Aviation Week & Space Technology

Podcast: Will The Airbus A380 Ever Make A Profit?

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on Apr 14, 2017

Adding more seats will not sole the problem, it will just reduce a little. The mais problem is the aircraft itself, with the 4 engines, which are pretty much same engines as 777 engines, and on the ground operations a 777 or 330 is much easy and less costs than the 380, they would probably sold as much they expected if it has been out in the 80, but now airlines want to save on fuel, on aircraft noise, ground operations costs and also the turn around time on ground...

on Apr 14, 2017

It's pure economics! Why do on four (4) engines what you can do on (2). The A-380 is doomed.

on Apr 14, 2017

No you cant. For the mainline carriers like Singapore with their emphasis on premium flyers, they carry 264 pass on a 777-300ER but 471 on a A380.
if you want to carry over 400 passengers in 4 classes there is only one choice.

on Apr 14, 2017

Hello Parker,
I really believe the discussion should not be only on economics but also on the appeal an airplane has.
My wife and I are planning our holiday for next month, flying first to the Gulf (for some shopping) and than on to Japan.
We never flew Emirates but judging on the favourable comments we are going to give it a try.
However I learned now that some of their flights out of Madrid (Spain) are using a triple 7.
After our disastrous experience flying an Air France 777-300 ER from Montreal to Paris (Extremely noisy and almost no chance to stretch our legs) we now decided to fly to Zurich first and from there to Dubai because Emirates is only using A 380's on that route.
It will cost us a little bit more but al least we have the guarantee to be able to have a drink at the bar, and not being forced to sit in our seat for 6 hours without moving, which is very bad for my legs.( We are + 70 years old).
So the fact that Emirates can now guarantee me an enjoyable flight made us decide to book with them rather than with another airline that are using less comfortable planes.
Sorry for my English it has become a bit rusty

on Apr 16, 2017

Eric your comment is clear and your English fine. I agree with your preference for A380 over 777, Better again I think is the 787 but they don't have anywhere near the capacity (passengers or layout) of the A380 on big volume routes.

on Apr 14, 2017

The A380 was conceptually flawed for the market and is now economically constrained as a program.
The four vs. two engines argument is obvious today, but not so obvious in the late 1990s when the design was conceived.
The wing is designed to allow for a longer fuselage version, so the current configuration is not optimized. Lengthening the fuselage would require billions of new Euro investment…and only exacerbate the "too much capacity" problem.
A cross-section of the fuselage shows that the lower cargo bay has to hold the luggage of 18 passengers per "slice", whereas a comparative number for a 777 is just 9 or 10. This means that the A380 can haul less cargo…a disappointment to any airline, since cargo revenue is typically much more profitable than passenger revenue.
The A380 is a passenger favorite….except for the loading time…in large part because of its spaciousness. Adding more seats would make the A380 less compelling to passengers…but is the lowest cost means of increasing potential revenue per flight.
In short, this observer does not see many options for Airbus on the A380. I feel certain that if Airbus had a do-over on the “let’s build a plane bigger than the 747” decision, there would be no A380. But the aircraft has done much for Airbus politically…and such thinking remains an important component of decisions in the EU.

on Apr 14, 2017

When the A300 made it's maiden flight in the early 1970's, sales were dismal and industry opinions (the experts!) were dubious at best. It's always tough to predict the future, but the design (sans the 4-engine dilemma today) probably will be part of our future days in one form or another. Economic success or not, Airbus /EADS is moving along to maximize marginal appeal. 80 extra seats will make the plane even more of an icon to those who want to see it that way. For the nay-sayers, probably nothing will change their mind anyway.

on Apr 14, 2017

The A380 will never make a profit.
But if one considers the huge R&D cost as a sunk cost, then the A380 is likely profitable at this time.
And low cost R&D, like revised seating, will be worthwhile to pursue.

on Apr 14, 2017

Airbus acknowledges that when they drop A380 production next year to 1 per month they will be losing money, but they describe the annual loss as an immaterial amount without giving a figure. I looked up Airbus's financials and their auditors KPMG define material as 200 million Euro, so the loss is less than that but we don't know the exact amount.

on Apr 14, 2017

You really need to define who is to be making the profit when you ask the question.
Certainly some of the Airlines have made profits with the A380.
Airbus itself has lost money and will probably never make any money on selling them, but they may break even some day servicing them.
The European Taxpayers who paid for the development? Naw, they will never see a dime.

on Apr 14, 2017

The main reason for AIRBUS to launch the A380 was to have something bigger than the Boeing 747; economics was not a heavy argument. They managed to convince their main shareholders (French and German states) that bigger were better and make them believe that there was a huge market for it. Already in the 90’s, analyses showed that the future was in smaller twin aisle twin engine planes allowing connections with smaller hubs and in which AIRBUS had a winner, the A330. But during almost 15 years, AIRBUS treated the A330 like an unwanted child while they tried to promote the lackluster A340 and the A380. With the exception of EMIRATES using the A380 from their main hub but without laptop on-board (probably for saving United Airlines, with which its new ultra-fast full fare passenger unboarding and anti-legging policies are not very popular), no airline is really making a profit with the A380 when comparing with other big twin aisle twin engines.
In addition, all A380 are heavily discounted and AIRBUS is not making a profit selling the plane. When second hand EMIRATES A380 will be on sale, the situation will be even worse for AIRBUS .
Flying in the A380 is a nice experience; the plane is quieter than other jets with the exception of the 787. However, packing more passengers will seriously degrade the comfort and more and more passengers will then avoid flying in an A380.
The main job of the A380 is to promote AIRBUS products and also to attract spotters along airfield for making nice pictures. Unfortunately spotter pictures don’t bring money in the coffers of AIRBUS.

on Apr 14, 2017

Emirates is state owned and subsidized enterprise

on Apr 14, 2017

i think you meant Republic airlines dba United Express

on Apr 14, 2017

Bigger isn't always better...
Now...longer lasting and 'stiffer' may do...
as we always "Dreamliner'd"...

on Apr 14, 2017

The A380 is certainly a polarizing subject and it seems that some folks want to go to extreme lengths to knock it with opinion pieces about one aspect or another. Let’s not forget, the airframe has been in service for ten years—ten successful years—which is almost a quarter of the life of the 747 airframe, now in its twilight years. Additionally it is unfair to look at the A380 in isolation from an airline and OEM perspective. In isolation, the case could be made that the 737 is the worst aircraft ever as it can’t make it across the Atlantic, but we all know that the 737 is the backbone of aviation. The A380 airframe was a necessary step for aircraft design evolution and many if not all aircraft manufacturers, operators, and suppliers have benefitted from the envelope-pushing design of the A380 in some way, be it technologically or economically. It gave us information we never had before.
The A380’s target market may be waning now as congestion has eased since 2008 and a number of airlines have opened new point-to-point routes with modern twinjets, but as our airplanes and airports once again become more congested, don’t be surprised if the A380 sees a resurgence in its fortunes. In any single day, most of the US’ major airports have an A380 at a gate, and all without a single US based operator.

on Apr 14, 2017

Interesting comment about the 737 not being able to cross the Atlantic...Flew WestJet 737's between Canada and Scotland in the summer of 2016. Didn't get wet.

on Apr 14, 2017

Halifax to Glasgow, no problem.
But thats nothing, SAS had a nonstop Stavanger Norway to Houston only 44 seats though. Secret is thats its the BBJ version.

on Apr 15, 2017

Norwegian is starting 737 service across the Atlantic as well.

Your point on traffic congestion is misplaced. The big twins not only allow point to point, they greatly reduce congestion at airports by allowing a more even distribution of flights during the day as well as increasing passenger throughput. Additionally, every flight from lesser airports probably reduce two or three short ranged flights feeding people to and from major hubs as well. So at least in the A380s lifetime, congestion is not going to drive more sales outside a very few markets.

on Apr 14, 2017

Will the A380 ever make a profit? About the best you could say is that it will probably do better than the SST. An airplane that big is highly specialized in the the markets it can serve and the airlines who can profitably fly it. Not to say it isn't a great ride, it's just that they will never be able to build enough of them to make a program profit. And now, with the reduction in rate, they may not even end up making enough money to cover the construction of the airplanes themselves. Adding seats is really just rearranging the deck chairs because there were too many already. There is no secondary market to speak of and no freight option, so after about 15 years of front-line service they are headed for the scrap yard. If Airbus and Rolls wanted to invest the money in a NEO that would probably sell a few more airplanes, but only make recovery of the design investment that much more impossible. Airbus built the A380 as a 747-beater and in that they succeeded, but so far as where the airline market is going they way too late for a commercial success.

on Apr 14, 2017

My answer to the questions posed in the headline: No.
The 380 reached its' 'revenue apogee' three years ago - any discussion of money from this point forward is all accounting, yield management and write-offs.
Putting more seats in the airplane is supercilious and will NOT sell one more airframe.
The airplane has many desirable features - but none of them will save the program. The program was too much, too late and too expensive.

Think of the A380...as a shopping MALL...in Chicago. There is no market, no future and no way of preventing it from extinction.

on Apr 14, 2017

You are forgetting about another plane that isnt making money- the 787.
Its accounting block started at 1100 in 2012 was raised to 1300 and is almost certain to go over 1500. Thats the number of planes to build to cover development costs, they are only at 500 so far.

on Apr 15, 2017

The 787 is making money, it just hasn't paid back it's development cost. But the A380 is both not making money and not paid back it's development cost. Think of it like a credit card.
We have two cardholders
1. 787 had a large balance but has started paying it back each month, the balance is going down and, more importantly, the 787 has a nice steady job with the likelihood of lots of overtime.
2. A380 also has a huge balance, but after making a few token payments, it's back to borrowing more to get by month to month. A380s is a good worker but the job outlook is not good with lots of competition and a bunch of customers that don't look like they will come through for him. Some have even started to not return his calls.
So, which is a better credit risk?

Beyond that, Boeing spent a lot of money developing new technology that, although charged to the 787, is being utilized across its entire line. For that matter, a lot of its technology is being used on the A350 although that doesn't help Boeing. How about the A380? Not so much, it was probably the pinnacle of the old school way of building airplanes. A technical marvel, but not a leader into the future.

Rob
on Apr 15, 2017

Excellent comment USNVO.
Although there will always be a need for very large aircraft, it won't be in numbers that Airbus had hoped. Let's see how many airlines dont renew their 10 year leases - time will tell.
Parts and consumables demand won't turn it into a profit either as the outright number of airplanes is not enough.
There was another aircraft that was similar in many respects, the BA748, which airlines quietly moved on from.

on Apr 14, 2017

No. But not to worry for Airbus shareholders - it used risk-free, refundable launch aid to finance its development. European taxpayers of the partner nations of the consortium who gave their sovereign guarantees for said launch aid, however, are another story.

on Apr 14, 2017

Boeing gets its subsidies from Washington and South Carolina states. Its 787 wing and centre barrel is subsidised by Japan. I cant talk about Bombardiers subsidies as it gives me heart palpitations!

on Apr 15, 2017

Oh please,
Boeing gets lower tax payments for locating and building in those states, kind of, no just like, Airbus does for its factory in Hamburg or in Mobile. Canada and Japan are just doing what the Europeans have continuously done for Airbus. But, they have the possibility of a ROI as the C series and 787 will be around a long time. But in the case of the A380, Airbus was given over 25 Billion that would only be payed back when the aircraft made a profit. Kiss that money goodby.

on Apr 23, 2017

All is not lost for the tax payers. A380 led the way for the A350,valuable lessons where learned. And the A350 is already a success. And the employees pay taxes!

on Apr 14, 2017

The long the A380 stays in production the better - for Boeing.

on Apr 14, 2017

Takes a long time before the losses on the low rate A380 match what Boeing has written off on the KC46-

on Apr 15, 2017

Economical or not, I've had more comfortable Economy flights on 380s than in Cripple7s!

on Apr 15, 2017

Love this airplane and would love to fly on it. Very sad that the days of 4-engine airliners (B-747, A380 and A340) are numbered...

on Apr 16, 2017

"The main reason for AIRBUS to launch the A380 was to have something bigger than the Boeing 747"

No. The A380 was intended to reduce the number of operations at major hubs. The problem was congestion at major hubs and the size of the A380, about 40% larger than the 747, was not to be bigger than one 747, it was to be as big as two smaller airplanes.

There has been more growth in non-stop long range point to point operations than expected thus the anticipated growth in major hub to major hub operations has not materialized.

The intended market is not going to disappear as there are limits to the size of cities which may support direct service by 787 sized airplanes.

The near future problem facing the A380 is that production will have to be maintained until the coming surge in older A380s being sold to secondary operators settles down and traffic growth and retirements finally raise the market for new aircraft to 2 or more a month. Too many were ordered at first which now are not easily absorbed for other service as they age.

Airbus made one major mistake on the A380. It was anticipated when the 747 design was created that the 747 would be replaced on trans-Atlantic and trans-Pacific routes by the 2707 so the 747 was designed with the ceiling was high enough to easily accommodate cargo making it a suitable cargo transport when the 2707 replaced it in premium service.

Airbus is just going to have to carry the production line at a low loss for a few years. Were it easier for its customers to dispose of older airplanes the problems of both operators and Airbus would be eased.

A tip of the hat to Joe Sutter for thinking ahead on the future of the 747 design, while a tut- tut goes to Jean Roeder for not thinking ahead to the future of the A380.

Will more seats "save" the A380? It might speed the retirement of a few airplanes on the highest density runs; but the airplane was well sized to the market as designed.

There is no profit in flying empty seats.

on Apr 21, 2017

I once crossed the pond two or three times a month and then more flying once I got there. My itinerary as I now look back was purely based on convenience (times of departure and arrival), loyalty programs, covenience and speed of terrestrial once there (location and access of train station/metro/bus/taxi) and airport. The time spent on the aircraft itself was the least important consideration if at all. I paid full fare and flew many times the same route at the same times. That, was my airline/destination decision not the seat or access to a "bar" at 37000ft. Convenience is still one if not THE key decision factor when spending $3K or more on a plane ticket. On board WiFi and Internet access will drive passenger traffic to thise airlines that provide it reliably and consistently.

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