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Airbus: A380 Superjumbo Program Now Sustainable

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Didier Evrard, executive vice president and head of programs at Airbus, did an interview from Airbus headquarters in Toulouse on Tuesday. The occasion: delivery of the first A350-1000 to Qatar Airways. But the news Evrard made was more about the A380 superjumbo, star-crossed queen of the Airbus line.

In January 2018, after a protracted standoff between Airbus and Emirates, Airbus super-salesman John Leahy helped coax the airline into a firm order for 20 aircraft, with an option for 16 more. Evrard said the Emirates order for the A380 will “secure the life of the program for the next ten years at least.” In fact, he declared, the aircraft could become "sustainable" going forward thanks to Emirates' order, with Airbus using the time to “further market the aircraft.”

The meaning of “sustainable” when it comes to the A380 is certainly open to debate. And certainly, “sustainable” does not necessarily mean “profitable" for an aircraft once called a "$25 billion write-off.

That said, is Evrard just blowing smoke about the long-term future of the aircraft, or could he be right? As always with the A380, there are strong arguments on each side.

Cicero said that "as long as there is life there’s hope." With the A380, as long as the production line is open, additional aircraft could be produced, should new orders appear. Keeping the line open gives Airbus 10 years to find additional customers. It also keeps workers working and research and updates going and enables the manufacture of spare parts without needing to cannibalize existing aircraft.

Building the A380 for another 10 to 12 years may also allow the airline industry to catch up with it. Demand for 555-seat airliners may pick up if projections for growth in passenger traffic are met. The International Air Transport Association (IATA) expects 7.2 billion passengers to travel in 2035, nearly double the 3.8 billion who flew in 2016. The IATA estimate, based on a 3.7% compound average growth rate, seems all too plausible if you’ve been to an airport lately.

The Middle East, where more than half of A380s are currently based, will grow strongly (4.8%) and see an extra 244 million passengers a year by 2035. Even more promising for the A380, the Pacific region, where a number of carriers (Singapore, Korean Air, China Southern) are utilizing the aircraft, is predicted to grow 4.7%. It will see an extra 1.8 billion annual passengers by 2035.

Finally, both airlines and Airbus are getting better at marketing the aircraft.

In March 2017, United Airlines actually organized a demonstration complete with picket signs at Newark Airport before the arrival of the first Emirates Athens to Newark flight. (Not to be confused with the demonstrations against United the very next month at O’Hare, after the beating of Dr. David Dao.) U.S. carriers like United say the Gulf airlines are heavily subsidized by their governments and violate U.S. open skies agreements. Hence they can offer unfairly low fares like Emirates’ non-stops from Newark to Athens for as little as $800. Emirates' long-haul, low-fare strategy has been in place at least since 2005, and the airline is certainly using its fleet of A380 aircraft to implement it.

As for Airbus, the aircraft manufacturer is now offering a free website and app called IFLY380. It’s designed to show potential passengers each airline’s unique A380 offering and help potential flyers find an A380 flight from nearby airports to their desired destinations. Often, A380 flights cost no more than those on lesser aircraft. The website alone, introduced last year, has had more than two million visitors.

Airbus

Nonetheless, there are some red flags that argue against the potential “sustainability” of the A380 program.

The primary argument against the A380 is simple: Most airlines don’t want it because it’s too big, too expensive (listed at $465 million) and too expensive to operate and ultimately doesn’t fit their model. That model is point-to-point, as opposed to hub-and-spoke. Most passengers and the airlines serving them would rather fly directly to their destination, instead of flying to a large hub and taking another flight. Long-range twin-engine aircraft, like the 787 Dreamliner, the 777 and Airbus’ own A350 are much easier to fill (250 to 350 seats) and can fly long distances more economically than the four-engine A380.

Similarly, only about 10 airports in North America currently handle A380 flights, including Los Angeles, JFK in New York, San Francisco, Miami, Atlanta and now O'Hare. Fully loaded, the A380 weighs more than a million pounds, and embarking and disembarking 500-plus passengers can require a special bridge.

A more fundamental problem to the sustainability of the A380 is the unbalanced nature of its distribution. More than half of the approximately 218 A380s in use are operated by the Gulf carriers, from countries with a total population of less than 30 million (Qatar, United Arab Emirates). Zero A380s are operated by North American carriers, out of countries with a total population of more than 400 million (U.S., Canada, Mexico). The best argument for the sustainability of the A380 would be a sale to a U.S. flag carrier.

Two other issues can impact the plane’s long-term future. One is that there is no freighter to help extend sales. Long delays early in the program killed the A380F program, as leading freight carriers like UPS and FedEx instead turned to the aging 747. Ironically, production of that aircraft continues only because of freighter orders.

And unlike smaller airliners, often sold to a new owner when they come off lease, the A380 currently has no resale market. The first A380 came off a 10-year lease with Singapore last year. At last report, it was parked in the Pyrenees awaiting disposition.

But so far, the A380 program itself has dodged the scrap heap. Ten years might be just enough time for the big plane to find itself some new customers.