Airbus A380: All Talk, No Profits
Market Share Claims Fail To Account For Yield Attrition
Weak Premium Demand Forces Qantas Into A380 Seating U-Turn
Singapore Airlines Continues To Lose Money Despite Operating “Profitable” A380
It’s all very well claiming that the A380 is “stealing” market share from competitors, however, in the absence of a few key markers, the marketing hype is at odds with reality.
The erosion of premium traffic and Qantas’ decision to reconfigure its A380 fleets with fewer First Class seating underscores how none of the current four operators are making money with their “Whalejet” A380’s. Emirates and Singapore Airlines routinely fly their A380’s into London Heathrow with premium cabins with less than 50% of the seats filled. Of the occasional flights that do have slightly higher occupancy, much of this is attributable to discounted fares, further pressurising passenger revenues.
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Further, many of the carriers that Airbus’ A380 Director of Product Marketing, Richard Carcaillet noted who are supposedly “losing” market share are actually cutting capacity, boosting load factors and cutting operational costs. Singapore Airlines, on the other hand, has been removing the bulk of its 747-400 fleet and increased capacity during offsetting, but has taken capacity out of its wider route network overall - however, booking data does not translate into profitability.
While the A380 struggles to “break even” at John Leahy’s oft-touted, less often achieved benchmark of 65%, the likes of Qantas who are now bizarrely chasing low yield traffic to fill “bums on seats” on the A380 puts it head to head with low cost off-shoot, Jetstar - which ironically saved Qantas from sporting a loss!
A glancing look at Singapore Airlines’ third quarter earnings shows a decline in passenger revenue YoY, passenger yield fell by 2 cents during the same period and passenger revenue in the 9 months to December 2009 showed a huge 13% decline - all during the tenure of the A380 within its fleet.
Hardly stealing market share for profitability, is it Mr. Carcaillet?
Of course, the bigger challenge for Airbus is to double the deliveries in 2010 after moving the goalposts four times last year - all that against the backdrop of the huge loss the program sits in as the chorus of investors question just how much longer the ailing A380 can survive whilst being breastfed.
It’s really not very good - securing just 202 orders in a decade; a decade which included the biggest order boom in over 60 years which the A380 (and Bombardier wannabe-seen CSeries) have missed in capturing any significant portion of.
But one could surmise that this is one of the benefits of being an entity propped up by the state…
90 comments February 10th, 2010
