Photographer: Jasper Juinen/Bloomberg

Airbus Sales Supremo Needs Dubai Magic to End A380 Order Drought

  • Program-reviving order from Emirates still a distant dream
  • Jet's air-show prospects hinge on deal with smaller carriers

Two years ago Airbus Group SE’s sales chief John Leahy conjured up a contract for 50 A380 jetliners at the Dubai Air Show from local carrier Emirates, swelling the order backlog for its flagship jet and stealing the headlines from Boeing Co.’s new 777X.

The chances of the European manufacturer making a similar splash with the double-decker at the biennial expo this year rate somewhere between unlikely and zero amid an order drought for a $428 million aircraft it once suggested was set to dominate long-haul travel for decades to come.

John Leahy
John Leahy
Photographer: Simon Dawson/Bloomberg

With the A380’s production backlog shrinking by the month and a program-reviving top-up deal with Emirates, the jet’s biggest operator, necessitating a costly revamp, Airbus’s best chance of ending the hiatus in Dubai lies in a sale to a minor industry player such as Royal Air Maroc or Saudi Arabian Airlines.

“If they get orders it won’t be many, maybe two or three here and there,” said Yan Derocles, an analyst at Oddo Securities in Paris. “It isn’t going to change anything. They really need to offer an improved version of the plane.”

Order Pledge

Adding to Airbus’s embarrassment, Leahy announced at the Paris Air Show in June that he aimed to bring in 25 A380 orders by year’s end, roughly matching the model’s annual delivery rate to maintain future production levels. With less than two months of 2015 remaining, the tally to date is precisely nil.

Even leading carriers have viewed the A380 as a niche product rather than a workhorse, preferring more efficient twin-engine wide-bodies such as its A350 and Boeing Co.’s planned 777X. Airbus wants to stick with the model because crowded airports might one day swing the market in favor the bigger jet.

Yet rather than adding operators, the superjumbo has been losing them, with four planes ordered by Russia’s Transaero Airlines in 2012 -- the last contract with a new airline customer -- unlikely ever to be delivered as the carrier prepares to cease flying amid a travel slump blamed on a weak ruble.

Airbus also saw a six-jet contact with Japan’s Skymark Airlines Inc. vanish in 2014 before the Japanese carrier filed for bankruptcy, while leasing firm Amedeo, the only new A380 buyer in the past three years, has failed to find a single operator and swapped its earliest delivery positions with Emirates.

Malaysian Airlines is also seeking to offload two of six superjumbos as Chief Executive Officer Christoph Mueller seeks smaller jets amid a decline in traffic. No new operator has yet been found, Mueller said Wednesday in London.

Strategy Rethink

Air Austral, which serves the island of Reunion, has changed strategy and shows no sign of taking two A380s in an 840-seat layout, and an order for 10 from Hong Kong Airlines has disappeared from Airbus’s backlog.

The A380 is struggling even among established players. Air France wants to swap two for something smaller. Virgin Atlantic Airways Ltd. has put back the handover of six planes for years and with a stake held by superjumbo customer Singapore Airlines Ltd. sold to Delta Air Lines Inc., which like U.S. peers has shunned the jet, delivery prospects look bleak.

New Customer

Amedeo founder Mark Lapidus predicted in an interview Wednesday that a new A380 client will sign this year, adding that the lessor itself is also “closer” to finding operators. It could still need to swap more delivery slots if users aren’t found soon.

The biggest concern for Airbus may be its A380 production line in Toulouse. The company has contracts for 317 planes, 146 of them yet to be be built. Exclude doubtful orders and the backlog is nearer 100, or 90 minus remaining 2015 deliveries. That corresponds to just three years of production at an annual rate of 30 jets, though Airbus says efficiencies may move break-even closer to 20.

The situation is exacerbated by the fact that it may take four years to develop the turbines and structural tweaks needed to revive the program with a re-engined Neo variant, so that Airbus’s window for maneuver is fast closing.

While Airbus could conceivably double the A380 backlog with an order from Emirates were it to commit to a fully upgraded A380, doing so could come at a cost that might never be recovered should the plane fail to find further buyers.

Emirates is in a class of its own as an A380 customer with 140 orders, or 45 percent of the total, and President Tim Clark says he could buy 200 more with sufficient performance gains as he develops Dubai into a global super-hub.

Airbus has promised to improve the A380, without committing to wholly new engines, while Rolls-Royce Holdings Plc, which will supply turbines for the last 50 Emirates planes, says enhancements must be determined by order potential.

Yet even those carriers following the Emirates model are opting for smaller jets, with Qatar Airways Ltd. and Abu Dhabi’s Etihad Airways PJSC buying just 20 A380s between them. Turkish Airlines has yet to order any.

“Airbus needs to make some sort of decision on the A380 this year,” said Zafar Kahn, an analyst at Societe Generale in London. “Just look at the backlog.”

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