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Flightline Friday: Airbus to cancel further A380 production December 19, 2014

Posted by Tantumblogo in Admin, Flightline Friday.

Boeing always said it was a white elephant.  The A380 was begun in a period when the airline industry was fat with cash and the hub and spoke model was at its peak.  But few people want to travel in a 700 seat cattle car.  And the hub and spoke model is increasingly breaking down, the point to point model being preferred by passengers.  After making about 200, mostly for Emirates Airlines (and don’t think there wasn’t a ton of cash under the table to make that happen), lagging sales and an inability to make a profit on each plane produced (they have to be sold for less than cost) is prompting Airbus to contemplate cancelling the A380 program:

Despite these luxuries, sales of new A380s have been dismal. Not a single A380 has been ordered by a passenger airline so far in 2014. (The sole new buyer this year was Dublin-based leasing company Amedeo, which has yet to line up a single carrier to take any of the 20 jets it ordered.)

The dearth of orders for the seven-year-old plane led Airbus Chief Financial Officer Harald Wilhelm on Dec. 10 to raise the prospect of discontinuing the A380 as soon as 2018. Wilhelm’s remarks at an investor meeting in London riled customers who bet on the big plane. The next day, Airbus backtracked. Fabrice Brégier, who leads its airliner unit, told investors that upgrades to the A380—more fuel-efficient engines and a stretch version capable of carrying 1,000 passengers—will happen “one day.”

Despite such optimism, there could be financial turbulence ahead for the A380. Airbus will break even on the plane in 2015, 2016, and 2017, [that only means they won’t lose money on each plane they build. It does not address the massive development cost of the A380, which will never, ever be recouped] but that outlook doesn’t hold for 2018, forcing the company to either spend heavily to improve the economics of its engines or discontinue the program, Wilhelm said.

I will state straight up, I’ve never liked Airbus. I don’t like their planes.  They feel rickety and cold.  Airbus would never be able to compete with Boeing if the European countries did not front 80-90% of their development costs.  Labor costs in Europe are simply too high, and their employees love ludicrous benefits too much, for them to be even remotely competitive without giant subisidies. And Airbus’ argument that Boeing’s defense contracts count as a similar subsidy are ludicrous.  The two units, commercial and defense, are completely separate at Boeing.  And development costs for military projects are rarely a source of fat profits (those come in production).

What ticks me off, is that a great company like McDonnell Douglas was forced out of the commercial airplane business partly due to their own unwillingness to seriously invest in their product, but mostly because of unfair subsidized competition from Airbus.  No Airbus, and McAir is still around.

The A380 was begun because Europe wanted to trump the US in having the biggest airliner.  There was no other reason for the program, no real economic justiication (again, Airbus would lose tens of billions on the project were that money not covered by member governments), it was always about having the biggest you know what on the planet.

And now, I’m out of time.


1. Observer - December 19, 2014

Wow, a lot of anti-Europeanism on display, just like the sour grapes over Concord!
McDonnell Douglas deserved to go under after the disasters associated with the DC-10.

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