A380 so that the manufacturer can maintain healthy output levels, safeguard the delivery line and justify research and development spending on the program.

“It would be hugely helpful if they were able to sell more,” he said. “They come to us because they are really not getting any kind of engagement with others. As long as you keep the line going you can adapt to the way the technology is addressing airframe and propulsion issues.”

Emirates is also considering buying the Airbus A350 wide-body or the rival 787 Dreamliner from Boeing in the next five or 10 years, Clark said, with a decision due in the next few years. 

FlyDubai Combination?

Emirates’ indecision on the A380 could also stem from potential changes under discussion by its state owner, which is pushing for closer coordination with sister airline FlyDubai, which specializes in low-cost flights. The plan, which is being developed at government level, could see both airlines grouped together in one structure within 18 months, Clark said.

Integration with FlyDubai would give Emirates access to a narrow-body fleet and permit the elimination of duplicate routes. That would free up slots for Emirates to expand, staving off a move to Dubai’s new Al Maktoum Airport hub by as much as three years, Clark said. That would be welcome since a transfer slated for 2025 is likely to be delayed to the 2026 to 2030 period, he said.

As Emirates evaluates adjustments to its business, it’s also examining the possibility of cooperating with discount long-haul carriers as they expand rapidly in Asia and Europe, Clark said, acknowledging that they may present a threat to his company’s hub-based tmodel.

Meanwhile, the airline is seeing some recovery in demand following U.S. travel restrictions, including the ongoing moratorium on carrying laptops into the cabins of U.S.-bound planes. Some 13 aircraft were grounded due to the disruption, with eight of those quickly redeployed and the bulk of the other five set to re-enter traffic for the Hajj pilgrimage season. While there has had a freeze on hiring since last summer, first-half earnings are likely to show an improvement versus the year ago period, he said.

To contact the reporters on this story: Christopher Jasper in Paris at cjasper@bloomberg.net, Deena Kamel Yousef in Dubai, UAE at dhussein1@bloomberg.net.

To contact the editor responsible for this story: Chris Reiter at creiter2@bloomberg.net.