No new A380s! Emirates reduces orders, Airbus cuts production

February 15, 2019 6:54 pm

REUTERS/Eric Gaillard

Emirates and Airbus have come to an agreement on outstanding A380 orders. Emirates will reduce its overall order of A380 aircraft from 162 to 123, and in doing so will receive its final 14 double-decker carriers between 2019 and 2021.

Airbus, in turn, has decided to pull the plug on the A380 production, with the last deliveries of the world’s biggest passenger plane scheduled for 2021.

The news, although expected, has left an indelible mark on the airline industry as the reality of rising fuel prices and unaffordable expenditures hits closer to home. Passengers and pilots across the world loved the massive A380, but the plane was too heavy a financial burden for airlines to carry.

“Emirates has been a staunch supporter of the A380 since its very inception. While we are disappointed to have to give up our order, and sad that the programme could not be sustained, we accept that this is the reality of the situation. For us, the A380 is a wonderful aircraft loved by our customers and our crew. It is a differentiator for Emirates. We have shown how people can truly fly better on the A380, and Emirates has set the standards for that by introducing customer experiences that are unique to the A380 like our Shower Spas and Onboard Lounge. The A380 will remain a pillar of our fleet well into the 2030s,” said Sheikh Ahmed bin Saeed Al Maktoum, Chairman and Chief Executive, Emirates Airline and Group.

Instead of spending on new A380s, Emirates has decided to order 40 new A330-900 aircraft, and 30 new A350-900 aircraft, in an agreement signed with Airbus. The deal is worth US$ 21.4 billion at list prices.

“By selecting A330-900neo’s and A350-900s, both powered by Rolls-Royce engines, as well as reducing its future commitments to the A380, Emirates has effectively reduced its exposure to the giant jet and arguably introduced more fleet flexibility – this is critical with its deepening relationship with flydubai in its pursuit to expand and capture efficiencies across its growing fleet,” said Saj Ahmad, Chief Analyst, StrategicAero Research.

 

How the world’s favourite dino went extinct

The massive A380 jet, which has been around for more than a decade, seats more than 500 passengers. At a time when people around the globe are considering the cheapest forms of travel, airlines are finding it difficult to sell those seats. Qantas cancelled eight orders before Emirates cancelled 39.

“Given that Emirates leases all its A380s, it has shielded itself against a new defunct programme and an asset whose values will only decline as time goes on. For Airbus, this deal will have been a very hard pill to swallow given the immense costs associated not just with producing the A380, but also to close it down,” Saj Ahmad said.

 

 

It doesn’t help that the much-loved A380 behemoth has four engines that guzzle fuel. Over the past two decades, airlines have been finding it much more efficient to operate on a new generation of smaller, but more nimble jets that have only two engines.

“There has been speculation for years whether we were 10 years too early for the A380, but I think it has become clear that we were probably at least 10 years too late … or more … However, let me stress one point here. We’re talking about the end of the production of the A380 in 2021. We’re not talking about the end of the program. Obviously, Airbus will support these 220-something aircraft that are in operation out there with many airlines,” said Tom Enders, outgoing CEO of Airbus, in a public statement.

 

A checkered history

The A380 has had to deal with more than an average share of troubles.

Even before the plane was introduced to the market, Airbus struggled to reduce the weight of the plane to avoid financial penalties. After disagreements between Airbus’ French and German management, the manufacturer was plagued with production delays and cost overruns.

Ever since the A380 behemoth was introduced into the commercial market with its voyage to Sydney under the Singapore Airlines banner, it has failed to shake off its “niche” label. It has tried to become a global mainstay with deals with multiple airlines including Qantas and Emirates, but it has failed to attract passengers.

Airbus also was unable to foresee that airlines would not necessarily need to fly through international hubs but instead would have smaller planes with shorter one-stop routes to multiple locations.

The beginning of the end was indicated in early 2018 when the initial A380s came off lease from Singapore Airlines. Most other airline carriers turned their back to the A380, leaving the gentle giants parked near the foothills of the French Pyrenees.

Late last year, Emirates and Airbus missed a deadline to select engines for new planes after the airline struggled to convince Rolls-Royce on price and performance concessions. The latest announcement by Emirates to reduce its A380 orders was too much for Airbus to bear.

“As a result of this decision we have no substantial A380 backlog and hence no basis to sustain production, despite all our sales efforts with other airlines in recent years,” Tom Enders said in a statement.

While there is great concern about job losses due to the discontinuation of A380 production, Airbus has assured that there is sufficient interest in newer models to reorganize its workforce.

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Anup Oommen
By Anup Oommen
Anup Oommen is a Business Editor at MediaQuest Corp. He has been a journalist for the last eight years and has extensive insight and expertise in international relations, macroeconomics, sports and financial news.



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