Friday, 16 July 2010

A380: white elephant or the plane of the tomorrow?

Here is a nice A380, banknote-themed, ad that is on The Economist's this week edition, just ahead of Farnborough airshow. The message is clear: the A380 is a profitable airplane.

The point here is that Airbus is trying to dissipate the image that is forming of the A380 as big (indeed!)"white elephant". The reality seems to be a bit more dire, the initial break-even point for the A380 project was around 250 deliveries, but later delays and cost overruns might have put this figure beyond the 400 aircraft mark as The Times pointed out in its day. At the moment, according to Wikipedia, there are 234 outstanding orders for the A380 at the time when I am writing this (not far from the initial profitability threshold). It is true, though, the A380 is a project for the long-run unless some disruptive new technology changes the competitive landscape on long-haul routes (sub-orbital flight anyone?).

So, it seems that it has not been very profitable for its manufacturer so far, but is it profitable for airlines? Well, nearly half of this orders come from one single airline: Emirates (that possibly has got large discounts for bulk orders), it looks like most airlines are not overly enthusiastic about the economics of the A380...or maybe they simply do not have the sort of routes that can accommodate this capacity. Or maybe is just a matter of time, when the economic crisis is over, before trends in global trade and tourism, airport and route congestion and environmental concerns make a plane like the A380 irreplaceable?

Emirates is often credited with having anticipated, to its advantage, the emerging trends in global travel, which makes me think: maybe they are onto something...

Thursday, 8 July 2010

The A380 and the American carriers

While Airbus is racking record orders from the Middle East for its A380 giant plane and more modest orders from European carriers, such as Air France and Lufthansa, the US market seems to be out of bounds for this model. In fact, there is nothing new with this, the next-largest Boeing 747 was also popular in Europe and Asia, but not among American carriers.

It looks like the economics of very large aircraft are not attractive enough for a bunch of network carriers that for most of the last two decades have been focused in a dire financial situation. Moreover, the American air market with its multiple hubs might be better served with smaller planes providing more frequencies, whereas European, Middle Eastern and Asian flag carriers usually serve a single mega-hub.

Here is an interesting article in the WSJ Middle Seat Terminal blog that comments on the possibility that the last wave of consolidation among US airlines, with the mergers of Delta and Northwest on one hand and United and Continental on the other, could pave the way for fresh A380 orders from across the Atlantic...a move that would be certainly welcome in Toulouse, that is becoming increasingly dependent on one single airline, Emirates, to make its A380 programme break even some day in the future.