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Airbus Scraps A380 Target as Demand Dwindles

July 11, 2012

Airbus Scraps Target of 30 A380 Sales as Jumbo Demand Wanes

An Airbus A380 aircraft in Malaysia Airline System Bhd. livery during the Farnborough International Air Show. Photographer: Chris Ratcliffe/Bloomberg

Airbus SAS abandoned a target of selling 30 A380 superjumbo jets this year, as airlines opt for smaller, less-expensive airliners in an economic slump.

“The big aircraft market has been slowing down,” Airbus Sales Chief John Leahy said in an interview at the Farnborough air show today. The target of 30 is “looking like a stretch at this point but when you set your goals at the beginning of the year you can’t change them. Let’s see how close we can get.”

Airbus has struggled with its flagship model, after cracks emerged in wing components and output in the first half only reached a third of the annual goal of 30 deliveries.

The A380, which typically seats about 520 passengers on two decks, is Airbus’s response to Boeing Co. (BA:US)’s 747 jumbo. That plane’s latest variant, the 747-8, has also failed to sustain the momentum of earlier versions, with Chicago-based Boeing booking the last orders for the humpbacked jet one year ago.

Airbus parent European Aeronautic, Defence & Space Co. fell 4.7 percent, the most since October, to 26.92 euros in Paris. The drop pared EADS’s gain this year to 11 percent.

Slow Intake

Airbus’s only contract for the A380 this year is one for four aircraft worth $1.58 billion from Russia’s Transaero Airlines. That’s after Leahy had said Feb. 15 at the Singapore air (SIA) show that he expected to sell at least 30 of the planes, replenishing the backlog by matching the delivery target.

“They’ll struggle to meet that level next year as well,” said Mark Lapidus, managing partner at London-based Doric Asset Finance Ltd., which is the biggest lessor of the A380, with 18. “Fixing the wings is diverting a lot of resources and that’s going to continue to be the case.”

The 747-8’s strength has been in the freighter model, with 70 sales so far compared with only 36 for the passenger version, and even those purchases have been under pressure. Boeing said in November that it lost a deal for five 747-8s when lessor Dubai Aerospace Enterprise Ltd. converted that order to the cargo version of the twin-engine 777.

“You can expect over the course of the next twelve months a number of orders to be realized on the 747 on the passenger side,” Patrick Shanahan, the chief of Boeing’s airplane programs, said today. “The freight market has been a little off. We have a good backlog there. I would expect the same thing, maybe a little bit later.”

Four-Engine Aircraft

The A380 and 747 are the only remaining aircraft with four engines in the manufacturers’ lineup. Airbus ended production of its four-engine A340 last year after the jet with the company’s longest fuselage lost out to the Boeing 777. Airlines are opting for more fuel-efficient two-engine jets, as kerosene makes up the single biggest expense for carriers.

Qantas Airways Ltd. (QAN) and Singapore Airlines Ltd. have both had to repair A380s after fissures were found in wing parts. While the aircraft is safe to fly with the cracks, repair work has cost Airbus more than a quarter of a billion euros and damaged the image of the world’s largest commercial aircraft. Emirates is the biggest customer for the A380, having ordered a total of 90 units, with a list price of $389.9 million apiece.

Qatar Airways Ltd. will receive an upgraded version of Airbus SAS’s A380 superjumbo after refusing to take jets with wing faults requiring modifications later, Chief Executive Officer Akbar Al Baker said at the show this week. The second- biggest Middle East carrier behind Etihad will take its first A380 in January 2014, he said.

Airbus has delivered 10 A380s so far this year, and would need to double output in the second half to reach its target. Malaysian Airline System BHD (MAS) is among the most recent airlines to receive the double-decker, and the carrier has put the jet on display at the Farnborough air show.

To contact the reporters on this story: Andrea Rothman in Farnborough, England, at aerothman@bloomberg.net; Robert Wall in Farnborough, England, at rwall6@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net


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