This can't be good - A380

[bizflyer]

https://www.dr-peters.de/en/company/news/2018/2018-06-01.html

[Less Hair]

So two used ones being parted out, at least another one leased on flying to HiFly.
SIA had five retired for new ones. Who is taking the other ones then?

[KenV]

Only 10 years after they went into service, two A380 super jumbo jets are being broken up for parts.
There might be some really good reasons for this, but no matter the reason, this can't be good for future prospects of this airplane.

https://www.cnbc.com/2018/06/05/a-decade-after-debut-first-a380-jumbos-to-be-broken-up.html

[wiggy]

Worth bearing in mind (as I understand it) that these were v early airframes with weight/performance issues that made them a very unattractive option for the rumoured prospective purchasers..I don’t think we can draw any conclusions about the second hand market in 380’s until some more typical airframes hit the market.

[swh]

First few 787s didn’t see a day of airline service and were broken up !!

[CONSO]

Well with sales in decline- its a good bet that the 380 will never meet its sales- delivery projections when Airbust filed for a bit of gubbermint help via low cost ' loans' - thus under the rules, a significant portion of the ' loans ' will never have to be repaid, but simply forgiven. Just one of the advantages of a state run company with short work weeks, great vacations, and fabulous PR ...:rolleyes:

Of course the BA 7 late 7 game - the shareholders eventually take it in the shorts over the long term . . .

[BAengineer]

The leasing companies have been warning for years that there isn't any viable used market for these aircraft so scrapping seems the obvious decision. Whether it is an economic decision depends on what the sale price was in the first place - if the airline got a really good deal then a 10 year lifespan isn't a big issue.

[swh]

Two are being parted out, two are being taken by HiFly. HiFly have advertised for crew, the first aircraft has gone test flights.

[RufusXS]

First few 787s didn’t see a day of airline service and were broken up !!
That's not really true. The first 6 787s produced were meant to be test articles. 1-3 were never envisioned as having economic value after testing so I believe they are scattered around the world as static displays. 4-6 were thought to potentially be suitable for sale, but only #6 was purchased (I believe by the Mexican government for VIP transport). 4 & 5 were indeed scrapped with very low hours (1,500ish I believe).

That's quite different than being sold to carriers, used for a number of years but nowhere near their potential lifespan, then being scrapped for lack of interest.

Now, the 787s did have their early production units known as the "terrible teens." Those sat at Boeing for several years waiting for buyers. They were eventually modified to upgrade some of their degraded performance and were sold (I'm sure at steep discounts). Now if those serve for however many years/hours/cycles that these A380s served for, then can't find a buyer and are thus scrapped, that's probably a better comparison. Other than test articles #'s 4 & 5 though, I'm not aware of any 787s being scrapped yet.

[vapilot2004]

Two points I found interesting - one, the owners of the leased aircraft apparently already made their investment back (with a profit) during the lease period. What happens to the aircraft afterwards is all gravy - they can sell the A380's engines, chop the rest up for scrap, and still have made plenty of money.

The second point, the biggest issue regarding profitability in the secondary market of the super jumbo is the enormous cost of an interior refit - $30-40 million US, which is outside of the range that airlines are willing to pay, so this fact, along with the limited demand for such a large, complex aircraft factors into the limited desirability.

[Intruder]

First few 787s didn’t see a day of airline service and were broken up !!
I know of one that was broken up at PAE just a few weeks ago. Haven't heard of any others...

Several of the early 787s are already in museums, including #1 in Nagoya, Japan and #3 at the Museum of Flight in Seattle.

[BluSdUp]

CONSO

And Boeing would do just fine without the Military, Fed and State subsidy, Eh, EH!
The dreamliner are making money for them ,,,,,,,,,,,,,,eeeeh. NEVER!

Grow Up

[tdracer]

CONSO

And Boeing would do just fine without the Military, Fed and State subsidy, Eh, EH!
The dreamliner are making money for them ,,,,,,,,,,,,,,eeeeh. NEVER!

Grow Up
BSU, Boeing is currently cash flow positive on the 787 to the tune of roughly $25 million/aircraft. That's about $4 billion/year. Now, even at that rate it'll take several years to break even on the program, but the 787 will likely make money.
Airbus isn't even cash flow positive on the A380... They need to up the production rate to twice it's current rate to be cash flow positive, so as it stands now, the more A380's they build, the more money it looses.

[swh]

That's not really true. The first 6 787s produced were meant to be test articles. 1-3 were never envisioned as having economic value after testing so I believe they are scattered around the world as static displays. 4-6 were thought to potentially be suitable for sale, but only #6 was purchased (I believe by the Mexican government for VIP transport). 4 & 5 were indeed scrapped with very low hours (1,500ish I believe).
o

It is true, none of the 787 test aircraft were supposed to be scrapped, they were all planned to go into service like the 777. All were supposed to be sold.

When’re market showed no interest in these frames, Boeing decided to scrap the aircraft, they used the aircraft to move 2.5 billion out of their 787 production costs into their R&D budget. They fixed two problems, their bloated production costs and aircraft no one wanted to buy.

[glad rag]

Only 10 years after they went into service, two A380 super jumbo jets are being broken up for parts.
There might be some really good reasons for this, but no matter the reason, this can't be good for future prospects of this airplane.

https://www.cnbc.com/2018/06/05/a-decade-after-debut-first-a380-jumbos-to-be-broken-up.html

tranche1 heavyweight aircraft.

[lederhosen]

VApilot the investors have I understand got about 75% of their original investment back after ten years. They may make a profit at some time in the future depending on how well the parting out goes.

[Torquelink]

And that is the totality of the yield they have made on their investment. In other words, currently they are 25% out of pocket and even if that 25% is recovered through part-out, they will have made a zero return on their investment over 10 years.

[swh]

Read the link in the opening post, return to investors 145-155%

[lederhosen]

swh it says they are expecting a planned return in that range. The actual return could be anywhere between Torquelink's nil and Peter's hoped for upper end of 55% over the 12 years the money will have been invested. Investors (some of whom I know) are inclined to believe it when they actually see the money.

[NOC40]

except: "This includes the repayments already made of approximately 72 percent (DS Fund No. 129) and 81 percent (DS Fund No. 130)". So the returns definitely won't be zero, and will very likely be in excess of 100% of the original money invested. As to how much and when, I agree those are harder questions to answer

[Sailvi767]

Two points I found interesting - one, the owners of the leased aircraft apparently already made their investment back (with a profit) during the lease period. What happens to the aircraft afterwards is all gravy - they can sell the A380's engines, chop the rest up for scrap, and still have made plenty of money.

The second point, the biggest issue regarding profitability in the secondary market of the super jumbo is the enormous cost of an interior refit - $30-40 million US, which is outside of the range that airlines are willing to pay, so this fact, along with the limited demand for such a large, complex aircraft factors into the limited desirability.

Here are what are believed to be the best lease terms available.
The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.
If you apply a 4% interest expense to purchase which is probably low for 2008 you could apply around 8.5 million a year against the note with a 10 year payoff around 85 million against the note.

[NOC40]

that lease factor is quite high for the A380; it's typically 0.68%-0.7% for most other aircraft, so you're getting well paid for taking some aircraft type risk. for anyone interested there's plenty of data out there in the public domain (including purchase prices and lease rates): look at dpaircraft.com/investors/financial_statements.htm for 787s leased to Thai/Norwegian and dnairone.com/investors/financial-statements.html for an A380 to Emirates

[KenV]

Here are what are believed to be the best lease terms available.The purchase price by the lessors is reported to be $198.6 million with a lease rate of $1.7 million a month, for what’s know as a lease-rate factor of 0.85%.
If you apply a 4% interest expense to purchase which is probably low for 2008 you could apply around 8.5 million a year against the note with a 10 year payoff around 85 million against the note.So crunching the numbers:
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)

Bottom line: Lousy investment with low returns yet relatively high risk.
It makes sense that they're breaking up the aircraft for parts so they can squeeze out as much return on their investment as possible.
What's sad is that they can apparently get more money by breaking up the aircraft than by leasing it at a discounted rate. Like the thread title says, this can't be good news.

[Lord Bracken]

Aren't these the frames that had massive reworking of the electrical systems because of the different versions of CATIA (v4 and v5) being used at various Airbus offices at the time? So not only are the aircraft non standard, they would also be a nightmare to refit. IIRC it took them to the 15th or 16th aircraft off the line to have "production" standard wiring.

[Volume]

because of the different versions of CATIA (v4 and v5) being used at various Airbus offices
It was probably more an issue of misusing Catia to determine the length of wire bundles... If you bend a tube, the centerline length stays constant (i.e. you compress the material on the inner radius and stretch it on the outer radius). If you bend a wire bundle, it´s centerline will become shorter (following not a simple rule), this is why dedicated specialized software was used previously to "more accurately" calculate the length of wire bundles.

Anyway, early airframes of almost any type have teething issues, so it is normal that they are not that popular on the used aircraft market. For a cheap small aircraft an airline may take a risk, for a massiv investment of that size, the airlines think twice.

Bottom line: Lousy investment with low returns yet relatively high risk.
Which brings us back to the old saying, that it is pretty easy to make a small forune in aviation... Just start with a big one.
There are only a few, which make good money in aviation.

[JCviggen]

So crunching the numbers:
1.7 x 12 x 10 = 204 million in lease fees received
198.6 million = cost of purchase
204 - 198.6 = 5.4 million "profit" over 10 years. (which equals 2.72% rate of return over 10 years)
198.6 x .04 = 7.9 million (earnings if the same amount was invested in mutual funds at a lousy 4% rate. You can buy an annuity that yields 4% with zero risk!)

I think you'll find that even an unwanted early example A380 still has a residual value that is considerably above zero...

[flatfootsam]

Between MSN 001 and MSN 004 there were over 20,000 production modifications. An object lesson in the pitfalls of concurrent engineering and the procurement lead design freeze requirements.

MSN 004was a basket case, originally used as an engine test platform and was scheduled for modification as a VVIP platform, however, any form of continued airworthiness would have required an entire specialized dept to support that particular white elephant.

The early production models and the aircraft taken as post flight test aircraft on lease by SIA were in this batch. SIA and the leasing company both generated a profit. Ipso facto, applying the 20 year design life and in service rule to these early aircraft implies that the airfames and processes were mature at the inception of the entry into service, which is not the case. Also, it was over two years late for entry into service. I still have my SIA ‘A380 EIS 2006’ coffee mug. Ironic maybe, but by this stage, the panic button in Aibus central had been hammered into the table and the launch customer was having a sense of humour failure.

There is a secondary market for A380’s, provided they’re not early production mod’ standard airframes, expensive refits notwithstanding, the low cost mass transport options and hadj options are already on the table.

To paraphrase Mark Twain: ‘The reports of my death are greatly exaggerated’

[Socalbug Smasher]

I know of one that was broken up at PAE just a few weeks ago. Haven't heard of any others...

Several of the early 787s are already in museums, including #1 in Nagoya, Japan and #3 at the Museum of Flight in Seattle.

#2 is at the Pima Air and Space museum in Tucson....