Analyzing The Airbus A380's Premature End
A few minutes before midnight on June 17, 2020, a mild summer Wednesday night in the small town of Levignac in southern France, the local bar normally would have been about to close. But that night the place was full despite the raging pandemic, and outside the street was filling with hundreds of people—both locals and many who had come from Toulouse, a 30 min. drive away.
- Only 14 years after first delivery, A380 production stops
- Lack of engine and airframe efficiency were competitive disadvantages
- Emirates is set to receive the last three aircraft in November
They were there to witness a historic moment: A convoy of trucks was transporting large Airbus A380 fuselage sections on the country roads of Toulouse’s hinterland to the Blagnac final assembly line for the very last time. Those sections, accompanied that night by farewell wishes of many who once worked on the program, have since turned into the last A380 ever produced, an aircraft that is slated to be handed over to Emirates Airline in November.
The delivery will close one of the most spectacular chapters in European aerospace history. It was spectacular in many ways: The A380 was the largest commercial aircraft ever produced, intended to eclipse Boeing’s 747; passengers and pilots loved its comfort and ease of flying, even if airline finance departments were less enamored with it. The aircraft’s production run, spanning just 14 years, was drama-filled, including the expensive redesign of its wings and increasingly desperate campaigns to sell more of the giant aircraft and extend its life. They were full of negotiations about even larger versions and Neos, after the reengining concept had worked so well for the A320 family.
But after Emirates finally pulled the plug on a large follow-up order that would have saved the program in the winter of 2018, it was up to departing Airbus CEO Tom Enders to finally decide the ending for the A380. It had become clear that Airbus would never recover the €25 billon ($30 billion) or so in research and development costs sunk into the program over the years. And with no new orders keeping production open even at minimal rates, it became unsustainable. Europe’s most ambitious commercial aircraft program post-Concorde had become a gigantic failure and a prime example of management reading the market improperly.
Was it a misreading, though? Was there ever a chance of it continuing until demand recovery?
In the weeks before that final delivery, Aviation Week spoke with many insiders who shared their views and memories. Among them were Enders and former Airbus sales chief John Leahy as well as Nico Buchholz, himself a former Airbus sales executive who later ordered the aircraft for Lufthansa as its head of fleet strategy. Some still think the program could have been rescued. But the look back into its history also shows that industry doubts about the A380’s viability had begun even before first delivery.
Enders was head of strategy at Airbus’ German shareholder DASA in the 1990s—the manufacturer was still a loose economic interest group (French acronym GIE), a consortium of shareholders that was nowhere near being integrated. Much later, of course, the A380 was the key factor in fundamentally changing that. In the 1990s, discussions about the risks and opportunities of building an A3XX were intensifying after years of studies. “Airbus did not stumble into [building] the A380; we were very aware of the project’s risks,” Enders says. “But then, technology and the market changed faster than everyone had thought.”
In hindsight, the writing may have been on the wall for the A380 even before its own entry into service—even as early as four years before. In December 2003, Boeing decided to launch the 787, a revolutionary aircraft in many ways, particularly in its use of lightweight composites for structural weight savings. By contrast, “Airbus’ achievement in the A380 was mainly to be able to build something that big,” says Buchholz. Other than that, the A380 was structurally fairly conventional.
Of equal importance was engine manufacturers’ commitment to build powerplants for the Boeing 787 that were significantly better than those of the A380.
The consequences were fundamental: Suddenly, the paradigm of building larger aircraft to cut unit costs was broken. The unit costs of 787—and later the A350—were comparable to or even better than those of the much larger A380, but with a considerably lower risk of not being able to fill the aircraft. Unit revenues were the other side of the coin: There was greater pressure on yields, with literally hundreds of additional seats to fill on every flight. Once Lufthansa started flying the A380 across the Atlantic, the airline found that the yield on its Frankfurt-New York route fell by almost as much as unit costs.
Looking back, Leahy has harsh words for Rolls-Royce and GE Aviation. “Airbus was blindsided by the engine manufacturers in 2000, when we were getting ready to launch it,” he says. “Our program people had assurances [from] the engine OEMs that there was nothing on the horizon with better specific fuel consumption [SFC] for years to come. And three years later, when we had not even delivered the first aircraft, GE and Rolls had engines with 15% better SFCs that they were bringing out for the 787. That left Airbus at a commercial disadvantage that was very unfortunate.”
The aircraft’s most important customer, Emirates Airline President Tim Clark, agrees to an extent. “I regret that it was not reengined, that the weight was not taken out,” he says. However, he also points to the many problems the A350 and the 787 have had since the market introductions of the next generation of engines, issues the A380 has not faced to the same degree. He asks whether the A380 may have had the same reliability issues, which are hard enough to handle on a 150-seat narrowbody but could require large sums for passenger compensation and handling for just one canceled A380 flight. The tradeoff between efficiency and reliability was a big consideration.
When Airbus decided to launch the A380, it was still chasing another idea, and therefore the wrong target. “In the 1990s, not only Airbus but also many airlines were still very focused on four engines when it came to widebodies,” Enders recalls. And Airbus thought it had to build an aircraft that would compete with the 747 and break into the Boeing monopoly on very large jets. In 2015, in the midst of increasingly desperate struggles to find new customers, then-CEO Fabrice Bregier conceded that the A380 had been launched “at least 10 years too soon.”
Perhaps it was not launched too soon but too late: In 1990, Boeing received orders for 122 747-400s and delivered 70. Ten years later, when Airbus committed to building the A380, 747 orders were down to 26 and deliveries to 25. And with few exceptions since, 747 production has continuously declined.
Airbus’ growing problem was not just the 787, or later its own A350, which further deepened the market shift. In April 2004, it was none other than Air France, in Airbus’ backyard, that took delivery of the first two Boeing 777-300ERs. That aircraft, and not the A380, replaced the 747 as the reference on long-haul trunk routes before slowly being superseded by even more efficient twins.
“We all have misjudged the future of the twins, and that led to the efficiency problem of the A380,” Enders says. “I only admit this reluctantly, but Boeing has largely been right with its point-to-point argument.” He is referencing the idea that passengers, when having the choice, prefer nonstop flights over hub connections. Both Leahy and Clark disagree with the idea that the hub concept has weakened. “I don’t share the view that the days of the superhub are over at all,” Clark says.
The two-year phase from 2005 to 2007 was crucial to the A380’s early demise, not only because of the growing threat from more efficient twins. In those years, billions of euros in extra costs were added to the program, and important decisions that could have been made were not.
The aircraft had performed its first flight at the end of April 2005, a milestone for the entire aviation industry. Airbus garnered applause from around the world for the achievement. But a little over a month later, the company was forced to announce the first (six-month) delay in the program. As it turned out, different parts of the consortium had used different versions of the CATIA design software and, infamously, as a result many of the cables inside the fuselage were too short.
An almost incomprehensible struggle followed. Airbus threw literally thousands of technicians and engineers at the problem. Many in charge burned out—and many left, but those who stayed learned tough lessons that were incredibly valuable for their later careers. Airbus had to announce two more delays before finally regaining control of the situation toward the end of 2006.
The crisis was so deep that management considered the most radical moves. “We asked ourselves whether we should terminate the program,” Enders reveals. “But that would not have been right back then. Development was very far advanced, and the reputational damage would have been huge.”
There were still consequences. EADS had been formed in 2000 along with the launch of the A380. The former Airbus GIE was converted into a real company a year later. But in 2006, EADS acquired the remaining 20% in Airbus SAS previously held by BAE Systems and proceeded with much deeper integration. “We pushed through relatively brutal integration in 2006-07,” Enders says. “Before that there had been a lot of talk about it but no real action.”
Airlines had their own perspective, which changed substantially between the 2000 launch and entry into service seven years later. “In 2000, you could not predict what crystallized in 2005—that the aircraft was technically outdated,” says Buchholz, who ordered the A380s for Lufthansa. After all, the aircraft’s unit costs were advertised to be 13% better than those of the 747-400. But then things started to move.
Japan opened up Tokyo Haneda Airport for international flights, weakening the argument that the A380 was needed for slot-constrained Narita International Airport. China built new international airports at a record pace and encouraged long-haul service to them. “You could get a feeling that the A380 was going to be too large,” remembers Buchholz. “But you could not really prove it.”
Buchholz contends that it might have been possible to rescue the A380, but it would have required early, decisive and painful action. When the program was delayed bya cabin installation disaster, Airbus should have used the opportunity to modernize the aircraft with a better engine based on ongoing development programs for the 787 and later the A350. “With a better engine, the A380 would have had a longer life,” he says.
“With new engines, it would have been an unbeatable aircraft in the marketplace,” Leahy asserts. “We came close to pulling it off. Had we had the right engines, we would probably have rewritten history.”
But he does not think Buchholz’s idea of pushing for an early reengining then would have been possible. “There were commitments made; the engines were being developed. It would have pushed back the thing a couple of years, [and] there would have been big fights with the engine manufacturers. They had invested a lot of money into that generation of engines.”
On Oct. 15, 2007, Airbus finally delivered the first A380 to Singapore Airlines. A little over a week later, the aircraft flew its first commercial service from Singapore to Sydney. It was a major milestone that, Airbus hoped, would pave the way for a less eventful future and a ramp-up of production to 45 aircraft a year, a rate of just under four aircraft per month. Of course, Airbus never reached rate 45. Production peaked at 30 aircraft in both 2012 and 2014. The last relatively big year for the type was 2016, when Airbus again managed to deliver 28. However, the turning point that likely sealed the aircraft’s fate also occurred in 2016 and led to the end of production five years later.
The nine years between 2007 and 2016 continued to be drama-filled. Emirates, by far the type’s most important and loyal operator, had just taken delivery of its first aircraft in early 2008 when the U.S. subprime and global financial crisis unfolded and heavily affected demand for international air travel. Airbus delivered 12 A380s in 2008 and only 10 a year later, a step in the wrong direction. It was not able to expand production in a significant manner until 2010, when it decided to shelve plans for the A380-900 in light of the huge financial burdens accumulated and development work on the A350, A320neo and A400M.
The stretched A380 version was what the Airbus designers really had in mind when they built a wing much larger than necessary for the baseline A380-800. It made that version heavier and so significantly less efficient than would have been possible with a smaller wing optimized for its fuselage size. “The [A380-800] was not the aircraft that we actually wanted to build,” Enders says.
“The design was optimized for larger variants,” Buchholz says. Airlines knew that, of course. But some, like Lufthansa, decided right from the beginning that the -900 would have been too large. The problem with the -800—“you can’t send the upper deck somewhere else when a route does not perform as planned,” as Bucholz puts it—would only have become worse with a larger aircraft, he says. The lack of flexibility was frightening airline planners.
On the other hand, Emirates was foremost of a number of airlines that were very much in favor of the -900. They pointed out that the larger version would be much more efficient and could reinstate the unit-cost advantage over smaller long-haul aircraft, including the A350 and 787. They also saw a market for it on their busiest routes. “We wanted the -900, not the -800,” Clark says. “The aircraft would have had another 120 seats. But when the idea was discussed, there was a slowing down in appetite [at other airlines]. We did not share [their] view.”
The real problem with the A380-900 plan was not that the stretch was never built, it was that it made the -800 a much worse version. “The fact that from the very beginning they built weight into the airplane so they could do the -900 was a program mistake,” Leahy points out. “You just don’t build extra weight into the airplane so you can stretch it. You optimize the aircraft, and then you figure out how to stretch it by taking some of the margin that you did not need. When you build in the capacity for another 100 seats from Day 1, you are going to build a heavy airplane.”
Clark says it still worked well for Emirates. “In the years after the financial crisis, 80% of our profits came from the A380,” he notes. “The A380 is still a hugely efficient aircraft, even though it has old-technology engines.” According to his calculations, a two-class A380 has 4% lower fuel burn per seat than a 787-9 at equivalent space allocation, which would mean putting 670 seats onto the aircraft. Emirates’ two-class A380s currently have 617 seats.
The airline went above and beyond anyone else in the industry to make the aircraft the core of its brand. “It was a wonderful, exciting challenge to deal with this enormous amount of space,” Clark remembers somewhat wistfully. “We put in the bars and the showers. We created a Ritz Carlton.”
But that Ritz Carlton was hugely complex to build. “The showers caused a lot of issues,” Clark says. Pumping hot water up to the upper deck with sufficient pressure was just one of them.
‘A Brick Wall’
One of the biggest misunderstandings in the history of the A380 was its true market potential in China. “If small Dubai can take more than 100 aircraft, we should be able to place a lot more of them into China,” a senior Airbus executive recalls thinking. But in the entire production run of the aircraft, only five were actually delivered to a Chinese airline, China Southern, the first of which arrived in October 2011. So why did China not work out?
When Airbus tried to sell the A380 to the nation’s big three—Air China, China Eastern and China Southern—some factors worked against them. Given their relatively poor reputation for customer service and product quality, the carriers lacked confidence that they could compete with their U.S. and European rivals on long-haul routes, let alone with an aircraft that big.
Long-haul flying was also a much smaller part of their business at the time, as opposed to the late 2010s. Being very conservative, the Chinese airlines also disliked launching a new aircraft, or even taking delivery of one, until performance was proven well after market introduction. The odds for Chinese business were always much lower than some in Toulouse had imagined.
“The obvious target [for A380s] should have been Air China,” says one insider. Of the three airlines, it was the one with a base in the country’s capital, and in many ways it was perceived as the flag carrier. But, unfortunately, the airline always had been close to Boeing and ended up being one of the few carriers around the world that ordered the 747-8.
For Leahy, the case is clear. “There was an enormous amount of politics involved in this from the U.S. and Boeing,” he says. “There was a lot of pressure on Beijing to not go with the airplane and stay with the 747. There was a lot of ingrained inertia with the old team in Beijing. That’s where we hit a brick wall.”
Some China experts believe it was still possible at some stage to have placed the A380 with Air China. “If Cathay Pacific had gone for the A380, Air China would have followed,” says a source with knowledge of past talks.“ Cathay certainly would have helped,” Leahy agrees.
Although the carrier’s former CEO Tony Tyler has always been skeptical about the aircraft, Cathay was nonetheless close to an order at various points, particularly in 2010. One time, according to an insider, a deal failed only because Toulouse was not willing to accept some last-minute concessions demanded by the airline.The Hong Kong-based carrier was perceived as a role model for strategy, fleet and product quality by Air China, which has since also become a big shareholder. But Cathay did not jump.
The only order for the A380 ever placed by a Chinese carrier also played a role, notes one executive. “You could argue that selling to China Southern was a mistake,” he says. “It really enraged Air China, because they viewed themselves as the flag carrier. There was also a lot of personal rivalry between the CEOs, and when China Southern went for [the A380], Air China had to show it was the wrong move.”
A fleet of just five aircraft was also suboptimal and a compromise that did not work, particularly from China Southern’s main base in Guangzhou. The airline always planned to base the aircraft at Beijing but was not allowed to deploy them on routes from Air China’s hub. The two carriers tried to negotiate a joint A380 operation but in the end could not come to an agreement.
At one point, Hong Kong Airlines placed an order for 10 A380s, but insiders say the commitment was “never very credible.”
Had Airbus succeeded in breaking into the Chinese market, would it really have been literally with hundreds of aircraft, as some hoped? One executive with deep knowledge of the situation says Air China could have taken no more than 15 A380s and China Eastern and China Southern possibly 10 each. Even if the Hong Kong Airlines deal had gone through, only about 50 aircraft across all Chinese and Hong Kong-based airlines seemed feasible, the executive says. “Two-hundred was never going to be realistic,” he asserts.
In the meantime, the A380 went through its first safety and second industrial crisis. On Nov. 4, 2010, Qantas Flight 32 (QF32), an A380 registered VH-OQA, took off from Singapore Changi Airport bound for Sydney, just like the type’s first commercial flight three years earlier. But this time, the flight did not go smoothly. VH-OQA suffered an uncontained failure of engine No. 2, a Rolls-Royce Trent 900, 4 min. after takeoff, causing extensive damage to the airframe, wings, tanks and one hydraulic system. Two other engines continued to operate, but only in degraded mode.
QF32 landed back in Singapore and no one was hurt, but both Qantas and Singapore Airlines temporarily grounded their A380 fleets. According to a 2011 preliminary report by the Australian Transport Safety Board, 55 Trent 900 engines had to be replaced across the world fleet.
As dramatic as the incident was, the type’s most serious since commercial service had begun also demonstrated the resilency of the aircraft—and the flight’s crew. Redundancy had paid off.
VH-OQA was repaired in Singapore and returned to Australia in April 2012. During the repairs, tiny cracks in the wings were discovered. They turned out to be the start of the next industrial crisis: Airbus had to strengthen certain areas of the wings for in-service aircraft and use a new aluminum alloy for some parts going forward. The problem was eventually fixed, and it is not among the main causes of the premature end of production. But it made the program’s economics even worse. It was becoming increasingly clear that Airbus would never make a profit on the A380.
The Last Stand
But the airframer was still a long way from giving up. About a year after the European Union Aviation Safety Agency (EASA) had made mandatory checks for wing cracks, Airbus delivered the 100th A380 to Malaysia Airlines. With the industry now fully out of the global financial crisis, the air transport sector entered an unprecedented period of strong growth, helped by expanding global trade, low interest rates and—for the most part--—relatively low fuel prices. Those in charge in Toulouse were still hopeful the A380 could benefit and somehow turn the corner.
In November 2013, Emirates gave the program another boost:With 39 of the aircraft in service and another 51 on firm order, the airline bought 50 more at the Dubai Airshow. The three big Gulf carriers were peaking—they also placed massive commitments for the new Boeing 777X at the time. The Emirates deal was for the existing aircraft, but the A380neo concept was also discussed. After all, Airbus had launched the A320neo in 2010 and had received much better market feedback than expected.
A year after that Dubai Airshow, Airbus’ then-CEO Fabrice Bregier said the company would “one day” launch an A380neo and a stretch—and the bigger aircraft would get new engines. Six months later, he talked about an A380neo that would enter service around 2020. But in June 2016, Clark announced that the talks about an A380neo had “lapsed.”
“It was becoming apparent that we weren’t getting a customer on board for a Neo or a stretch,” Leahy says. “They were looking at some strong commitments from the engine manufacturers, as well as Airbus, about what the capability was going to be of a reengined airplane.”
Potential customers did not get what they wanted. Only one month later, in July 2016, Airbus made a U-turn by announcing a massive production cut from 28 aircraft that year to just 12 in 2018. The company was trying to buy time, as well as looking for alternatives.
In June 2017, Airbus presented the A380plus concept—the same airframe as before but with a more efficient cabin, around 80 more seats. Space was going to be made available, among other ways, by eliminating the rear staircase that was taking up a lot of room. But, again, customer response was lukewarm. Notably, Emirates did not like the idea since the A380’s luxury—the first-class shower and the bar at the back of the upper deck—had become part of its iconic brand.
Emirates stuck with the aircraft nonetheless. With the A380 deep in crisis mode and questions about its viability (and residual value) swirling, the airline agreed to buy another 36 aircraft at the beginning of 2018. The decision was preceded by months of tense negotiations with both Airbus and Rolls-Royce. The Engine Alliance of General Electric and Pratt & Whitney had long lost interest in further A380 business.
The deal, Airbus hoped, would enable it to sustain production at low but justifiable levels long enough for demand from other airlines to kick in eventually. It was also Leahy’s last marquee deal, a final exclamation point at the end of a very successful decades-spanning career as an aircraft salesman. Almost exactly one year after Leahy returned from the contract talks in Dubai, though, Enders pulled the plug on the project, announcing that production would cease in 2022, a date that would later be pulled forward to November 2021.
When Enders decided to end the program, Leahy had already retired, and the CEO had also announced his own departure. “Tom was leaving the company. He felt the A380 was not selling well, and he wanted to clear the deck for the new team and shut down the program,” the former sales chief says. “That is just the way Tom is.”
Leahy saw things differently. “I fully expected the A380 program to continue with Emirates’ support after I retired,” he says. “I left around February, handed over to a new commercial director and expected to have that deal finalized.”
So why didn’t that happen? “I never really managed to get to the bottom of why they were not able to do it,” he says. “I think it was a combination of Airbus and Rolls-Royce factors. Emirates still wanted to do the deal. I still believe it to this day.”
The case may be more nuanced. Clark remembers that Emirates was going through another round of fleet strategy planning in late 2018 and was coming to the conclusion that a fleet of 120 A380s was going to be “optimal.” At least a large part of that fleet is to be flown “well into the 2030s,” Clark notes.
However, in the end, even Emirates found that it did not want more of the aircraft and instead decided that a supplemental fleet of smaller A350s and 787-9s made more sense.
These two potential "Super" Jumbos were the topic; as was Boeing's potential decision to have a "me too" moment. And either launch an upgraded "Super B-747"; a brand new aircraft; or, nothing at all.
The Boeing representative proudly touted his persuasion of Boeing's Board. That regardless of the truth, fiction, or dare in Air Bus's plans for a post 747 Super-Jumbo. There was never going to be a prayer for a new aircraft order configuration that would support two (2) airframe manufacturers. And especially since one of them (Boeing) would be years late entering the competition; behind, the industries' first mover, Airbus.
History has proved Boeing got that decision 100% right. There was no market for a second manufacturing source for a follow-on B-747; or a "Super Jumbo" aircraft.
Boeing also argued in that (early Spring 1997) forum, that the other handicap the Super-Jumbo faced, was its complete miss-reading of the future "long haul" market..
The demand (as Boeing predicted) was for profitably serving lots of "long-thin" routes. Not short (or long) thick inter-hub routes. That would carry 1,000 passengers per aircraft from Say Dallas to London. But on routes from cities like Austin, TX to Dublin or Seoul. Routes for the Boeing B-787 or Boeing B-777.
That turned out to have been spectacularly prescient too.