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Airbus ready to ace A380 if it fails to win EK order.

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Airbus ready to ace A380 if it fails to win EK order.

Old 28th Dec 2017, 00:13
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Airbus ready to ace A380 if it fails to win EK order.

https://www.reuters.com/article/us-a...-idUSKBN1EL11L

PARIS (Reuters) - Airbus is drawing up contingency plans to phase out production of the world’s largest jetliner, the A380 superjumbo, if it fails to win a key order from Dubai’s Emirates, three people familiar with the matter said.

The moment of truth for the slow-selling airliner looms after just 10 years in service and leaves one of Europe’s most visible international symbols hanging by a thread, despite a major airline investment in new cabins unveiled this month.

“If there is no Emirates deal, Airbus will start the process of ending A380 production,” a person briefed on the plans said. A supplier added such a move was logical due to weak demand.

Airbus and Emirates declined to comment. Airbus also declined to say how many people work on the project.

Any shutdown is expected to be gradual, allowing Airbus to produce orders it has in hand, mainly from Emirates.

It has enough orders to last until early next decade at current production rates, according to a Reuters analysis.

The A380 was developed at a cost of 11 billion euros to carry some 500 people and challenge the reign of the Boeing 747.

But demand for these four-engined goliaths has fallen as airlines choose smaller twin-engined models, which are easier to fill and cheaper to maintain.
Emirates, however, has been a strong believer in the A380 and is easily the largest customer with total orders of 142 aircraft, of which it has taken just over 100.

Talks between Airbus and Emirates over a new order for 36 superjumbos worth $16 billion broke down at the Dubai Airshow last month. Negotiations are said to have resumed, but there are no visible signs that a deal is imminent.

Although airlines such as British Airways have expressed interest in the A380, Airbus is reluctant to keep factories open without the certainty that a bulk Emirates order would provide.

Emirates, for its part, wants a guarantee that Airbus will keep production going for a decade to protect its investment.

A decision to cancel would mark a rupture between Airbus and one of its largest customers and tie Emirates’ future growth to recent Boeing orders. European sources say that reflects growing American influence in the Gulf under President Donald Trump, but U.S. and UAE industry sources deny politics are involved.

There are also potential hurdles to a deal over engine choices and after-sales support.

SAFETY NET

Yet if talks succeed, European sources say there is a glimmer of hope for the double-deck jet, which Airbus says will become more popular with airlines due to congestion.

Singapore Airlines, which first introduced the A380 to passengers in 2007, showcased an $850 million cabin re-design this month and expressed confidence in the model’s future.

Airbus hopes to use an Emirates order to stabilise output and establish a safety net from which to attract A380 sales to other carriers, but has ruled out trying to do this the other way round, industry sources said.

As of the end of November, Airbus had won orders for 317 A380s and delivered 221, leaving 96 unfilled orders.

But based on airlines’ intentions or finances, 47 of those are unlikely to be delivered, according to industry sources, which halves the number of jets in play.

Airbus needs to sell at least another 30 to keep lines open for 10 years and possibly more to justify the price concessions likely to be demanded by any new buyers.

To bridge the gap, Airbus plans to cut output to six a year beyond 2019, from 12 in 2018 and 8 in 2019, even if it means producing at a loss, Reuters recently reported.

Chief Operating Officer Fabrice Bregier confirmed this month Airbus was looking at cutting output to 6-7 a year.

If Airbus does decide to wind down production, some believe Emirates will ask Airbus to deliver the remaining 41 it has on order and then keep most A380s in service as long as possible.

Even so, some A380s are likely to be heading for scrap.

Reporting by Tim Hepher; Editing by Mark Potter
Our Standards:The Thomson Reuters Trust Principles.
#BUSINESS NEWSDECEMBER 27, 2017 / 10:29 PM / UP
Metro man is offline  
Old 28th Dec 2017, 00:27
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Monsieur Hubris, may I introduce Monsieur Nemesis?

What a pointless squandering of capital and talent this entire exercise has been.
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Old 28th Dec 2017, 00:29
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Not really. Its a great ride. Smoothest and quietest airliner I've ever flown on.
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Old 28th Dec 2017, 01:11
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"ready to ace" = ready to axe?
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Old 28th Dec 2017, 01:39
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I'm more worried about what EK is going to do with 150 odd of these things when they reach the end of their lifespan?
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Old 28th Dec 2017, 01:48
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Return most of them to the lessor.
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Old 28th Dec 2017, 02:02
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And that's the real reason for the controversy. No one in his right mind would want to be a lessor for this relict no more, least AB themselves! EK could buy them on their own, but know better than anyone else why not, even if it was for the ridiculous dumping price they got the first lot (once again, thank you European taxpayer).
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Old 28th Dec 2017, 02:17
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Ah ok thanks for clearing that up.
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Old 28th Dec 2017, 08:20
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Originally Posted by TURIN View Post
Not really. Its a great ride. Smoothest and quietest airliner I've ever flown on.
I heard there was this plane called the "Concorde" once, was apparently the fastest airliner ever operated. It cost lots and lots of money to develop, and the people who made it and operated it were very very proud of it.

I don't believe it's in service anymore. Something about economics or whatever.
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Old 28th Dec 2017, 08:45
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Originally Posted by TURIN View Post
Not really. Its a great ride. Smoothest and quietest airliner I've ever flown on.
Designing and producing the smoothest and quietest airplane doesn't guarantee a succes story. It's a fact that Airbus is far from being break-even with the A380 and as long as no-one else is interested in buying them, the potential A380 life-saving NEO engines and PLUS wingtips will never be produced.

It's a useful aircraft for congested airports where slots are hard to get, but is it worth the high investment to get those extra seats which have a high operating cost?
It would probably make more sense for Airbus to focus on stretching the A350 to compete with the B777X.
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Old 28th Dec 2017, 09:14
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Concorde was in a very, very different category in may ways. Yet I still believe that revenue was covering operational costs when it was axed (and every effort made to insure it would never fly again - I'm not sure what was the impetus for that but this is not the topic at hand here).

As for the 380 I am sure it is a very profitable aircraft on the "right" connection (ie when full). How good of a job Emirates does on this is anyone's guess... Any yes it is a very nice ride passenger wise.

We are witnessing a poker game between Emirates and Airbus - future will tell who will flinch first !
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Old 28th Dec 2017, 14:04
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Yes the Concorde was an entirely different animal. It was paid for by the taxpayers and given to BA and AF for free and the Airlines still couldn’t make it turn a profit.
When it burns as much fuel as a 747 but carries 3 1/2 times LESS pax it’s tough to make it work especially when you are route limited and do not enjoy economies of scale.
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Old 28th Dec 2017, 14:32
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Originally Posted by atakacs View Post
As for the 380 I am sure it is a very profitable aircraft on the "right" connection (ie when full).
I'd love to see the figures for seat yield as when the 380 came into service the guys on the Line were shocked at how much more fuel it used than the 777 for the same route - and it had to leave behind freight.

I suspect that the number of routes where the 380 is a clear winner over a twin jet is extremely limited (much like Concorde) which probably explains the lack of orders from airlines around the globe.
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Old 29th Dec 2017, 05:24
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We all know the Trip wins hands down on direct operating costs. The value proposition has nothing to do with those operating costs but rather slots.

The average 380 carries 150 pax more than the Trip so if the 380 were to replace the Trip into London everyday, Emirates would lose nearly 1,000,000 passengers/year. Or need 4 extra slots and 6 more aircraft, 60 crews, support etc. etc.
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Old 29th Dec 2017, 09:07
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Originally Posted by Schnowzer View Post
We all know the Trip wins hands down on direct operating costs. The value proposition has nothing to do with those operating costs but rather slots.

The average 380 carries 150 pax more than the Trip so if the 380 were to replace the Trip into London everyday, Emirates would lose nearly 1,000,000 passengers/year. Or need 4 extra slots and 6 more aircraft, 60 crews, support etc. etc.
When the 380 was originally being mooted, wasn’t this the objective of the aircraft - translatlantic shuttling between slot-constrained major airports? It does that job VERY well.

The problem is that more and more airlines are exploring point to point services rather than hub and spoke. The modern less-patient pax wants convenience as well as low fares. The likes of a 787/350 can do that.

When EK ordered 120 of these behemoths, I don’t think it was out of arrogance or ego, just a lack of foresight to see the amount of competition in the region and with far eastern carriers linking Europe and Asia.

I’d be interested to know how many are leased from non-Dubai Companies and how many are actually owned by the airline/Dubai - if it’s mostly overseas lessors then I’d be worried more for them than EK!
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Old 29th Dec 2017, 11:04
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When the 380 was originally being mooted, wasn’t this the objective of the aircraft - translatlantic shuttling between slot-constrained major airports? It does that job VERY well.
True, but this objective did not allow enough units to be sold to get a break-even. Airbus therefore tried to lure operators into believing that it could do just as well in competing with twins on all routes by their sheer pax number, especially by implementing more high revenue pax (you know, the ones that pay Y, get upgraded and drunk at the bar ....)

The problem is that more and more airlines are exploring point to point services rather than hub and spoke. The modern less-patient pax wants convenience as well as low fares. The likes of a 787/350 can do that.
They are not 'exploring' that. It was Boeing's antithesis to the above since the beginning and most operators apparently made a better assessment of the future than EK and AB.

When EK ordered 120 of these behemoths, I don’t think it was out of arrogance or ego, just a lack of foresight to see the amount of competition in the region and with far eastern carriers linking Europe and Asia.
You may call it lack of foresight, i however call it arrogance when you belittle the competition, like Timmy did when pretending that they were less skilfully managed in not going for the dugong. Just as i call it arrogance when AAR boasted on an interview that EK needed even bigger airframes, because when 'we open the doors, they flock in'.

Last edited by glofish; 29th Dec 2017 at 11:20.
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Old 29th Dec 2017, 12:57
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Originally Posted by Schnowzer View Post
We all know the Trip wins hands down on direct operating costs. The value proposition has nothing to do with those operating costs but rather slots.

The average 380 carries 150 pax more than the Trip so if the 380 were to replace the Trip into London everyday, Emirates would lose nearly 1,000,000 passengers/year. Or need 4 extra slots and 6 more aircraft, 60 crews, support etc. etc.
That is assuming 380s always have 100% load factor.
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Old 29th Dec 2017, 13:33
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Originally Posted by Schnowzer View Post
We all know the Trip wins hands down on direct operating costs. The value proposition has nothing to do with those operating costs but rather slots.

The average 380 carries 150 pax more than the Trip so if the 380 were to replace the Trip into London everyday, Emirates would lose nearly 1,000,000 passengers/year. Or need 4 extra slots and 6 more aircraft, 60 crews, support etc. etc.
But on the London route when it went all 380 EK had to lay on a freighter to to take in the cargo that didnt fit on the 380 (unlike the 777). What London does have are the premium passengers to support the operation (unlike a lot of other destinations).

The yield calculations must be very interesting
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Old 29th Dec 2017, 19:45
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Jet II,
dont forget EK had to block 100 seats to make it to LAX, DFW and IAH
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Old 30th Dec 2017, 09:07
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That is a load of bunk put about by the Boeing brigade. The 380 carries 3/4 of the 777-300 cargo and flies full to all those destinations if they sell the seats.
Originally Posted by GoreTex View Post
Jet II,
dont forget EK had to block 100 seats to make it to LAX, DFW and IAH
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