The_Guardian_-_2016-12-29

Airbus developed the A380, which can carry 850 passengers, believing that airlines would turn to
larger jets to feed more people through hub airports serving a growing number of “megacities”.
This vision of the future prompted the firm – part-owned by the French, German and Spanish
governments – to predict huge demand for the giant twin-aisle, four-engine planes.
Despite cost overruns and long delays that cost several executives their jobs, the jet eventually took
to the skies for its first public flight in 2007 to great acclaim from its early passengers.
But stagnant economic growth and a lack of orders from countries such as the US and Japan have
forced Airbus to rein in production.
It has delivered just 193 superjumbos and has only a further 126 orders left to fulfil, having initially
predicted demand for 1,200 over two decades.
At the same time, smaller but longer range twin-engine jets with large cargo capacity – such as
Boeing’s 777 – have proved popular because airlines see them as less risky economically.
John Strickland, a veteran aviation industry analyst and director of JLS Consulting, said the A380
was well-liked but that there had not been a sufficient market for it so far.
“It’s regarded as a fantastic aircraft by the airlines that have taken it. [IAG chief executive] Willie
Walsh has praised it, [Emirates chief executive] Tim Clark has praised it. They say passengers even
choose it, asking to go on an A380 if there’s a choice.
“But these days, given the economic climate, airlines are more risk-averse and the A380 has a lot of
seats to fill.”
Airbus has said that it can break even at an annual production rate of 20 A380s, which carry an order
book price of $430m but are typically sold at a discount.
It beat this target in 2015, with 27 rolling off the production line, but a slowdown in orders forced the
company to slash scheduled annual deliveries to just 12 from 2018. The firm is also cutting costs to
make up for the shortfall in income.
Strickland said Airbus now faced a difficult decision over whether to continue making the jet at a loss
in the hope that its patience would be rewarded within a few years.
“So the question is whether Airbus can get through this challenging period to the brighter future which
they envision, where airlines are falling over themselves to get hold of larger planes,” he said.
“They will have to keep it under continuous review because it’s a commercially driven business,
even though it’s government-owned.
“They have many other calls on their investment. At the moment it’s a greater risk to throw in the
towel, but there’s a challenge of how to maintain very low levels of production if you’re actually
losing money.”