Emirates Holds Out for Airbus Assurances on A380’s Future

  • Dubai-based airline seeks undertakings on superjumbo’s future
  • Clark worried about plunge in jet values if program is canned

Emirates Sees 'Marked Improvement' in Performance

Emirates, the world’s biggest long-haul airline, is holding out for assurances about the future of Airbus SE’s A380 program before committing to an $8 billion order for more of the double-decker aircraft.

While Airbus is pushing for a deal at November’s air show in Dubai, where the carrier is based, concern that the value of used A380s will plummet if the slow-selling model is canceled represents a major sticking point, together with the proposed price, Tim Clark, the airline’s president, said in an interview Thursday.

“I know they would like us to do something,” Clark said in London. “At the moment we are not at that state of readiness. We need copper-bottomed undertakings that they would do everything they needed to do to keep the program going. We don’t want to be left with aircraft that have no value.”

Airbus announced in July that it will slash A380 production to eight jets a year in 2019, down from 15 this year and 28 in 2016, casting doubt over the model’s future. That plan won’t change even if the Toulouse, France-based aircraft manufacturer gets another purchase contract before the end of this year, unless the number of planes bought is unexpectedly high, Chief Executive Officer Tom Enders said at the time.

Emirates is already the No. 1 superjumbo buyer, with 97 A380s in operation out of firm orders and commitments for more than 140 planes. The model has a list price of $436.9 million, though key customers can get big discounts.

Airbus offered an enhanced version of the A380 in June featuring fuel-saving winglets, which combined with an already-announced layout revision accommodating 80 more people would shave 13 percent from costs per seat. Emirates is exploring the upgrade with a view to buying 20 more planes, though Clark -- who originally campaigned for a more significant upgrade featuring new engines -- has said he doesn’t need the extra capacity.

U.S. Revival

Emirates also needs to consider how to deal with its oldest 25 A380s, which are due to be replaced by the last 25 planes of its existing order. It’s possible that the original airliners, some of which the carrier owns, may be retained to augment capacity, Clark said.

Airbus was already planning to slow A380 production to one aircraft a month as of May 2018. The reductions outlined in July mean that it is no longer breaking even on a per-plane basis. Shares of the company, which long ago gave up on recouping the program’s 25 billion euros ($30 billion) in development costs, closed 1.5 percent lower in Paris.

Clark, who spoke at the 2017 Aviation Festival, said that Emirates plans to reverse reductions in U.S. capacity over the next six to nine months.

The airline cut flights earlier this year following a slump in demand linked to curbs that U.S. President Donald Trump’s administration imposed in response to concerns about terror threats and security standards at Middle Eastern airports. Traffic has now recovered almost to previous levels, Clark said.

“It has been a good story, a lot better than we thought it would be,” he said. “It has settled out now. People are getting used to the new protocols.”

Emirates aims to restore twice-daily flights to Boston, Los Angeles and Seattle and a daily service to Fort Lauderdale, Florida, Clark said. The carrier has scaled back capacity through the early retirement of more than 60 aircraft, the executive said, with others used to increase offerings to destinations including the African cities of Lagos, Abuja and Luanda.

While U.S. carriers seeking to block Emirates’s expansion amid claims it has benefited from illegal state aid may have hoped that Trump would reignite an investigation of its funding, that appears not to be the case, the executive said.

“So far so good,” he said. “I believe the administration is not minded to take action against us for reason of all the other things that are going on in the White House at the moment.” He repeated denials that Emirates has received unfair subsidies.

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