PARIS: Airbus is drawing up contingency plans to phase out
production of the world’s largest jetliner, the A380 superjumbo, if it
fails to win a key order from Dubai’s Emirates, three people familiar
with the matter said.
The moment of truth for the
slow-selling airliner looms after just 10 years in service and leaves
one of Europe’s most visible international symbols hanging by a thread,
despite a major airline investment in new cabins unveiled this month.
“If
there is no Emirates deal, Airbus will start the process of ending A380
production,” a person briefed on the plans said. A supplier added such a
move was logical due to weak demand.
Airbus and Emirates declined to comment. Airbus also declined to say how many people work on the project.
Any shutdown is expected to be gradual, allowing Airbus to produce orders it has in hand, mainly from Emirates.
It has enough orders to last until early next decade at current production rates, according to an analysis.
The A380 was developed at a cost of 11 billion euros to carry some 500 people and challenge the reign of Boeing 747.
But
demand for these four-engine goliaths has fallen as airlines choose
smaller twin-engine models, which are easier to fill and cheaper to
maintain.
Emirates, however, has been a strong believer
in the A380 and is easily the largest customer with total orders of 142
aircraft, of which it has taken just over 100.
Talks
between Airbus and Emirates over a fresh order for 36 superjumbos worth
$16 billion broke down at the Dubai Airshow last month. Negotiations are
said to have resumed, but there are no visible signs that a deal is
imminent.
Although airlines such as British Airways have
expressed interest in the A380, Airbus is reluctant to keep factories
open without the certainty that a bulk Emirates order would provide.
Emirates, for its part, wants a guarantee that Airbus will keep production going for a decade to protect its investment.
A
decision to cancel would mark a rupture between Airbus and one of its
largest customers and tie Emirates future growth to recent Boeing
orders. European sources say that reflects growing American influence in
the Gulf under President Donald Trump, but US and UAE industry sources
deny politics are involved.
There are also potential hurdles to a deal over engine choices and after-sales support.
Safety net
Yet
if talks succeed, European sources say there is a glimmer of hope for
the double-deck jet, which Airbus says will become more popular with
airlines due to congestion.
Singapore Airlines, which
first introduced the A380 to passengers in 2007, showcased an $850
million cabin re-design this month and expressed confidence in the
model’s future.
Airbus hopes to use an Emirates order to
stabilise output and establish a safety net from which to attract A380
sales to other carriers, but has ruled out trying to do this the other
way round, industry sources said.
At the end of last month, Airbus had won orders for 317 A380s and delivered 221, leaving 96 unfilled orders.
But
based on airlines’ intentions or finances, 47 of those are unlikely to
be delivered, according to industry sources, which halves the number of
jets in play.
Airbus needs to sell at least another 30 to
keep lines open for 10 years, and possibly more, to justify the price
concessions likely to be demanded by any new buyers.
To
bridge the gap, Airbus plans to cut output to six a year beyond 2019,
from 12 next year and eight in 2019, even if it means producing at a
loss.
Chief Operating Officer Fabrice Bregier confirmed this month Airbus was looking at cutting output to six or seven a year.
If
Airbus does decide to wind down production, some believe Emirates will
ask Airbus to deliver the remaining 41 it has on order and then keep
most A380s in service as long as possible.
Even so, some A380s are likely to be heading for scrap.
