Airbus A380 Agony Continues

Having been delayed almost two years, Airbus’ flagship A380 program seems to have run into yet another stumbling block, much to the ire of its key Arab customer, Emirates.

At the end of April 2008, Airbus CEO Thomas Enders stated that the company would be reviewing the production plans.

“This is a very steep ramp up and this is something one always needs to be concerned about,” Enders said.

“Yes, Emirates can confirm that it has received the letter from Airbus. At present we have nothing more to add,” an Emirates spokesperson told the Gulf News yesterday. However, President Tim Clark told Reuters by telephone in Dubai on Tuesday that the situation “is very serious,” and that it “will do us serious damage.“

Etihad Airways was also among the customers informed of the A380 review - considering the airline is the process of placing its biggest ever order this year, the timing could not have been more precarious.

Image courtesy of Airbus

According to sources within these two airlines I have spoken to, both carriers are now expediting their evaluation of the 747-8 Intercontinental. Revealed exclusively last month, Emirates has made no secret that the 747-8I is not completely out of the running. With production at just under 2 airplanes a month, Boeing certainly has the better capability to increase production on an already established legacy airplane.

With Airbus dropping plans to sell some factories, Power8 in a state of duress and currency woes biting hard, any further delays to the A380 may just sign the death knell for the behemoth. Already over budget to the tune of some $20bn, the A380 has secured just 3 firm orders so far this year.

Oil prices have been reaching record highs, airlines have been collapsing and demand for large airplanes, particularly quadjets have been stagnant and are in the long term not ever likely to replicate the boom enjoyed by the 747-400 back in late 1980’s/early 1990’s.

Although the A380 review is not expected to last long, its implications are far reaching. There’s no question Airbus could indeed stick to a higher rate of production, now that the second wave of correctly wired A380’s has entered the production stream - the critical issue remains that with demand for big (passenger) jets on the wane in favour of the 777, 787 and A350, how long can production remain in operation without foregoing a change in the intended delivery regime to customers? Further from that, how long can the line remain open without further sales, especially without a freighter model to support it?

Throw in burgeoning fuel costs - by the time some existing customers get their A380’s, the airplane will not be sporting as energy efficient engines as some perceive - we must remember that the engines were designed almost a decade ago.

Customers taking deliveries of A380’s in 2015 or beyond will have these older engines, with higher fuel bills compared to 787 or A350 engines.

While hindsight is magical, there is no doubt that Airbus must be thinking that developing an all new twin in the A350 is far more important than the A380. Letting the A350 suffer because of ensuing problems will mean that Airbus runs the very high risk of losing customer trust as it did on the big A380.

In gearing efforts for a contracting marketplace with the A380, Airbus has no one but itself to blame if the A350 is delayed - with so much riding on it, the company can ill-afford to repeat the fiasco of the A380 all over again.

6 comments May 7th, 2008