More trouble for A380 Program ?
 

http://www.bbc.com/news/business-37362488



Singapore Airlines drops Airbus A380 plane

Singapore Airlines has decided not to keep the first A380 it leased, delivering a fresh setback for Airbus' super-jumbo plane.
Singapore Airlines was the launch customer for the two-deck jet in 2007.
The airline has decided not to renew the A380 plane when the ten-year contract expires next year.
The news comes after Airbus more than halved its delivery target for the A380, raising fears it could slip back to making a loss from the aircraft.
A Singapore Airlines spokesperson said: "Our first five A380s are on 10-year leases, with options to extend. The first expires in October 2017, and we have decided not to extend it.
"For the other four, decisions will be made later."
But they added the airline had orders for five separate A380s with Airbus, which will start being delivered in the second half of 2017.
The A380 only began breaking even for Airbus last year.
In July, Airbus said it would still avoid losing money on the jet in 2017 with as few as 20 deliveries, but gave no further guidance.
Analysts says that big aircraft like the A380 and Boeing's 747 series have fallen out of favour.
Smaller jets can be more profitable as they are easier to fill and are cheaper to operate, analysts say.

I wouldn't read too much into this - Singapore is known to keep a young fleet, dumping airframes when they're due for heavy maintenance and getting new ones.
Singapore previously had stated they intended to take delivery of the A380's currently on order. I wouldn't be the least bit surprised if Singapore simply replaced some 10 year old A380's with new ones, keeping the same number of operational A380s.
However I expect the leasing company may be getting seriously nervous - at the moment there doesn't appear to much interest in taking second hand A380s.

I agree with tdracer, SQ don't like heavy maintenance. Back in the day that is how they managed to keep the "youngest fleet in the air"

SQ keeps a young fleet back in the cabin as well... :D

So financing new 380s will be the challenge!

Unless SQ want's to dish out the cash themselves, but they will most certainly not want to sit on something unsellable 10 years later.

Makes sense to buy new to replace End of Lease old ones. Presumably the original leasing plan was because they weren't sure if they wanted to use them in the longer term, and now they are ready to buy.

Anyone know the difference in 10 years of lease payments, vs purchase outright?

I wouldn't say it means more trouble but for a while now the news coming out of Toulouse is that they are very much planning to reduce the rate of production, and it already having an effect on the subcontractors.

Fairly typical article/take on the situation in French language here:

Faute de commandes, Airbus diminue de moitié la production de l?A380

Regardless of what SQ do I don't think Airbus management is expecting everybody to start renewing hulls at the ten year point......

According to Aviation Week, the leasing company bought the aircraft from Sing in a sale and lease back deal for $197m in 2007, and Sing pays $1.71m a month for it. Over the 10 year term that's a total of $205.2m. OK, on the face of it $7.2m is a very low return on investment for the lease co, but if it ends up going off to the desert and parts-recovered, I suspect the end result won't be the worst ever. Sing on the other hand is replacing it one-for-one, and might end up paying a not too different amount for a brand new, more efficient airframe that is years away from a cabin refit and heavy overhaul at a time when it arguably doesn't need extra VLA capacity.

I was under the impression that SIAs first (few?) were a bit heavier and a little more troublesome than the rest so could be a motivator also

The first ones especially will be full of after market mods. The new ones (hopefully) will be fully configured with the latest fixes and will not require updating.

7.2 0n 197 in ten years about 0.4% of ROI per year: Does not even cover inflation. And if most of the whales go to Mojave after only 10 years and only a few new ones a ordered, the spare parts will not be of a huge value.

Spin it however you want, the 4-holers are doomed and will never bring back the investment. Maybe for the more ruthless companies like EK and SQ on their initial batch, but lessors and investors learn quick!
Financing for new models will only be possible through the ignorant European taxpayer, no one else in their right mind would put their dollar on them no more.

Shame that the best plane in the air from a pax point of view faces these problems-the T7 is a complete dog compared to the 380 but of course it is efficient , not the first time its happened but probably will be the last.

On the other hand none of the newer designs work that well on v high density restricted hub routes. Is it purely down to the extra cost of ownership/maintenance and overall fuel burn that means fours can never match twins even if they get bigger ?

MH frames are in the market for at least one year without much luck.

SQ may very well drop pending A380 orders for A350s.

I don't think any lessor/airline can afford to sink additional $5+ Million to redo entire interior on top of deferred heavy maintenance of a used A380 and still make money.

Premium heavy SQ/EK cabins are not appropriate for most airlines in secondary market (if there is one for A380)

With just 300 frames, I doubt there will be huge demand for parted out components. Airbus and its supply chain is counting on at least making money on parts. Its not a A320 with 1000s of frames flying around.

Sardine cans??

I think you'll find they will be redelivered off a heavy check: 12 Year done early so they won't be avoiding heavy maintenance. They will take all five of the new ones.

I've got a question. If Singapore does not like heavy maintenance and gets rid of their aircraft at around the 10 year point when heavy maintenance comes due, owning the airplane makes little or no sense unless they can be assured they can sell the airplane at the 10 year point. So why would Singapore replace 5 leased airplanes with 5 owned airplanes if in 10 years they won't be able to sell them? Especially considering that at that point the design will be 20 years old and even more obsolete than the 10 year old airplanes they are getting rid of.

Rule of thumb is monthly lease rates amount to ~1% of the airframe purchase price, over a 10 year lease the leasing company will have recovered their initial investment, a second term lease or sale at residual value is just an added bonus. Of course actual deals will hover around both sides of this number, depending on which side is in a beter negotiating position.
Same reason. If they can obtain cheaper financing than a leasing company (and to my knowledge SQ is sitting on a fairly large amount of free cash), then over a 10 year period they can write off the asset value to zero with a smaller overall cost than if the same aircraft were leased. All beancounting stuff.

KenV

A Residual Value Guarantee would be essential. SQ is very smart at negotiating purchase agreements with manufacturers whereby the latter agrees to facilitate disposal/take back on special terms against a future acquisition.

At what point do airbus try and re-launch the A380F?

(Majority of 747's recent production has been freighters... )

Also, how possible/economic is it to convert them to freighters?