Air France has just announced that it will return five of its ten double-deck Airbus A380s to their owners as leases expire over the next couple of years. The move might yet be a ploy designed to put the squeeze on the lessor in a less than buoyant market, but the carrier has also admitted it is only keeping the other five - which it owns - because it believes there is no use market for them. If the aircraft do leave the fleet it will be another blow for Airbus which is struggling to persuade Emirates to place another order while juggling with the possible launch of the A380plus or maybe even an A380neo. Retired aircraft could start stacking up in the desert unless more airlines like Portuguese HiFly, which has taken two airframes offloaded by Singapore Airlines, can be persuaded to take on the leviathan.
Airbus first started to study 500-800 seat very large commercial transport (VLCT) concepts as far back as 1990. It forecast that airlines would need 1,235 more aircraft in the category by 2020 and by the middle of the decade the European firm decided to go ahead with the project. But here we are just over a year short of the end date of the Airbus forecast, and only around 230 have been delivered with fewer than 100 still on order for the manufacturer to build. Many travellers agree that the A380 is the most comfortable very large aircraft to travel in, as its spacious cabin is a very pleasant environment and is also extremely quiet. The game isn't totally over yet and there is still a chance that there could be a revival in demand for the A380 but as the order drought continues that is looking less and less likely. So where did it all go wrong?
In the mid-1990s airports were filling up fast. Slots were at a premium. Demand was growing at a compound rate of 5% per annum, and almost everyone thought the answer was an aircraft with greater capacity. Airbus' hopes were pinned on the A380 'Super Jumbo' seating 400-500 passengers in a mixed configuration but accommodating as many as 800 in with an all-economy fit. Meanwhile Boeing eventually countered with a slightly smaller aircraft, an updated version of the original Jumbo Jet, which it designated the 747-8i.
Things started fairly well for the A380 with several blue-chip clients including Air France, Lufthansa and Singapore Airlines signing up for early examples. Emirates and Qantas followed suit, as did China Southern Airlines and Korean Air. Other Middle East operators eventually felt the need to match their rivals, with Etihad and Qatar Airways also placing orders. Malaysia Airlines, Thai Airways and British Airways also made commitments. Japan's All Nippon Airlines is the most recent customer for new-builds, although its order for three was in part related the convoluted arrangements resulting from the collapse and takeover of Skymark Airlines. Emirates accounts for 50% of the firm commitments to date and few other airlines have shown any interest in taking on the largest widebody available.
Then things changed. Firstly the A380 was bigger than anything that came before, and that limited the airports it could fly into. At the peak of the A380 frenzy in the 90s, it was widely expected that the facilities at most large hubs would upgraded to accommodate the double-deck giant. It didn't quite happen that way, and many airports decided to wait to see how many A380s were ordered before embarking on costly infrastructure upgrades. The tardiness limited the scope for A380 operations in the early days, and still does today to some extent.
Next came the very capable Boeing 777-300/ER. The twin-engined Boeing can move 375 passengers the same distance or further than a 450 seat A380. The Boeing costs slightly more to operate per seat, but critically the overall cost of flying it from A to B is lower. The A380 is an excellent money earner - if an airline can fill every flight with passengers willing to pay a reasonable amount for a ticket. But when the market is down, seats on A380s might go empty, or fares have to be reduced to below cost-price to generate revenue.
Savvy airlines soon realised that it was better to fly an aircraft with a lower overall trip cost and fewer seats - seats that they were more certain to fill - than to struggle to fill the back end of an A380 at junk fares. They reasoned that sometimes a 777 might not satisfy demand, but that would often be preferable to having to almost give away the last few seats on an A380. So a few potential customers passed up on A380s or limited their orders and acquired more 777s instead.
The final challenge came from smaller Boeing 787s and A350s. The former in particular was sometimes marketed as a hub-bypass (or point-to-point) aircraft. It was capable of flying long haul but had a more sellable capacity, enabling to to be deployed on routes that would be uneconomic if flown with larger aircraft. The 787 made possible daily flights between city pairs such as Heathrow and Austin, TX or San Jose, CA. Previously passengers would have had to travel via Dallas or Los Angeles, but all of a sudden they could fly non-stop. The new direct flights to smaller airports took pressure of slots at some of the larger hubs and constrained growth on hub-to-hub routes.
The ethos behind the A380 was that slots were rare and capacity between hubs would need to be increased to cope with demand. All of a sudden the there were more lines on the world's route maps, and A380's primary raison d'etre was weakened.
Any more for any more?
Very few airlines not already flying A380s are persuaded by the aircraft's economics. When things go well it is a very good aircraft that can earn is operators a great deal of money, but when the market turns down most carriers losses will be greater with A380s than they will be with smaller aircraft. And that is the crux of the matter. Boeing's MOM is going to open more opportunities for hub-busting, so a substantial paradigm shift will be needed before the A380 order book perks up again. Airbus may be able to continue with a NEO or higher capacity version of the A380 with even better economics, but whether it is prepared to take a punt in the absence of significant demand for airlines remains open to significant doubt.
Over the next two or three years, Emirates is likely to start returning its early A380s to lessors and they will join examples from Singapore Airlines and possibly Air France that are parked. It will create a glut in the used aircraft market. Two examples already retired by Singapore Airlines have found a market with an ACMI operator but the rest are to be stripped for spares. No one has lost out yet because the owners will more than get a return on their investment. But as more A380s are grounded the secondary market is likely to take a downward turn. Will any other airlines take a punt on new A380s? It seems rather unlikely at the moment.
Text © The Aviation Oracle