Persian Gulf carrier Emirates’ love for Airbus’s (EADSY, Financial) A380 “super jumbo” seems to be increasing every month. Any person following the industry knows particularly how fond the airline is of the jet model, and the company keeps expressing its interest to buy more A380s every now and then. Recently the carrier announced its interest to buy as many as 200 units of the model, valued at $85.6 billion at list price. Let’s check out the significance of this announcement and the dynamics between Emirates and Airbus.
Emirates constantly pushing Airbus for A380neo
Emirates maintains a very simple but highly effective fleet strategy that focuses primarily on A380 and then on Boeing (BA, Financial) 777. The carrier relies on Airbus’s jet for its long-haul flights. Over the years the airline has placed several orders and in recent times has expressed interest for future orders. In September last year, Emirates expressed desire to order 60-70 A380 valued at $28.98 billion, provided the jet maker comes up with new engines. Later in January this year the order count went up to 100 jets values at $42.8 billion. The airline has constantly been pushing Airbus for the A380neo.
What gives Emirates this power over Airbus?
According to Airbus’s orders and deliveries data, till date A380 has received orders for 317 units, of which Emirates placed orders for 48.6% or 154 units. Of the total order, Airbus has delivered 154 units all of which are operational. Emirates took deliveries for 58 jets, i.e. 37.7% of all deliveries and 41.4% of its total orders. The Gulf carrier is the largest customer for A380 aircraft and accounts for a substantial chunk of the jet’s demand. And now with orders for another 200 jets in sight, the carrier’s requirements become even more important while deciding how the make the aircraft.
Emirates operates in the Persian Gulf, where the weather conditions are much different and planes require more power to get airborne, automatically consuming higher quantity of fuel. Thus, it becomes important for Emirates to invest in planes that are fuel efficient. A380’s old engines are not delivering fuel efficiency that the carrier requires. That’s why Emirates is pushing Airbus to add new engines that can reduce the fuel burn significantly. After all, fuel accounts for a third of the operating expenses of an airline.
What makes the deal tempting?
The European aero major launched A380 as a response to Boeing’s 747 jumbo jet. It entered service more than three decades after the “Queen of the Skies” started flying, and because of this it lost out on a lot of customers. Despite this the jet’s popularity and customer acceptance has been huge. But with the advent of new age fuel-efficient jets, demand for the jumbo jets are fading and plane makers are finding it difficult to attract buyers and keep the production lines running. In such a situation the order for 200 additional A380s is surely tempting.
The figures from the previous paragraphs makes it pretty clear how important a client Emirates is to Airbus. So, there’s no doubt about the fact that new engines are required. What remains to be seen is how soon Airbus acts on this demand and announces the re-engineered A380neo. It’s truly and offer than Airbus can’t and shouldn’t refuse.
