European aero major Airbus (EADSY, Financial) had huge expectations from its jumbo jet, the A380, especially after the phenomenal success Boeing’s (BA, Financial) 747 turned out to be. However, unlike the Queen of the Skies, the Super Jumbo failed to grab huge number of orders on the back of a weak global economy and lack of long distance flights. In 2007 when A380 entered service, the demand for jumbo jets had already started fading - something that Boeing never had to worry about when it launched 747 in 1970. Airbus is having difficulty in attracting new orders for the epic model and analysts fear this may lead to closing of its production line. On top of this, the aero major needs to think about the older A380s that are about to reach the end of their lease. Here’s a look at what’s going on.
The core issue
Airbus’ most magnificent and prestigious piece of work, the A380, has been taking a beating since business for such huge jets that can fly such great distances is down. Carriers across the world started feeling the pinch of using A380s when fuel prices started escalating and worldwide travel started declining. There were times when the airlines had to make the jets fly at lower capacity, resulting in losses as cost per seat went up. During this same point of time, relatively smaller twin engine jets started gaining popularity. Thanks to technological advancements, these jets were now able to cover distances equal to that covered by the A380, but with only two engines.
Compared to the fuel guzzling A380, airlines began preferring the new generation fuel sipping jets such as A330 and 777. So far, A380’s biggest customer has been the gulf carrier Emirates and Singapore Airlines. However, there are reports that the two carriers may soon return the model to the leasing companies. Emirates has always been interested in A380 – a major portion of its fleet is comprised of this particular model. The airline is still interested to place orders for more A380, provided Airbus works on a new engine option that will offer increased fuel efficiency.
Because of all these issues, the future of A380 was looking bleak and analysts and industry experts believed the end of the line for the model was near. A major concern for the aero major is what would happen to those A380s that were produced at the beginning and now have reached the end of their lease. Airlines across the world are not placing orders for new jets, let alone orders for used jets.
The possible solution
It seems the answer to the puzzle has also arrived. According to latest set of reports, Airbus believes these jets can be used by the no-frill low cost carries to support their long-haul operations. But, the question remains, how will this help the demand for the jet? With this single move the jet maker will be able to find a home for the pre-used A380s, as well as increase the customer base for the model. Airbus Group head of strategy, Kiran Rao, believes Asia-Pacific region is a likely market that’s looking at flying the used A380s since they will be able to fly lots of passengers in a low-cost set up.
According to a Business Insider report, “For these airlines, Airbus would pack the double-decker with 600-650 seats in a two-class setup, with an ideal flying distance of 6-8 hours. In more extreme situations, the company can even set the plane up to handle as many as 800 passengers.” Industry experts and analysts believe with time the low-cost Asian carriers will also promote themselves to newer A380s. A major strategic move for Airbus is to expand the customer base for the model and that seems to be possible with Asian players joining the A380 family.
