Global Economics

Airbus Confirms Further A380 Delay


Airlines are kept waiting once again as the beleaguered planemaker announces production difficulties will keep it from meeting targets

Airbus's delay-ridden A380 mega jet has fallen even further behind schedule. On May 13, the European planemaker confirmed what its airline customers already suspected: Because of ongoing production difficulties, only 12 of the doubledecker planes will be delivered to airlines this year, down from an earlier estimate of 13. Next year's estimated deliveries have fallen from 25 to 21. "The steep ramp-up planned [to reach the earlier targets] is not fully achievable," the company said in a statement.

Airbus is still struggling to complete an initial batch of 25 A380s that had to be rewired because of mismatched design software (BusinessWeek.com, 10/5/06). While painstakingly finishing those planes at a rate of about one per month, it's gearing up for full-speed production of additional planes, expected to reach a rate of about four per month. Managing both tasks simultaneously has been tougher than expected, Airbus now acknowledges. Shares in Airbus's parent European Aeronautics Defence & Space (EAD.PA) fell about 0.4% in May 13 trading on European exchanges.

A total of 33 deliveries instead of 38 may not seem like a huge difference—unless you're one of the airlines that has been waiting more than two years for this plane and, in some cases, built new business plans around the expected capacity boost. Those likely to be affected by the latest delay include the first customer to fly the double-decker plane, Singapore Airlines, which now has four of the superjumbos in service; Emirates Airline and Australia's Qantas Airways (QAN.AX), which had been expecting their first deliveries in August; and Air France (AIRF.PA) and Lufthansa (LHAG.DE), which were scheduled to get their first deliveries in 2009.

Financial Consequences for Airbus

Singapore said on May 13 it expects to receive its fifth A380 in July, but the delivery schedule for the remaining 14 aircraft it has ordered remains uncertain. Emirates and Qantas are likely to get their planes as planned in August. However the schedule for subsequent deliveries to one or both of those carriers is likely to slip. Emirates president Tim Clark has said further delays could cause "serious damage" to the Dubai-based carrier, which has 58 A380s on order (BusinessWeek.com, 3/16/06).

The slippage also will have financial consequences for Airbus (BusinessWeek.com, 5/7/08). Not only must the company pay millions in compensation to customers for late deliveries, but it will also see a big bundle of expected revenues slipping into future years, since more than 90% of each plane's purchase price is paid at the time of delivery. The A380 lists for about $315 million, and even with generous discounting the price tag for the five planes pushed beyond 2009 comes to over $1 billion.

In its statement, Airbus said it needed more time to determine the financial impact of the delay. "This will follow discussions with the customers and a more precise evaluation of the implications of the new delivery schedule for 2010 and beyond," the company said.

Matlack is BusinessWeek's Paris bureau chief.

American Apparel's Future
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus