BusinessWeek Logo

The A380: A New Way to Travel?

Posted by: Justin Bachman on August 04

A38.JPG
Enough about the showers, I sat thinking, waiting for my turn in the media queue to chat with Emirates’ outspoken president, Tim Clark. We were all gathered in the airline’s extremely posh first-class lounge Friday at JFK Airport for the first Airbus A380 revenue flight to the United States. Emirates had received its first superjumbo four days earlier in Hamburg and the press coverage in following days was enraptured by the notion of a shower for the folks flying first class. Interesting concept, but ultimately it’s a bit of gimmick. Clark noted in a brief news conference that the space where the showers are situated could not be used for revenue-generating seats anyway. In other words, it is space for a lavatory – no matter how lovely said loo may be, bathed as it is in sleek, sophisticated lighting, warm, amber woods, and modern gray trim. But since seats cannot go there, and the shower technology exists – and because successful airline stories always come with Barnum-style showmanship – why not install showers and rename your supersized loo a spa?

So I say leave aside the ablutions. This jet has even grander blandishments.

The A380’s tremendous scale is most apparent from outside the plane; inside, you don’t have a sense that you’re strolling around the largest passenger plane in commercial service. It’s just another big, wide-body aircraft. Until, of course, you get to the cocktail lounge, aft of business class. That is where you find the compact sofas, beside wood-and-metal columns on which a lamp is perched. The back wall of the plane is given to a 42-inch LCD flat panel, with flight position data and feeds from three external cameras displaying the terrain below. An attendant staffs the bar full-time during each flight, satisfying one’s urge for a red wine or bourbon or canapé, regardless of the hour. The lounge is one “golly” moment in the A380, a spot where a dozen or more people can congregate comfortably. You get a real sense of the plane’s girth from this space. (Images I shot inside the plane can be seen here.)

The A380 media tour Friday evening was restricted to first and business-class since those were cleaned first and the airline was most eager to show off the opulent bits of its new machine. The plane was heading back to Dubai with a full load four hours after it arrived, so the tours were truncated. In first class, situated between those two famous showers, a very beautiful wooden credenza-style bar sits beneath a waterfall built into the wall. The bar is another spot to grab a drink and chat when you need to stretch. The waterfall is… decoration? Folly? Stunning? Probably all of the above. Also in first class, movies, games and television are consumed on 23-inch high-definition flat panels, nicer than one sees in the average home. The plane also offers mood lighting, with stars projected on the ceiling at night. If one were to believe the marketing hype around the plane, the A380 represents a different way to fly. Clark says turbulence has been minimized by the plane’s size. Moreover, the lighting, reduced noise and entertainment system work together so that flying time seems shorter. The space, and vertical walls, helps to offer one the perception of a building more than a metallic cylinder. To hear Clark tell it, many passengers are not ready to land as they have additional movies or television programs they want to watch. Having not yet flown on the plane, I have no way to determine if such sentiments hold any truth, but it would be interesting to hear from any past Singapore or Emirates 380 passengers on this subject.

My second A380 surprise came later, as I fooled with some very basic back-of-the-envelope arithmetic. Emirates put 90 well-appointed seats in the top deck of its A380, including 14 “suites” in its first class cabin. Based on posted fares for the plane next month, it is collecting almost $900,000 from that deck – and around $519,000 from the 399 economy-class seats below. It takes more than 11 coach seats to equal the revenue power of a single first-class passenger. Even that does not truly reflect the importance of premium customers to big players such as Emirates, Singapore, or Air France KLM, since those travelers are much more immune to whatever higher fares and fuel surcharges a carrier may impose. (They don’t tend to leave you when economic times are tough.) Emirates, for example, is charging 45% higher fares now than at the start of the year, and Clark says customer resistance has been minimal. Of course, every premium international carrier sports seat economics like this, but the A380 really drives the point home. After the initial honeymoon phase, Emirates won’t charge a fare premium for the A380, Clark says. He thinks such pricing would tell the market, wrongly, that the premium service is superior to what one finds on the company’s other planes. For Clark, a proper English gentleman with refined tastes, an A380 fare premium would also smack of a certain type of chintziness, somewhat akin to assessing an additional fee for a particular wine or spirit served onboard.

Emirates’ growth over the past 23 years has been remarkable, from two leased planes to a new fleet of 118 jumbo jets. The company is also the largest A380 customer, with 58 on order, representing nearly a third of all Airbus’ orders for the A380. Emirates is also buying 70 of Airbus’ even newer A350, and 46 of various models of Boeing’s 777 jumbo. As the world economy sputters and shakes, it may seem almost hubristic to have so much capacity planned. It’s a question the airline hears a lot, especially since many analysts say Airbus and Boeing are likely to confront cancellations. With the plane, Clark says his airline will be able to battle the problem of congested airports such as Heathrow and JFK. It also expects to avoid any potential downturn because of its location in the very economically gung-ho United Arab Emirates. If New York City is the center of the cultural world, Emirates officials say they are at the center of the aviation world. “They will all be full,” Clark says of the 58 A380s, “… and if the truth be known, we need a lot more.” Moments later, he enthuses like a revival tent preacher, “our work has only just begun.” That work is, of course, the task of becoming a global airline brand akin to British Airways, Lufthansa, and Virgin.

For years, Emirates has been dogged by questions of whether its government patron subsidizes any part of the operation, and Clark again heard this question on Friday from a member of the aviation press. He denied it, as the company has consistently. Clark said the airline must meet operating targets like any other rival. The company’s fuel bill is $1.5 billion higher this year because of crude oil’s surge, which has meant new urgency on revenue generation. “I can’t find $1.5 billion in costs. Nobody can do that,” Clark says. Fares have increased, but one suspects that higher passenger volume will be critical to making Emirates’ business model work if fuel stays high. The airline has opened service to Houston and will add daily Los Angeles and San Francisco flights by year’s end. Any U.S. city with ample population – Chicago, Atlanta, Dallas, Phoenix – is fair game for Emirates, Clark says.

Which leads one to wonder: If our terribly beleaguered domestic airline industry were to finally collapse upon itself, and/or Congress decided to allow majority foreign control, might Emirates or one of its respected international peers enter as an acquirer? The U.S. remains the most lucrative air travel market in the world, service mediocrity notwithstanding. Lufthansa already owns 19% of JetBlue, and BA would almost certainly snap up AMR’s American Airlines if it went on the auction block. An Air France KLM deal for Delta is also not hard to imagine if consolidation were to commence. Just don’t look for Emirates to ever play in this arena. “M&A for us is something that we look at askance, with great difficulty,” he says. “We don’t operate quite like anyone else.” If Emirates did end up with one of the U.S. legacy players, Clark opines, “I think we’d probably run screaming out of the room.”

Reader Comments

_sahir

August 5, 2008 02:39 AM

Congratulations to Emirates!

Of course, all old hat to us in Australasia. We've had, dealt with, and forgotten the A380 hype over the last year already.

joe sages

August 5, 2008 02:36 PM

Sorry, when I fly I want to be on a smaller plane. I prefer a smaller plane from 20+ years of flying weekly. Faster on, faster off and shorter wait for luggage. I will, if the option is there, schedule around a larger plane to take something smaller. This, of course, is an opinion.

citracyde

August 5, 2008 03:16 PM

The UAE will trip and fall hard like every other developing nation has in history after a prolonged boom. After all, when the oil runs out, all you are left with is sand and a ghost town.

Dave Crook

August 5, 2008 03:25 PM

I flew the SIA A380 Sydney-Singapore-Sydney last January. I was in economy; both downstairs and upstairs. The A380 is terrific; passengers will love it. The more you know about the plane, the more you will appreciate it.

Erik Radcliffe

August 5, 2008 03:49 PM

Nice airplane but will Airbus ever make a cent off this thing? NO, NO, NO!!! To date, it would take the sale of 515 airplanes to cover the R&D cost and late payment penalties that Airbus has paid, not to mention the future late payments they will continue to make. This airplane is no more than a farce in the business world and yet the media seems to play it up to be much greater than it is. No American airlines are buying it, that should tell you something right there. To date, Airbus has only sold 200 of these behemoth, unnecessary aircraft and will NEVER reach the goal of at least 515 to break even. And in these days and times of exhorbitant fuel prices, unless Emirates or Singapore or Quantas fills these airplanes to capacity on each and EVERY flight, they will lose money hand over fist. Sorry, but your article is way off base and to keep touting this airplane as something special is a joke. We in the industry know and understand that an airplane is not successful unless it makes money. The A380 will NEVER make a cent and will only suck the investment dollars and euro's right out of the pocket of those investors.

Dominic

August 5, 2008 04:18 PM


Erik

US airlines cannot afford the 380 at the moment even if they want to....
Even the 747 when it came out almost 40 years ago was regarded as a white elephant,too big, etc...
Well the rest is history...
I would not write the A380 off...

Frequent Flyer

August 5, 2008 04:26 PM

Regarding Erik's comments that the A380 project is currently a loss forgets that both the parent company of Airbus (EADS) and Emirates are both heavily linked to their respective governments, where the idea of profit/loss takes a very different shape. I can't be sure if the breakeven point is 515 although I recall that it's a very large number such as that. I think that the strength of the A380 will come from its long term sales and operations. After all, there was a recent study that due to rising congestion, the A380 will become more popular. This is a very similar argument to the Boeing 747 upon its entry into service. I still think it's a beautiful plane and I can't wait to try it out. That and the Boeing 787.

Wilber Wrong

August 5, 2008 04:46 PM

Ref: Frequent Flyer:

To claim EADS is allied to its associated goverments is undeniable as it is to say the same of Boeing & the US goverment. Importantly it's a collaborative technically advanced project that's finally gone well. Congratulation to LAX being ready to handle this next stage in long range four engined travel, thank you.

Nodir Ruzmatov

August 5, 2008 04:52 PM

I know that the A380 is the place with latest technology. But my question is: Is it sufficient enough? I am planning to fly with Emirates this fall ....

Emeka Obianyor

August 5, 2008 06:03 PM

With the number of passengers increasing annually and airports around the world becoming increasingly congested, I think that every international airline will benefit from having a few A380s on their fleet especially for flights on their busiest routes and into busy hubs. I think the A380 will break even and will be around for a long time,... until something bigger (and much more efficient) comes along.

billd

August 5, 2008 06:35 PM

When was the last time you boarded a jumbo jet and said, "You know, what this plane needs in 400 more passengers."?

Imagine the queues for luggage as 4 land concurrently.

No thanks!

will keiler

August 5, 2008 08:08 PM

As expected, most Americans can't stand the fact that Europe will lead the way in this industry. Imagine if Boeing had come up with a 'B380' first. I guess then that would have been the best that the industry ever got. Losers...you Americans....

sonicspeed

August 6, 2008 12:35 AM

Lets see...I want to wait for 550 more people to board or de-plane vs. 400.

I don't care if they have a car lot on board, you can HAVE IT!

I would go for small and SPEED every time. The company that launches Supersonic...again. Will be the winner. The technology is there. When I need to be in Rome from LA I want to go as fast as possible, not lumbering along on a big fat Blimp.

Keep it, not interested!

Skyflyer

August 6, 2008 12:40 AM

Will Keiler...you are sadly mistaken and your inferiority complex is on display. Big is not always better.

Do you actually think that IF...America wanted a VLA and believed that was were the profits will be, would not have built one?

Do not forget, Airbus is currently trying to be all things to everybody. That does not bode well for business savvy.

Chris

August 6, 2008 02:00 AM

It's very sad to see US vs Europe. The A380 is a beautiful plane and people should be in awe as we were with Concorde.

America should understand that good engineering is not limited to the USA and that without German engineers they would not have had a space program.

I'm from the UK by the way.

denisaf

August 6, 2008 02:30 AM

It is interesting that there is no mention in the article or comments on what the A380 or other airliners are going to use for fuel as the avtur derived from the declining supply of oil becomes really scarce.

Abhilash Reddy

August 6, 2008 04:24 PM

Nice article and very interesting comments.

I think very large aircraft are good because they can carry a large number of people at a lesser cost. In this period of downturn, when people who have to travel are looking for the most value-for-money options, planes like A380s will only become more popular.

Some people said that they'd rather travel in smaller planes. Such planes are only suited for smaller routes. And they are costly on a per km basis.

And we're a long way from the supersonic jet phase.

And the US vs EU thing. Just appreciate the plane leaving this issue aside.


Wishing Airbus a great luck for its A350 and Boeing for its B787. I really hope it flies next year.

adamski

August 7, 2008 05:00 AM

re "Do you actually think that IF...America wanted a VLA and believed that was where the profits will be, would not have built one?"

Free market capitalism is not that simple. The development costs are so huge, and potential market so small, only one manufacturer can profit from a plane this size.
If Boeing had built one too and got into a price war with Airbus, they would both have lost their shirts.

There are ~1,405 747s in operation which will need to be replaced eventually, and almost nobody wants to buy Boeings 'new' 747-8. And the A380 Freighter is yet to be built.

BW Editor Justin Bachman

August 13, 2008 01:02 PM

Erik raises some valid points about the business argument for a plane like the A380, several of which have been addressed in the comments.

True, no U.S. airline has ordered any but that is because they are so cash-strapped and still enamored of small-jet frequencies over big-jet density, despite the troubles caused by the Northeast U.S.'s severe congestion. Still, beyond the airlines' cash crunch, the A380 doesn't work economically in the U.S., right now, and maybe it never will. As for whether the plane is profitable, have no doubt that it will be for the major international carriers who craved it: Emirates, Singapore, Qantas and Lufthansa. It will be a boost to their bottom lines.

As for the deep costs Airbus/EADS is suffering on the thing, I think we often forget how much pride people, ie, governments, experience in engineering feats. It is a jet, but it is also a proud achievement for the countries who contributed to its creation. That counts far more than money to many.

Squeezebox

November 19, 2008 10:39 AM

A-380 is a passing fad. As we enter the era of space tourism, we will develop faster craft for getting us from Earth to the Moon. That technology will trickle down to faster pasenger jets ala the Concorde. Rather than ferrying a huge number of people all at once, we will have more frequent flights to more places making life more convenient for business travellers. As the economy takes a nosedive, leisure travellers will look at cost effective options such as cruise lines.

KT

December 17, 2008 01:51 PM

Where is the beef for passengers, passengers, and passengers like me? Is is going to be cheaper to fly, more convinient to board, more space to sit, and easier to pick up the luggage and leave early? Where is the innovative solution for travellers?

Cheq Six

January 27, 2009 06:29 PM

If it ain't Boeing, I ain't going! The 747 was conceived and designed almost 40 yrs to go and still rules the skies. Airbus should've made a SST learning off the Concorde experience, instead, they publicly displayed their inferiority complex!

Danny Boy

March 3, 2009 10:19 AM

The A380 has been on sale for 9 years and sold barely 200. Do the math. Boeing had a double decker on the drawing board in the late 60's and discovered that it would not sell. They were right and Airbus will painfully learn that too. European taxpayer will pick up the tab, but they don't seem to mind.

Post a comment

 

About

BusinessWeek editors Dean Foust and Justin Bachman provide road warriors with the latest news, trends in business travel, which as most readers are aware, has all the romance of taking a school bus cross country. Come here to pick up travel news and tips or just commiserate about your latest business trip gone awry.

BW Mall - Sponsored Links