Ten Years of the Airbus A380, but Demand Remains Soft
Jet sales chief John Leahy sees strong demand for superjumbo from 2020
LONDON—Airbus GroupNV on Monday celebrates the 10-year anniversary of the A380 superjumbo’s first flight. The European plane maker so far has had little to cheer about, though, as it struggled to win sales for its flagship plane.
Development and production delays, a deep financial crisis and changes in airline preferences have stymied Airbus’s efforts to sell the world’s biggest airliner.
Almost as many buyers have decided not to introduce into their fleets some or all of the A380s they ordered as those that have stuck to their commitments. About a dozen airlines have walked away or delayed delivery of A380 jets. Still, others, such as Emirates Airline and Singapore Airlines Ltd., have been big customers.
When the company embarked on building the jet in 2000, Airbus bet that over the next 20 years, it would win half the market for very large aircraft, which it estimated at around 1,550 planes. Airbus to date has booked 317 A380 orders, of which 158 have been delivered.
“The A380 was always a small market, but it’s a growing market,” Airbus’s chief operating officer for customers, John Leahy, said in an interview.
Orders in hand are roughly in line with what Airbus expected, after taking into account that a planned larger version of the A380, and a freighter offshoot, were never built, Mr. Leahy said. Airbus scrapped those derivatives when the program fell years behind schedule and ran over cost.
Rival Boeing Co. also has struggled to win sales for its 747-8, the direct competitor to the A380. It has had to curtail output, though the Chicago-based plane maker had lower ambitions than Airbus.
A380 buyers that no longer are onboard with taking the plane include Virgin Atlantic Airways, the airline founded by Richard Branson; International Lease Finance Corp., one of the world’s largest leasing companies, now owned by AerCap Holdings NV; and India’s Kingfisher Airlines Ltd. A deal with Japan’s Skymark was canceled last year over payment concerns.
Deutsche Lufthansa AG and Air France-KLM SA, have said they wouldn’t take the number they once planned. Orders from FedEx, the world’s largest cargo airline, and United Parcel Service Inc. died when the freighter was canceled.
The A380 “from the beginning wasn’t super-efficient,” said Adam Pilarski, senior vice president at aviation consultancy Avitas. “It’s big, old technology.”
Having given large price discounts to the A380’s first customers and those that bought large numbers, which is typical in the aviation industry, Airbus now has to try to sell A380s at high prices, he said, hampering efforts to win new deals. A380s carry a price tag of $428 million, though customers usually pay less.
Airbus Chief Financial Officer Harald Wilhelm in December suggested the A380 could go out of production around the end of the decade unless orders pick up. Since then, however, Airbus officials have been at pains to say the project won’t be abandoned.
Airbus spent $15 billion to develop the plane and, before costs rose, hoped to reach break-even on the program after 250 deliveries. It now has promised investors that A380s being delivered from this year will no longer lose money, though executives have ceased talking about making a profit on the program.
Mr. Leahy said the A380 will enjoy “good, solid growth going forward.” Airbus should be able to sell about as many jets this year as the roughly 30 A380 it plans to deliver, he said.
It has been almost three years since Airbus won an A380 order from a new airline customer, though Emirates Airline, the plane’s biggest buyer, ordered 50 more in 2013. Lessor Amedeo ordered 20 in a deal completed last year, though it has yet to announce any airlines that will take the plane and has delayed its first delivery.
Mr. Leahy said “the market will remain a little bit soft for the next couple of years,” though he is optimistic A380 demand will show “very strong growth” from 2020 as Asian traffic increases and airports reach capacity limits forcing airlines to use bigger planes.
The A380 has proved popular with passengers even as airline buyers remained concerned about making money with the plane. To boost the A380’s economic appeal, Airbus has increased the advertised average seat count on the plane to 544 passengers from 525. More seats mean lower unit costs, which is a closely watched measure by airlines when they decide what plane to buy.
Mr. Leahy said some airlines are showing interest in a stretched version that could seat far more passengers.