Emirates Provides an Answer to A380 Jumbo Jet's Future

Airbus ended 2017 with a backlog of 7,265 planes

Author's Avatar
Jan 20, 2018
Article's Main Image

The European aerospace behemoth Airbus (EADSY, Financial) said that it might have to bring the production of its A380 Superjumbo plane to a close down after having received no orders of the same for the past two years. Since A380’s entry, Airbus has delivered 222 of them. The company, as of now, has unfulfilled orders of 95 A380s.

Emirates signs A380 deal

At the Dubai Air Show held in November 2017, A380 jumbo jet faced a setback at the hands of Emirates when the latter entered into a contract with Boeing (BA, Financial) to buy 40 787 Dreamliners valued at just over $15 billion.

The airline operator Emirates, however, infused life in A380 when it agreed to buy 36 more planes from Airbus. The Dubai-based carrier confirmed that it would buy a minimum of 20 planes while reserving an option to buy 16 more. Also, this is the first big order that the double-deck, wide-body jet has won in more than 4 years. Emirate’s chief executive and chairman, Sheikh Ahmed Bin Saeed Al Maktoum, commented:

“We’ve made no secret of the fact that the A380 has been a success for Emirates. Our customers love it, and we’ve been able to deploy it on different missions across our network, giving us flexibility in terms of range and passenger mix.”

Snapshot of 2017

Last year, Airbus delivered a huge number of planes besides bagging new orders than what was expected. The company delivered more than 718 planes whereas it won 1,109 orders (after adjustments). All through 2017, the company had supplier issues which slowed down deliveries. However, the company met its delivery target for the whole year by delivering a record 127 planes in December. As a matter of fact, the European-based company ended the year with a backlog of 7,265 planes, which translates to more than 10 years of production.

Last word

Airbus’s A380 was developed to take on Boeing’s 747, also called Queen of the Skies. The officials of Airbus came up with an idea of developing A380 and launched the A380 program in 1994. After delays and modifications, A380 finally entered service in 2007 with first delivery to Singapore Airline. Airbus had incurred a developmental cost of $25 billion on A380.

The evolution and growth of smaller and alternative planes such as Boeing’s Dreamliner and Airbus’s A350 has hampered the growth of A380 in recent years. As a matter of fact, A380 has to operate at full capacity so as to make profit. Cost per seat remains high and fuel consumption is enormous. The company had previously cut the annual production rate to 8. As of now, the company looks to maintain a production rate of 6 a year for the production process to be sustainable.

Disclosure: I do not hold any position in the stocks mentioned in this article.