As Airbus approaches break-even on the now 10-year-old A380, talk of the programme’s future has drawn controversy from both industry analysts and Airbus executives, to the extent that Airbus finance director Harald Wilhelm once raised the possibility of discontinuing the aircraft altogether. Although the first mention of a redeveloped variant of the A380-800 was over 5 years ago, the proposal has hung in the balance ever since, all the while major customer Emirates has publicly applied pressure on Airbus to pursue a stretched, re-engined model. This week’s Dubai airshow was expected by many to host the launch of the aircraft, however no such announcement has been made by Airbus. Confirmation of the neo model could offer a new lease of life to the airframe and the potential for Airbus to turn the otherwise underperforming A380 into a serious revenue generator. This article reviews the programme background and gives an operational overview of the conceptual A380neo and what it means for both existing and potential investors.
When the A380 was first conceived, Airbus saw a potential capacity envelope spanning from 500 to 900 passengers as well as freighter applications and 3 variants of the aircraft were devised to suit. By 2010, the European airframer was no longer pursuing the freighter, or stretched -900 types, in favor of only the 650 seat A380-800. Chairman and CEO of Air Lease Corp. estimated a stretch could allow the neo variant to accommodate up to 700 passengers in 3 class configuration – 20% more than the -800, placing its capacity part-way between the -800 and conceptual -900 models.
The A380 has always operated in an entirely niche market (Figure 2) and its initial success prompted Boeing to develop the 747-8, although unable compete with the A380’s capacity, Boeing claims its jumbo alternative offers a 26% trip cost advantage over the twin deck A380. Despite significant programme delays, the A380 had a 6-year head start over the 747-8, which enabled the Boeing to utilize the ground-breaking efficiency of the General Electric (NYSE:GE) GEnx series powerplant, as well as the wing technology proven by the 787 Dreamliner programme. This gave Boeing a significant advantage in terms of both efficiency, operating cost and engine performance. What the A380neo could offer is the immense capacity of the original aircraft, coupled with improved efficiency and the latest engine technology currently maturing on the A350 platform. The ace up the sleeve of the A380 has always been its potential; the original tri-model concept has resulted in the wings being ready-sized to accommodate increased payload and a fuselage stretch, meaning the A380neo development will be far less labour-some than that of the 747-8.
The unfortunate timing of A380’s entry into service in 2007 meant it had strong headwinds to defeat during a very rocky period in civil aircraft sales. Now however, US air traffic is 10% larger than the volumes achieved prior to the 2008 industry decline and is expected to continue to grow at a rate of 5% year-on-year; the bloated market that the A380 was devised to relieve appears to be re-emerging. The Airbus super-jumbo programme has always been a topic of debate and many will see a neo variant as a result of customer pressure, as opposed to the planned execution of Airbus strategy. The truth is the neo is an unintentionally well-timed solution to the under-appreciated problem of airport limitations and slot-restricted routes. The primary selling point of the A380 is the unbeaten per-seat economy that can be achieved where load-factors permit – the aircraft is designed to serve the densest of routes, primarily hub-to-hubs. Many believe the industry is still, today too juvenile to use hub-to-hub travel models to their full potential, however Gulf airlines such as Emirates, Qatar Airways and Etihad Airways have displayed the profits and rapid expansion achievable by pursuing the model. In the already saturated long-haul market, operations into and out of some western cities are heavily restricted by slot limitations, meaning capacity plays more and more of a part in the fleet strategy of international operators. Several airports, notably Heathrow and JFK have operated at full capacity for several years, meaning airlines are unable to expand dense routes despite increasing demand. The A380neo could offer airlines the ability to achieve 20% more passenger revenue per-flight on routes currently served by widebodies such as the popular 777-300ER. Of course the unique gate requirements of the A380 mean it is not so simple as to attain a slot and utilize it, but the cost of terminal upgrades are small in comparison to the potential revenues generated by a high efficiency, extra-capacity A380neo.
Both Airbus and Boeing have undertaken substantial developments in recent years, with both clean-sheet and redeveloped airframes being developed simultaneously. Prior to introduction of the highly anticipated next generation single-aisle aircraft families, both airframers have a lull in development schedules, something I expect Airbus to fill in the form of the A380neo during 2016. Figure 3 shows how A380neo development will suit the longer-term airbus R&D strategy, maintaining fleet progression as the A320neo, A330neo and A350-1000 programmes conclude.
Although far less than the 1500 sales originally targeted by Airbus, the A380-800 has gained substantial orders since entry into service. With 317 ordered in total, the current backlog stands at 144 aircraft, keeping the line moving until 2021. There has however been a severe lull in very large airframe orders [Figure 4] and with the exception of a few cancelled commitments, pen hasn’t hit the order book’s paper since Amedeo firmed up a Memorandum of Understanding from the 2013 Paris Air Show. The A380 and the neo concept has been supported by Gulf carrier Emirates from day one and having ordered 140 of the conventional engine option A380, the company’s voice carries some clout. As announced at Dubai this week by Emirates President Tim Clark, if it could buy 100 neo variants at Dubai this year, it would.
Continues at… What The A380neo Could Do For Airbus