Doric Lease Corp. said it plans to sign an order for 20 A380 superjumbos by the end of the year and is confident of finding operators for an aircraft that has failed to attract a single buyer this year.
The leasing company plans to firm up its first A380 client in early 2014 after closing the contract with manufacturer Airbus SAS, Doric Chief Executive Officer Marc Lapidus said in an interview in Toulouse, France, where Airbus is based. He declined to give names of prospective customers. Lifting seat count to 630 on the A380 will help woo operators, Lapidus said.
Lapidus, who unveiled his plan for the A380s at the Paris Air Show in June, is betting on the double-decker jet’s appeal with airlines that only want a small number of the aircraft to serve global routes while avoiding large upfront financial commitments to Airbus. Doric would only need to sign up three or four carriers to make its A380 order work, Lapidus said.
“As the global economy enters a different state, where we’re not in the great financial recession any longer, the mindset is changing, and we’ll see airlines wanting to put the biggest planes on trunk routes,” Lapidus, 51, said in the interview. “We’re on the crest of the wave where airlines are starting to look for growth in their business models.”
The order from closely held Doric is a litmus test for the A380, which has been a tough sell for Airbus, with no firm orders this year. Boeing Co. has also struggled with its 747-8 jumbo and has reduced output for a second time to adapt to slack demand. Lapidus’s plan to take 20 A380s would be the largest single contract since Emirates signed for 32 more in 2010, for a total of 90.
While Emirates, the largest operator of the A380, has said it’s considering a further follow-up purchase, other customers are retreating. Qantas Airways Ltd. has deferred orders, as has Virgin Atlantic Airways Ltd. Deutsche Lufthansa AG has dropped purchase plans this year for three A380s, and Air France KLM-Group said on Oct. 31 that it’s exploring whether to swap its last two units still pending for something smaller.
Airbus has targeted production at 30 aircraft a year. With about 150 A380s still on order, that suggests five years of work. The company plans to deliver A380s profitably from 2015, a year for which it still has some open manufacturing slots.
Lapidus, a native of Russia who emigrated to the West with his family when he was 17, works with a team of about a dozen other people at London-based Doric, criss-crossing the globe to speak with airline customers and investors about his plan. He’s seeking interest particularly from private equity to invest in the equity portion of the aircraft financings, and said he spends even more time courting investors than he does airlines.
The executive said he doesn’t rule out Malaysian Airline Systems BhD., which already has six of its own A380s and has said it could use more, as a possible customer, or Cathay Pacific Airways Ltd., which so far operates none of the planes.
Turkish Airlines CEO Temel Kotil said yesterday he’ll stick with his fleet of Boeing 777 wide-bodies for now rather than opting for the A380.
“The aircraft very quickly becomes expensive versus new-generation twin-aisle jets,” Celine Fornaro, an analyst at Bank of America Merrill Lynch said in a report on Nov. 4. Airbus’s claim that the A380 boasts the lowest fuel burn per seat of any aircraft doesn’t provide an advantage if airlines can’t fill the plane, she said.
Operators typically require two to three A380s to serve a given city pair, with the number depending on the distance of the flight and how fast an airline can turn around the plane. Lufthansa, for example, is able to serve Frankfurt to Tokyo with just two A380s. Lapidus said airlines leasing A380s for just one or two key routes mean Doric only needs a handful of customers for the 20 planes he’s ordering.
One keystone of Lapidus’s plan is to outfit the A380s with more seats. His will have 11-abreast in economy compared with 10 in the current version. Lapidus also expects to maintain comfort levels by raising the floor under the seats on the main deck to boost available width, he said.
While Airbus markets the double-decker as easily accommodating 525 people in a standard three classes, operators have generally preferred less-dense configurations. The majority seat fewer than 500, outfitting the plane as a luxury flagship. Korean Air Lines Co. carries only 407 people in its A380s.
“When we put the proper seat count on the plane, the economics are unbeatable and will remain unbeatable,” Lapidus said.