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Airbus Dropping Skymark A380 Order Drives Hunt for Takers

Airbus Group NV (AIR) scrapping an order for six A380 superjumbos from Skymark Airlines Inc. (9204) forces it to seek a new buyer at short notice for a customized and half-painted plane that’s been tough to sell even in mint condition.

Airbus took a last-minute step of canceling the order from the Japanese carrier for six superjumbos, with two of the planes already built and awaiting their final touches at factories in Hamburg and Toulouse, France, where the manufacturer is based. Airbus didn’t say how it would re-market the airliners, one of which is already emblazoned with Skymark’s signature yellow star on the tail.

“It’s going to be very hard to re-market,” said Nick Cunningham, managing partner at London-based equity research company Agency Partners. “Outfitting for a different customer could mean significantly new wiring.”

Airbus is already struggling to find any new or follow-up buyers for its largest and more expensive jet, with some key customers, including Deutsche Lufthansa AG, Air France-KLM (AF) Group and Qantas Airways Ltd. (QAN) instead scaling back their fleets. Airbus wants to break even with the program in 2015, a plan that requires delivering 30 units each year. It has won no business from a new airline customer in two years, relying instead on repeat purchases by Dubai-based Emirates, by far the biggest operator.

Photographer: Tomohiro Ohsumi/Bloomberg

Skymark President Shinichi Nishikubo attends a news conference in Tokyo, on Tuesday, July 29. Nishikubo said the two sides had been in talks since April, after the carrier told Airbus it needed to alter plans on introducing the plane because of a weaker yen and tougher competition. Close

Skymark President Shinichi Nishikubo attends a news conference in Tokyo, on Tuesday,... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

Skymark President Shinichi Nishikubo attends a news conference in Tokyo, on Tuesday, July 29. Nishikubo said the two sides had been in talks since April, after the carrier told Airbus it needed to alter plans on introducing the plane because of a weaker yen and tougher competition.

Incomplete Interior

The A380s ordered by Skymark come with Rolls-Royce Holdings Plc (RR/) Trent 900 engines, which have a broader customer base but are installed in fewer absolute numbers than the competing Engine Alliance model favored by Emirates, which has 140 jets on order. Any airline taking A380s typically requires four to serve a daily city pair, so two planes available at short notice may not prove an attractive proposition for any buyer.

Skymark President Shinichi Nishikubo said the two sides had been in talks since April, after the carrier told Airbus it needed to alter plans on introducing the plane because of a weaker yen and tougher competition. Skymark said last month the planes would be delayed by as much as six months, and Airbus has not completed the interior outfit or the external paint job.

The A380 drew a blank this month at the Farnborough Air Show, typically a forum for deals. Amedeo, a lessor that signed to buy 20 Airbus A380s in February, has yet to line up a single customer for any of those planes. Hong Kong Airlines Ltd., which has ordered 10 A380s, said in late 2012 it wanted to swap those orders for smaller A330s instead. Virgin Atlantic Airways Ltd. has put off the purchase of six units indefinitely.

Photographer: Balint Porneczi/Bloomberg

An employee works on a Rolls Royce Trent 900 aircraft engine as it sits beneath the wing of an Airbus A380 aircraft on the assembly line in the Airbus Group NV factory in Toulouse. Close

An employee works on a Rolls Royce Trent 900 aircraft engine as it sits beneath the... Read More

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Photographer: Balint Porneczi/Bloomberg

An employee works on a Rolls Royce Trent 900 aircraft engine as it sits beneath the wing of an Airbus A380 aircraft on the assembly line in the Airbus Group NV factory in Toulouse.

Already Painted

Airbus didn’t specify plans for re-marketing the Skymark aircraft or say if it would return any of the airline’s deposits. No other carrier in Japan has bought the aircraft, which typically fits about 525 people. Airbus is already struggling to find airline customers slated for early 2016 deliveries willing to take planes that will come off the production line in late 2015.

Japan is a key battleground for Airbus because the market is a traditional stronghold of Boeing. Airbus logged a success with its A350 wide-body jet when Japan Airlines Co. (9201) picked the aircraft instead of the competition, though Boeing still dominates in terms of the overall market share, an anomaly in an industry where the two rivals are otherwise neck and neck.

Skymark initially signed a firm contract for four A380s in 2011, and later came back for two more. The aircraft, the biggest and most expensive commercial airliner, has a list price of $414 million per unit, though customers get discounts and the jet would have been cheaper in 2011.

Airbus suffered its biggest-ever plane cancellation last month, when Emirates scrapped 70 A350s valued at $16 billion. Still, it will be easier for Airbus to fill open delivery slots for the A350 than for the bigger A380, given the A350 backlog is for more than 700 planes from a broader customer base.

“It’s not an aircraft that can be used regionally or domestically,” said Timothy Ross, a Singapore-based analyst at Credit Suisse AG. “It was a bull-market kind of conception and reality has hit home before it was too late.”

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net Benedikt Kammel, Christopher Jasper

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