While the industry downturn continues to force premium traffic off airplanes, the chances of recovery within 2009 (or even 2010 for that matter) seem as bleak as ever.
Billed as the biggest commercial airliners ever to have entered service, both the Airbus A380 and Boeing 747-8 families have had a tough time – not just from the new evolution of consumer spending trends favouring cheaper alternatives to full service airlines, but also they battle from within their respective portfolio’s of sisterships.
The runaway sales success of the 787 Dreamliner followed closely by Airbus’ A350XWB family, the popularity of the A330 topped by the unmatched dominance of the 777 family has forced these two big airplanes into niche roles.
Images courtesy of Airbus / Boeing
Between the 2008 Boeing Current Market Outlook (980) and the 2007 Airbus Global Market Forecast (1283), there doesn’t appear to be an awful lot separating the two jet makers in their assessment of the large airplane arena.
The reality of the marketplace does however seem to differ, particularly in the wake of the long denied and even longer awaited production cut to the A380, as well as Boeing’s decision not to up rates on its widebody airplanes.
“Tomorrow’s large-airplane market will be filled by the Boeing 747-8, whose step-up in size from the current industry-standard 747-400 makes far more commercial sense in today’s slower-growth markets than the over-sized, un-optimised and under-achieving Airbus A380. Plus, at today’s A380 build rate of up to 14 aircraft/year (even generously allowing 20/year from 2010 — and that is being generous), Airbus has practically a decade of A380 backlog on its hands.
Assuming of course that all booked A380 orders are firm. Airbus says they are, so they must be…
Therefore any carrier which wants new high-capacity aircraft for delivery before 2020 has only one choice — the 747-8 Intercontinental. Reliability, practicality and pragmatism are far more bankable commodities than runaway egos, pet projects and ridiculous pipe-dreams (like 45 A380 deliveries/year by 2010/2011).
It’s Boeing’s market,” says Doug McVitie, MD at Arran Aerospace.
Image copyright/owned by FleetBuzz Editorial.com
Where the A380 lacks a sibling in a freighter model, the 747-8F has soldiered on without any cancelled orders while still having the 747-8I stable-mate alongside it, with launch customer Lufthansa sticking firmly by its order for the latter.
The debates here on the Editorial have been a delight to read, and in part, is why this piece exists to further foster discussion and analysis from readers and those that have direct experience in the aerospace field – and not from those ”me too” chaps that have sat in an A380 (or 747) pilot seat “pretending” to fly it - (Good Lord, I bet many readers/spotters/enthusiasts have sat in a pilots seat…but I digress…)
Having seen the “boom years” pass by, both A380 and 747-8 families have been hit by delays and increased production costs. Given the current state of the market, the 747′s saving grace is that the new models are not in service and have relatively little impact on its production. In the case of the 747-8I, Boeing’s decision to push back service entry into Q4 of 2011 could well be timed with a firmer, wider industry rebound.
For the A380, having already revised rates numerous times poses questions about Airbus’ promises to shave weight from the airplane in time for a 2012 service entry, with British Airways executives being among the most sceptical that such milestones can be reached with a production rate that barely pushes over the 1-a-month ratio.
Travel trends have changed, pricing power, consumer attitudes and even the recent spike in oil prices do not favour the old model of hub-to-hub traffic transit while the unabated explosion of point-to-point traffic continues to become the dominant force.
Image courtesy of Boeing
No one has a crystal ball to predict the outcome of “who did better” in this niche – suffice to say that in the absence of a direct competitor, much like the 777-300ER’s position, the 747-8F has wrapped up the freight segment. The likelihood of an A380F is almost zero – or perhaps as promising as an A340-300 freighter.
The debates around the success(es) or otherwise of the A380 and 747-8 will rumble on – just as traffic has influenced operator routes to favour twin engine airplanes over the last quarter of a century, their continued development will ultimately have the final say on the longevity of these two leviathan airplanes.
It’s a market that no-one has the correct answer to, suffice to say that from a financial standpoint, perhaps the 747-8 still appears to be streets ahead in the race for making money while Airbus pussyfoots around deciding on a breakeven number it probably will not achieve anyway (unless you’ve been paid to believe otherwise).
Perhaps, if you included the A346, 77W, 74-2/3 and even the 744 in that VLA definition of yours — which seems to be reasonable — and put the 76-2/3/4, A306, A313, A33-2/3, A34-2/3/5, 777, and 77E/L in that “small” and intermediate widebody category, Heathrow would still remain a “VLA-heaven”?
For arguments sake, lets add the A346, B77W into the equation (which isn’t correct as both Airbus and Boeing consider VLA’s to be B744′s and above). B744′s are already considered VLA’s and very few-if any carriers fly B742/B743′s into LHR-even cargo carriers.
LHR will still not see a majour increase of VLA’s (as per % of total flights. Especially A380′s, B744′s and B748′s.
101. Jacobin777 | June 7th, 2009 at 04:41 “Perhaps, if you included the A346, 77W, 74-2/3 and even the 744 in that VLA definition of yours — which seems to be reasonable — and put the 76-2/3/4, A306, A313, A33-2/3, A34-2/3/5, 777, and 77E/L in that “small” and intermediate widebody category, Heathrow would still remain a “VLA-heaven”?”
And you can add A318/A319/A320/A321/737NG as “Micro VLA”.
Why can’t we call the regional jets as “Nano VLA”?
100. Leelaw | June 7th, 2009 at 02:41
You posted the one hundredth message. You won my respect.
96. Chris Wallace -
Chris, the last paragraph has described precisely the reason why I do not believe that BA has been seduced by an extra X% off the discounted price for the A380. If they are planning to operate the plane for 20 years, that amount will just be lost as noise in the overall costs. BA had to make a strategic decision and if that decision is influenced only by the last minute offer of the X%, then I think the company is headed by the wrong management team.
100. Leelaw
“Margins drive earnings which determines share price”
Sure but there are other reasons. Confidence, for one. Confidence that the company is going in the right direction, confidence in management and confidence that the programmes are executed on time and budget. In the ‘credit crunch’ time, confidence that the airlines will get money from somewhere to pay for those planes and the manufacturers will not face mass cancellations…
Investors lost confidence in the ability of Airbus to be a source of robust earnings and/or earnings growth at EADS long before the onset of the “credit crisis,” before that the excuse was the weak dollar…yada, yada, yada… never are the Forgeard/Leahy low margin/high volume marketing strategy and the WhaleBus[t] fiasco cited as the sources of distress. Empress Airbus, always the innocent victim of circumstance rather than its own moronic leadership.
Yes. And still they gained market leadership from a 15% market share in the late nineties. Leelaw face it. They must do something right..
Share price & short term profit driven enterprises hit the wall in an epic way. The economic laws are being redefined.
Ask your president.
“And still they gained market leadership from a 15% market share in the late nineties. Leelaw face it.”
To what end, Airbus has a ZERO enterprise value, with no meaningful earnings growth in sight over both the short-term and mid-term. Whatever may be the basis for a turn around over the longer term will have to overcome the considerable financial albatross that is the WhaleBus[t].
I’m not sure that GM and Chrysler were ever chasing short-term profits, they “invested’ billions in failed capital projects, some of thismoney that could have been returned to shareholders/stakeholders in the form dividends or increased share value, but is now lost forever.
As for Mr. Obama, he’s a committed “statetist,” as are the eurocrat caretakers of EADS/Airbus, who’s surrounded himself with hack political wastrels plucked from ranks of the obscenely corrupt “Illinois Combine” from which he himself arose. Live in Hope of “change you can believe in,” die in the despair of a trashed dollar and epic governmental waste.
Based on BA’s current fleet structure and deployment pattern, I still believe they were leaning towards the 747-8I and Airbus (and their suppliers) were able to sweeten the deal to the point that BA was willing to take a gamble and go with the A380.
And when I say gamble, I’m not talking “high-risk stakes” or “bet the company” risks.
But if BA truly has decided they will not buy the 747-8 going forward, then they have made a conscious decision to not grow market-share to a large part of the world. An A380 will never land at SEA or PHX – two cities that see BA 747-400 services. And there are many other city-pairs where BA sends their 55 747-400s that won’t see an A380. So that means BA will be giving up market-share to competitors. And not just airlines, but also cities as connecting traffic bypasses LHR and instead flies to AMS, FRA or CDG on SkyTeam/Star Alliance carriers.
Such a decision may in fact for BA into Boeing’s arms for the 777-300ER, since it is a larger plane able to carry more people and cargo then the A350-1000XWB. The decision to take four of them may just be the initial tranche of what could end up being dozens or even scores.
I think most expected BA to order the A380 eventually. Many said it was build for LHR; big, quiet.
Looking at BA growth during the last 20 yrs (3-5% /yr) it would have been dramatic to select a 10-15% bigger aircraft for the next 25 yrs.
Only adding more flights could have avoided a drop in market share in many markets. BA flies any routes 1x 747 a day. How to deal with growth?
“Only adding more flights could have avoided a drop in market share in many markets. BA flies any routes 1x 747 a day. How to deal with growth?”
Growth?
What growth?
Did you not see the beautiful double digit drop in the Asia region for BA in their May traffic figures?
BA is standing down 747-400′s – BA has and always will be frequency driven, not mass market mover.
The reason are the slots at LHR – to which the A380 adds next to no value.
Boeing Investor, BA is starting introduction of their A380 fleet from 2012 for the next 25 (?) yrs.
They dont look to much in this weeks news for these kind of decisions.
Major competitors like AFKL, LH, SQ and EK have a headstart.
The problem, Kessje, is that an A380-only strategy for BA means that they can only grow a handful of cities.
I don’t begrudge BA buying the A380. I think it makes sense for them in a number of markets.
But they have 55 747-400s that they send to cities that lack the infrastructure to effectively handle an A380. If BA has decided to not buy the 747-8 and instead replace the other 35 747s with a smaller plane, unless BA can open more frequencies at LHR, they will shrink in those markets, not grow.
And it is not just O&D traffic to LHR that is at risk. Passengers now flying BA to LHR to connect to other destinations will instead fly LH/UA to FRA, or DL/KL to AMS, or AF to CDG and connect from there.
But then, perhaps that is BA’s plan. To become a smaller, leaner airline serving the domestic British market through LHR as NH/JL do the Japanese through NRT. They will draw-back from being a major global-spanning EU airline and leave that job to LH.
A more equitable (re)distribution of slots held by the large network operators at slot constrained hub airports would largely obviate the need for
the expanded use of VLA class aircraft in the mid-term.
113. Leelaw | June 8th, 2009 at 05:44 “A more equitable (re)distribution of slots held by the large network operators at slot constrained hub airports would largely obviate the need for
the expanded use of VLA class aircraft in the mid-term.”
Agree.
The A380 and the 747-8i are good aircraft. The question is not about the aircraft but it is about the market. The air transport industry is changing in a very dynamic manner.
Only one year ago, US-EU openskies agreement became effective. http://useu.usmission.gov/Dossiers/Open_Skies/Mar2808_Open_Skies_Accord_In_Force.asp
Quote:
Under the Agreement, all U.S. and EU airlines may fly between any point in the EU and any point in the U.S. without restrictions on routes, the number of flights, or prices charged. Already, Aer Lingus is offering non-stop flights from Ireland to Washington, San Francisco, and Orlando that were not authorized under the old U.S.-Ireland agreement. At London’s Heathrow Airport, five new airlines are offering service between the United States and Heathrow: Air France, Continental, Delta, Northwest, and US Airways. At least five additional United States cities will have non-stop service to Heathrow: Atlanta, Dallas, Denver, Houston, and Raleigh. (emphasis added)
BA is now facing a fierce competition at LHR. Things must change in BA’s long term strategy.
Other changes are on the way in many places in the world.
It is time to be Versatile, agile and Flexible.
IATA’s Giovanni Bisignani delivered this message:
http://iata.org/pressroom/speeches/2009-06-08-01.htm
It is very interesting.
Vero Venia :
I had lunch with the “Old Mandarin” yesterday and his best guesstimate is that cumulative production of each VLA type will be in the 90-120 unit range before the plugs are mercifully pulled, with less likelihood that the 748 will break 100 deliveries.
Strong indication are Cathay and ANA will order A380 soon, while other carriers (BA) will place follow up orders.
As far as I’m concerned Boeing will focus on the 747-8F soon. Commenting on the A380 / 747-8 as similar aircraft with similar prospects is total nonsense, maybe an Euphemism for the 8i.
116. Leelaw | June 8th, 2009 at 09:54
Your number given by your Old Mandarin is quite conservative.
For many reasons, of which some are neither rational nor economic, the total combined deliveries of the A380 and the 747-8I may be higher than 300 before the plugs are pulled.
117. keesje | June 8th, 2009 at 10:52 Commenting on the A380 / 747-8 as similar aircraft with similar prospects is total nonsense,
They are not similar aircraft, but they have similar prospect: bleak.
Leelaw,
What does more equitable distribution mean to you and why would it change the need for VLAs?
Did your Old Mandarin give a time frame for when the plug will be pulled?
@ Falcon
See my earlier replies #50 & 54.
Leelaw,
2016. Thank You. Sorry I missed it.
What about what equitable distribution means to you and why it changes the need for VLAs?
116. Leelaw | June 8th, 2009 at 09:54
Whats the logic behind that. You/he thinks both projects will still be cash flow negative in 6 to 9 years? And why stop a program that you make money from, even if it is just a little. Stopping a program won’t magically remove the depth of dept.
Even the hugely unsuccessful A340, an aircraft without a market thanks tot the 777 and ETOPS, sold and build some 365 units so far.
747 sold 1400+ units. Most of these (plus 3-5% YoY growth) will be replaced by long range twins. But there is a requirement for big ass quads. Why will no 380 ever visit SEA? is your crystal ball rated for 35-50 years? (or do you simply drive a DeLorean?)
Wow! Talk about a “sharp stick in the eye”! Steven Udvar-Hazy speaks out on the possibility of ILFC cancelling the A380 order.
http://www.capitalfm.co.ke/business/International/US-firm-may-cancel-Airbus-orders-2395.html
“The leasing giant has noticed “an important change in attitude by airlines regarding the A380″ and found that “interest is weaker than expected in particular among the Chinese,” Udvar-Hazy was quoted as saying.
Such a huge plane, which can carry up to 853 passengers, cannot operate on as many lines as expected, and is expensive for leasing companies owing to costs involved in making modifications for different clients.
“If I were Airbus I would be very worried,” said the boss of ILFC, a unit of US insurance group AIG, which was recently nationalised to prevent its bankruptcy.
“At current production rhythms, it will be very hard to make money with this plane,” he said.”
And right before the Paris Airshow at that!
@ Ikkeman
The “Old Mandarin” feels that the completely separate logistical and production infrastructure makes the cost structure prohibitive at low rates of production, without there first having been a ramp-up to a more robust and sustained rate of production, particularly in the case of the A380. In short, low rate of production from the outset is financially crippling given the level of investment. Sorry , I’m traveling today and replying from a phone at the moment, will post more tomorrow.
I think we have to realize when (prospective) customers are negotiating with Airbus on the a380 special conditions exist, big money & no competition.
So a smart purchasing teams start explaining Leahy they basicly don’t need the A380 at all.
http://www.independent.co.uk/news/business/news/ba-chief-hints-he-may-buy-new-boeing-not-airbus-515361.html
Anyone stating he needs A380s is committing negotiating Harikiri.
Smart SUH is building up a negotiating position.
- Steven Udvar-Hazy has a short term cash issue (selling / buying ILFC)
- 10 A380s is a lot of hard cash
- Many airlines are deffering aircraft deliveries because of credit crunch & traffic fall
- Oil is low making it less of a burden to fly with less efficient aircraft (747)
SUH is preparing negotiations. It shines through.
Of course everybody is free to forecast far reaching disasters for the A380, as we have seen for years
Jacbin do you realise the reason why VLA’s in Heathrow have declined is because the Dumbojet is an obsolete and inefficient dinosaur with 50 year old origins. Because A380 was delayed it is natural that Dumbojets were replaced by more efficient and better equipment.
Airbus Fanboi Keesje says: “Strong indication are Cathay and ANA will order A380 soon, while other carriers (BA) will place follow up orders.”
Dude, you have been beating this gong for what 4 years now on aholes.net. It hasn’t happened. It’s not going to happen.
Cathay isn’t in a position to. They were Hazy’s target for the leases of A380s and guess what???
ANA MADE their decision. NO A380s, more 777s. ANA is not likely to order either the A380 or the 747.
So go sing another round of Airbus Uber Alles, drink some more koolaid from the Airbus Chalet, and keep dreaming.
keesje: “Smart SUH is building up a negotiating position.”
So you think he’s going to double down on his order like “smart Chew” or “smart Dixon”?
Strong indication are Cathay and ANA will order A380 soon, while other carriers (BA) will place follow up orders.
Unfortunately this is not the case. CX has deferred 777-300R’s because it cannot fill them, nor have they identified a need for the A380-800.
ANA will never order the A380. Their route network has also been frequency driven. The last of their cattle-cart 747-400D’s will not be replaced and I suspect its a matter of time before they too, like JAL switch their 787-3 orders to 787-8s.
As for BA, well, they are in neck deep doo-doo to consider any new orders.
If ILFC actually had customers for their A380s, they wouldn’t need to worry about financing them.
That they appear to not have customers is indeed an issue because why spend over $1 billion on planes that won’t be leaving the factory flight-line?
Yes, I know a highly-respected member on a.net said NH signed an MoU with Airbus last fall for six A380s. But many more highly-respected members on a.net said it never happened and that was just an NH executive trying to “negotiate through the press”.
Same with CX. At best, they want an A380-900 (just as SUH does) because it is clearly big enough to actually consolidate multiple 747 or 777 flights onto.
Stitch:
Who’s the “highly respected” member of A.net made that that claim?
Stitch:
Who’s the “highly respected” member of A.net made that made that claim?
@ Orack Babama:
“Jacbin do you realise the reason why VLA’s in Heathrow have declined is because the Dumbojet is an obsolete and inefficient dinosaur with 50 year old origins. Because A380 was delayed it is natural that Dumbojets were replaced by more efficient and better equipment.”
I almost laughed (sic) at your silly comment.
Leelaw: It was CHRISBA777ER.
Scrollling over the main page I noticed this :
“Therefore any carrier which wants new high-capacity aircraft for delivery before 2020 has only one choice — the 747-8 Intercontinental. Reliability, practicality and pragmatism are far more bankable commodities than runaway egos, pet projects and ridiculous pipe-dreams (like 45 A380 deliveries/year by 2010/2011).
It’s Boeing’s market,” says Doug McVitie, MD at Arran Aerospace. ”
Honestly, I think its hilarious
Are you still laughing keesje?