The Airbus A380 : RIP

An Emirates A380 flies off into the sunset. Literally, and now figuratively too.

Airbus surprised no-one, but saddened many, with its announcement on Thursday this week that it was ending the A380 program.  It would build 17 more planes (14 for Emirates and 3 for ANA) and then cease production some time in 2021.  In total, it is probable they will end up producing 251 planes, a sad contrast to their projected total sales that were in the order of hoping for variously somewhere between 700 and 1200 planes to be sold.

What happened?  What went wrong?  And with the previous early demise of their A340 program, and the 747 now almost entirely defunct too, does this mark the end of the large four-engined airplane era?

The Airplane Edsel?

In largest part, the problem with the A380 is that during its design and development process, the marketplace changed, and the problem it was being developed to solve variously changed or went away.

This was essentially the problem with the Edsel – it was a great car, but it took so long to get to market that it was out of date before even reaching the car dealer showrooms.

Amusingly, while for many years Airbus has steadfastly described the A380 as an airplane “ahead of its time” and has claimed to be waiting for the market to catch up with the capabilities for the A380, in reality, perhaps the opposite might have been the case.  It is possible the A380 might have been very much more successful if it was released ten (or, better still, twenty) years previously.

The origins of the A380 go back a very long way, to the early 1990s or even before, but the plane itself didn’t first enter service until 2007.  The marketplace needs and issues had changed enormously in the almost 20 years of its development.

The Main Reasons Supporting the Development of the A380

Unofficially, it has been speculated that Airbus simply wanted to come up with a plane as big as or bigger than the 747.  This was both so they could match Boeing with a complete product range, and also a bit of envy – they wanted boasting rights to having the largest plane in the sky.

It is certainly true that Boeing had an advantage – both the obvious one that there was no competitor to the 747, and also two more subtle ones.

If you bought their 747 it was slightly more likely you’d be predisposed to buy their other planes too.  But this was a weak advantage rather than a deal-breaking benefit that was making it impossible for Airbus to compete in narrow body and medium-sized planes, but weak, even irrational reasons, when aligned with corporate pride and a vague theme of “Europe vs the US” can sometimes become powerfully compelling in board rooms.

The more subtle advantage was that with a monopoly on large airplanes, Boeing was able to price its 747 much higher than it would in a competitive environment.  In the earlier days of the 747, when it was twice the size of any other plane, and when “big planes ruled the skies” Boeing was able to earn substantial extra revenue from its 747 sales in its monopoly position.  This not only appealed to Airbus as a commercial opportunity, but some sources suggest that due to the extra cash being generated by the 747, Boeing was able to subsidize some of the smaller planes that were directly competing with Airbus.  So reducing the “super profits” from the 747 program was a separate, largely unstated, but still valid objective for the A380 program.

The two more official reasons related to developing a plane with lower operating costs per passenger, and a plane that could carry more people to solve congestion problems.

The advantage of a lower cost per mile per passenger needs no explanation.

The benefit of a plane that could carry more people was more apparent in the 1990s, at a time when most airlines operated a hub and spoke system, and the key hubs around the world were all either at or projected to soon reach maximum capacity in terms of airplane take-offs and landings.  The benefit of being able to have more passengers per airplane movement, when there was a limit on total airplane movements, was obvious.

Astonishingly, in 1993, Airbus and Boeing jointly worked together on developing a new very large airplane.  This unlikely cooperation ended two years later, with Boeing saying it no longer saw a market for a new plane substantially larger than its current 747, and eventually ended up with one more stretch of the 747, making it the 747-8.  The previous four models went in sequence from 747-100 through to 747-400 – the new number marked Boeing’s infatuation with the Chinese market and its belief that including the number “8” in an airplane model would help to sell it due to it being a lucky number in Chinese.

Airbus, which had simultaneously been doing its own research, decided to go it alone and in 1995 formed a “Large Aircraft Division” that would oversee the design/development of this new plane.

The plane was finally ready for sale and officially launched in late 2000, with 50 launch orders announced from six airlines.  This was a great start, and Airbus was full of bold statements about the wonderful future of the plane.

The first test model flew in 2005, and after some unfortunate delays, the first plane to operate a commercial flight occurred on 25 October, 2007, when Singapore Airlines flew an A380 from Singapore to Sydney.

Emirates started operating A380s in August 2008, and Qantas was the third airline to start A380 flights, in October 2008.

But The Market Changes

The A380 definitely succeeded at having a larger passenger capacity than the 747.  Depending on cabin configuration, a 747-400 or 747-8 would generally carry about 410 – 415 passengers, whereas an A380 would carry 500 – 550, and could, in a maximum density configuration, carry up to 853 passengers.

The A380 also succeeded at having a lower per passenger cost.  Singapore Airlines reported that the A380 was using 20% less fuel per passenger seat/mile than its 747-400s.

So both these successes were excellent, and in general, it is fair to say that the A380 met or exceeded the hopes and promises of Airbus and its airline customers.

But.

These measures ceased to be the relevant measures by which airplanes were evaluated.

At the same time that Airbus was starting to develop its A380, Boeing was completing its 777, which entered commercial service in 1995.  This was a large capacity (about 300 – 400 passenger) twin-engined plane.  It was also a lot more than that.  The plane was also immediately granted, as soon as it started flying, a 180 minute ETOPS rating (something never done previously), which made many of the longer international routes feasible.  Prior to then, longer international routes pretty much demanded a three or four engine plane.

This – and the subsequent extensions of its ETOPS rating, eventually reaching a massive 330 minute rating, reduced one of the essential benefits of a three or four engined plane – the ability to fly long routes far away from emergency landing airports, such as are often the case over the Pacific in particular.

The new engine technology for the 777 (and, in time, for the other wide-body twin airplanes, the 787, A330 and A350) also provided more efficient engines capable of generating more thrust and power per gallon of jetfuel consumed.

This reduced the savings offered by the A380 (and also the 747), and over the years, got to the point where the smaller twin-engined planes had become less expensive to operate than the large four-engined planes.

That’s not all.  The other reason for the A380 – airport (and, lesserly, airway) congestion was surprising ameliorated by a trend away from hub to hub routes and to point to point routes.

Instead of, for example, flying from your home airport to LAX or ORD or JFK and then from there to perhaps LHR or FRA, and then from there to your final destination in Europe, increasingly it was possible to fly perhaps to one hub, and then direct from that hub to your destination, and sometimes even direct from your airport to your ultimate destination, bypassing both hubs.  The benefits to passengers were enormous – shorter total flight time, less hassle, and less chance of lost bags or missed connecting flights.  There were major benefits to the airlines too, who also had less complex interlocking operational requirements when operating point to point than hub to hub, and cheaper flights without as many take-offs, landings, and airport fees.

Airbus got one thing right.  Air travel has steadily increased over the years.  But they misunderstood the implications of this.  Rather than creating still more traffic on the concentrated hub to hub routes for which the A380 was designed, it made secondary routes grow to a size where they could now viably operate direct services rather than need to go through hubs.  This, in a single sentence, was perhaps the biggest factor that doomed the A380.

As an interesting aside, secondary cities are growing in size almost twice as fast as megacities, so in addition to general growth in travel, the population of the secondary cities is growing much faster too, making them still more appealing and viable for direct point to point routes.

And whereas airlines could fill an A380 on their main hub-hub routes, they couldn’t easily fill an A380 on a route direct from one secondary airport to another secondary airport.  This was where the smaller 777 (and even smaller 787) planes came into their own.  An A380 might need 350 passengers to profitably fly a route, but the smaller plane could fly profitably with half that many passengers.

So what was the resulting purpose or justification for the A380?  This was a question asked by the airlines, and for which there seemed to be no clear answer.  This question (and its answer) continued to become more surprising.

Two Become Cheaper than One

The economics of operating the smaller twin-engined planes continued to improve, while the A380 remained almost frozen in time.  Not only were both Airbus and Boeing steadily releasing new version of their smaller twin-aisled planed, but so too were the engine manufacturers refining and improving the engines the airplanes used.

The operating costs and economics of the twin-engined planes were steadily improving.  But neither the A380 airframe nor the engines which powered it changed appreciably from its original specification in the late 1990s through to the present day, 20 years later.

This was very disappointing, because, ironically, the A380 had been designed with the concept of future larger models in mind and pre-designed into its wings and general structure.  An extension would probably have required no or very little change to the wing.  But sadly, the A380’s size was quickly becoming “too big” as it was, and (apart from Emirates) there was no pressure to make the plane still bigger.

The engine manufacturers, while seeing markets for many thousands of engines if they invested billions into R&D and came out with newer better engines for twin jet planes, saw almost no market for new A380 engines, and so did not invest in upgrades to the engines they had designed.

At some time, it got to the extreme point where for all intents and purposes, it cost no more money to operate two smaller twin-jet planes on a route than to operate a single A380.  Obviously, operating two flights at slightly different times of day was much preferred by potential passengers (or four flights instead of two, and so on), and more operationally flexible for the airline.

At this point, the unanswerable question becomes “Why buy one A380 when we can buy two smaller planes for only a little more money upfront and then operate them more flexibly, and for less than the cost of operating a single A380”?

The Future Closes In on Airbus and the A380

To start with, there was an exciting and affirming rush of early sales of the A380.

But then sales slowed.  This was explained as being because other airlines were taking a “wait and see” approach before ordering.  They wanted to see how successful the A380 proved itself to be in commercial operation.  Were the operating costs and economies as good as promised?  Was it a reliable plane?  Did the public like it?

All these questions ended up with positive answers, but still the rate of new orders remained terribly slow.  Emirates clearly loved the plane (as did everyone who flew in it), but other than Emirates, few other carriers bought any planes (in total, 12 other airlines).  Even worse, some of the airlines that had excitedly boasted about their orders for A380s started quietly deferring and then cancelling them (yes, we’re thinking of you, launch-partner Virgin Atlantic in particular), and most of the airlines which had taken delivery of small quantities of A380s failed to then turn around and order more.

Consider, for example, British Airways.  They had at one time as many as 57 747s all in service simultaneously, but ordered a mere 12 A380s and never ordered more.  Similar numbers apply to Air France.  Or Lufthansa – they first ordered 15 A380s, then increased their order to 17, but then reduced it down to 14, and also have not added any more.  They also ordered and have received 19 747-8 planes and were a major operator of earlier 747 models, too.

Airlines are very much sensitive to what other airlines are doing, and there was no consensus across the industry to support the A380, and the airlines that did buy them bought very few and failed to buy many more, with the single notable exception of Emirates, an airline which the traditional major airlines can easily dismiss and ignore as being “not like us”.

In a chicken and egg situation, airports were not overwhelmingly eager to commit to the costs of modifications and extensions to handle the A380, either.  About 60 airports currently have scheduled A380 service, and another 80 could potentially handle A380 service, but don’t have any.

The Market Impasse

Airbus and its potential A380 customers came to find themselves in a terrible impasse.  Airbus (and the engine manufacturers) were unwilling to spend more money on the A380 program unless they could see a clear commercial opportunity for a good return on the extra funds that would need to be invested.

But the potential customers were unwilling to commit to buying planes that did not offer an acceptable business/financial case any longer, and pressed for investment in a more efficient plane with better operating economics.

Several times, Emirates has acted to keep the A380 program alive by announcing orders for still more A380s, while simultaneously pressing (unsuccessfully) both Airbus and Rolls-Royce to improve the plane and its engines.

After the last such order, Emirates made it very clear that the engines were failing to meet their expectations and needed to be improved.  Rolls-Royce refused, and so Airbus eventually cancelled the order, leaving only the remains of its other orders.  At almost the same time, Qantas cancelled its order for eight more A380s, saying the plane no longer had a part in its future plans.  There was also one other remaining order – three planes to ANA.  Probably ANA never much wanted these in the first place but was obliged to purchase them as part of taking over a failed airline which owed money to Airbus.

Airbus found itself with very few unfulfilled orders, and no likely prospects about to buy more.  Its choice was obvious and unavoidable.

Resale Values a Problem Too

Buying a plane is similar to buying a car.  One of the things a careful buyer considers is what the resale value will be.  The higher the resale value, the lower the overall total cost of ownership becomes.  If financing were available, wouldn’t you prefer to buy a $100,000 car and then sell it in five years for $90,000, rather than buy a $50,000 car and sell it in five years for $15,000.

Sadly, the A380 has not only struggled to find airlines to buy the plane brand new, but it has almost completely failed to find airlines to buy the plane, at any price, second-hand.  Airlines are starting to retire their first A380s, and no-one is buying these used planes.

One A380 was purchased by a European airplane leasing company, but they’ve not bought any more, and other A380s are either being parked in the hope of finding buyers, or are being sold for scrap, being parted out.

There had been a hope that some of the second level and low cost/low fare airlines would eagerly respond to the possibility of bargain prices on used A380s.  A ten-year-old A380 is less than half-way through its likely economic life, and so in theory should be an attractive proposition if the price is right.  But this hope has failed to materialize, and has further discouraged airlines from buying new A380s, because they don’t see a realistic market for reselling them when they have finished with them.

Could the A380 Program Restart in the Future

Sadly, the answer to this is almost certainly “no”.  Building an airplane is an extremely complicated process (in the case of the A380, there are over two million parts, all of which have to be certified and tracked), and there is a long lead time to “tool up” a production line and get sub-assemblies from suppliers as needed.

The A380 production line (which is in multiple parts around Europe) takes up a lot of space which will disappear (ie be repurposed for other plane manufacturing).  It has specialized tooling, and thousands of specialised trained staff to assemble the planes.  Recreating all of this is possible, but very expensive and would take a year or more (probably more) to get in place.  It would only make sense for a sizable airplane order.

Meanwhile, with each passing day/week/month/year, the “frozen in place” technology of the A380 and its engines slips further into the past and becomes less and less economical and relevant.

Might a sudden order in the next month or two be accepted, allowing the program to extend before it closes down?  Possibly, but even now, barely days after the announcement, you can be sure Airbus is starting to plan for its future without the A380 program; moving staff, equipment, reallocating space and resources.  Its suppliers are doing the same thing.

Could Airbus take its present A380 design and tweak/improve it, and relaunch it as a “super” A380 with improved performance and economics?  Well, yes, it probably could, but the cost of this would probably be some billions of dollars (at least $5 billion, probably $10 billion) and a five year lead time, so it is a non-trivial consideration, and unlikely to be done unless Airbus was staring at the certainly of a decent number of orders.  The A380’s problem is not just an economic one, the general “prevailing wisdom” is that it is just too big.  We also have a feeling that the concept of “once bitten, twice shy” would definitely apply.

Instead, to give another somewhat large airplane for its customers, Airbus may be considering an extension to the A350-1000, currently the next biggest plane it makes, and which can hold about 366 passengers in a typical three-class configuration.  It is thought there might be some interest in a 400 passenger version, which is also about the same as the current largest size 777 models.

There have been some suggestions that the concept of “two engines are cheaper/better than four” is no longer as valid as it once was.  The thing is a plane has to be able to take off with one engine failed.  That means on a twin-engine plane, each engine needs to be able to produce twice the power it normally would, whereas on a four engine plane, each engine only needs to product an extra 33% of power.

This is even more extreme than it might seem.  Say you have a plane that needs in total 100 units of power from its engines.  With a twin-engine plane, each engine would have to provide 100 units of power (ie half the 100 units, then doubled in case of engine failure).  With a four engine plane, each engine only needs to produce 33 units of power (ie one-quarter of 100 then with one-third added to that).  The four engine plane can have engines three times smaller than the twin-engine plane.

It is possible that a rethink might see a return of three or four engined planes, but at present, that trend has not started, and possibly never might.

Another fear now is how long will Airbus support the A380s it has sold.  There’s clearly much less commercial value in supporting a small population of 250 planes than there would be for a larger number of planes. Emirates says it plans to continue operating the plane “well into the 2030s” and Airbus says it will continue to fully support the plane and its operators for “many years to come”.  Those are vague promises.

Summary

The magnificent majesty of the A380 and its passenger comfort needs to be experienced to be believed.  Inside it is enormous (over 5,000 sq ft spread over two levels).  In the air it is remarkably quiet and incredibly smooth – its size and weight cause it to go through turbulence with almost no buffeting, unlike planes that are much lighter and which are more tossed about by turbulence.  In an industry marked by so many indistinguishable “me too” airplane designs, no-one can confuse an A380 for any other type of plane.

So passengers love flying on A380s.  But they’ve not shown any willingness to pay extra for an A380 compared to any other plane, and the new modern 787 and A350, with their claims of higher humidity and greater cabin pressure are providing other new passenger comforts.

With the economics moving steadily to more modern twin-engined planes (777 and 787 from Boeing, A350 and A330 from Airbus), the business case for the A380, which had already weakened by the time the plane entered service in 2007, got worse and worse until reaching the point where no airlines could justify buying the plane, and, reading between the lines, many of the current A380 operators will be very pleased when they can finally retire their planes.

In total, probably 251 A380 planes will have been produced when production finishes in 2021.  Almost exactly half (123) will have gone to Emirates, and the balance to 12 other airlines.  The probable lifetime sales target was somewhere between 700 and 1200 planes.

Astonishingly, it seems likely that the 747 will still be in production.   The 747 first flew 37 years before the A380 (in 1970), and while almost all recent sales have been for freighter versions, it will probably still be a current model plane in 2021, giving it a model life in excess of 51 years, compared to the short 14 years for the A380.

If you’d like to read more, here’s a good article about the A380 program, and a good article about the outcomes of the cancellation.

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