Why the Superjumbo A380 Airplane Faces a New Crisis

(Bloomberg) -- Airbus SE appeared to have secured a long-term future for the world’s biggest passenger plane, the A380 superjumbo, when it agreed last year to sell as many as 36 of them to Dubai-based Emirates in an order worth $16 billion at list prices. Now the model’s very survival is once again in doubt as the airline considers a switch to smaller jets after failing to agree on a deal with engine makers to power the plane.

1. Why does this deal matter so much?

The double-decker A380’s cavernous interior is a hit with customers, and airlines regularly make it a focus of ad campaigns. But even the biggest carriers have stopped short of buying the jet in large numbers. Top European operators such as British Airways have a dozen or so, and Singapore Airlines has ordered twice that number. But only Emirates has truly bought into the A380, ordering 162 aircraft that are the linchpin of a global hub strategy that’s made it the world’s biggest long-haul airline. Lose the latest deal from the Mideast giant, and a plane that’s been in production for little more than a decade could face being wound down.

2. Why aren’t the engine companies clamoring for the business?

While the size of the Emirates contract might sound impressive, 36 planes is small fry by aviation standards -- and not enough to warrant the sort of investment required to deliver significant improvements in fuel burn. Though Emirates had reluctantly accepted that its A380s wouldn’t get a wholly new engine, it was told the planes should benefit from upgrades planned by Airbus to keep the program going for another decade. But an alliance of General Electric Co. and Pratt & Whitney showed little enthusiasm for the engine enhancements and incumbent supplier Rolls-Royce Holdings Plc has resisted the airline’s price and performance demands.

3. Why hasn’t the A380 caught on?

The four-engine plane has been on shaky ground for years as the aviation industry increasingly turns to leaner twin-turbine planes like the Airbus A350 and Boeing’s 787 Dreamliner for longer routes. Put simply, the A380 is just too thirsty for most airlines, with only a handful able to make the fuel-burn economics feasible. It may also be too big for its own good. Airbus designed the jet to meet a surge in passenger traffic, reasoning that crowded airports would compel carriers to operate bigger aircraft. While that’s been the case in some locations -- London Heathrow, with just two runways, is the second-biggest A380 hub, after Dubai -- the prediction has by and large proved inaccurate. Airports are expanding capacity to keep pace with demand, and cities around the world are increasingly getting direct links, undercutting the need for Persian Gulf-style mega-hubs.

Why the Superjumbo A380 Airplane Faces a New Crisis

4. Does it matter if the A380 disappears from the skies?

If it’s really the dinosaur that sales figures suggest, no. Yet some in the industry -- and at Airbus -- have a nagging sense that the A380 simply arrived too soon, and that the global economy, held back by the 2008 slump, is still traveling toward a point where a huge aircraft will come into its own. Airbus rival Boeing Co. has already effectively written off the superjumbo sector, choosing to upgrade its venerable 747 rather than create a new model and focusing resources on smaller jets such as the Dreamliner and a revamped 777. That’s why -- pride and jobs aside -- Airbus has been so eager to secure a lifeline for the A380; if demand does turn, it will have the market to itself. Much will depend on how travel habits, and hence jetliner demand, evolve in the key markets of China and India, but if production lines close now, and tooling and expertise is lost, there can be no going back.

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