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Aviation: What next for Emirates and the A380?

Another intriguing A380 story emerged over the weekend. Dubai-based Emirates already has more than 100 of the double-deck leviathans in service, not far short of half of the total operating around the globe. But deliveries from a part-fulfilled 34-aircraft order stalled earlier this year. At the core of the issue is a dispute over the fuel burn, durability and price of the Rolls-Royce Trent 900 engines that power the aircraft – ironically the carrier only switched to RR in 2015 after its first 90 A380s were equipped with rival Engine Alliance GP7000s. The UK-based engine manufacturer has admitted to battling durability issues with the high-pressure fan blades in the Trent 900 turbofan which has had three upgrades (known as PIPs, or Performance Improvement Program) since it entered service a decade ago. These have reduced fuel consumption by more than 1%. Extended-life blades are on the way and further improvements are set for 2020. But until all the issues are completely resolved the engines need extra inspections and are more likely to be sent to maintenance organisations for component replacement - which adds costs and creates inconvenience for users.

Emirates hasn’t decided which supplier will provide engines for the next 20 A380s on order, or 16 options, that were included in a deal with Airbus back in January. It is being suggested that the airline has declined deliveries (from 34 ordered previously) as leverage to obtain additional performance improvements. The Trent 900 has potential for another round of enhancements - albeit at a substantial cost to Rolls-Royce - but the manufacturer is already taking a major financial hit for upgrades to its current line-up and appears unwilling to invest enough to take development of the engine as far as some customers would like. Let’s face it, A380 engines won’t be sold to many airlines in the short- to mid-term future unless there is a dramatic change in the industry, so the return on investment from any further upgrades will be limited.

Issues resolved?

Things changed last week when one A380 was handed over to Emirates, and another is expected to be flown to Dubai during the coming week. So is the issue now resolved? Can we look forward to the airline completing the deal for its next 20 A380s – or even all 36?

As always it’s likely there’s a bit more to it. Airline execs can’t just say “we don’t want to take that aircraft”, as contracts cover the terms under which an aircraft is handed over and accepted. Airbus says that the delays are attributable to "contractual reasons". It is widely believed that the Trent 900 is still falling short of the performance promises made by the manufacturer, and this could be used to delay a delivery or negotiate a change in the financial terms of the deal.

The situation is further complicated by an order for 40 787-10 Dreamliners that Emirates placed with Boeing a year ago. Engine selection for the fleet involves the Rolls-Royce Trent 1000 pitched against the rival General Electric GEnx. Emirates has yet to make a choice. The Trent 900 and Trent 1000 have some commonality, and it would make sense logistically (and financially?) for the airline to hang engines from just one manufacturer on both fleets. But Rolls-Royce is still battling durability problems with the Trent 1000 too. The airline has also committed to take 150 new-generation Boeing 777X aircraft powered by GE engines, the first of which will arrive in 2020. These 350-425 seat airliners will replace some of the 145 Boeing 777-300/ERs already operated by the airline, but its final -300/ER was only delivered last week and the fleet has many years of life left in it yet. So although the 777X is a bit smaller, some of them could substitute for future A380 deliveries especially as the new Boeing offers the potential of lower fuel burn per seat than the Airbus. On the other hand the airline typically retires aircraft after 10-12 years of service, when the airframes are really only at mid-life. Some existing A380 leases could be extended to maintain capacity in the absence of new airframes or Emirates might revert to the GP7000 - which is still available - to power its next tranche of A380s.

The success of Emirates' business model hinges on channeling large numbers of passengers through Dubai and onward to other airports around the globe. The carrier’s hub is creaking at the seams due to a lack of space, and a move to the new mega-airport Dubai World Central seems to be getting no closer. Although Emirates needs the A380 almost as much as Airbus needs Emirates, the carrier is in a powerful negotiating position. It is the only airline interested in more A380s at the moment and its backlog is the only thing keeping the production line going. Airbus hopes to build A380s at the rate of six per year until at least 2029, but absent any further commitments being finalised the last one could roll out of the factory in 2024. The most reaslistic scenario is that Emirates will eventually agree to take the remaining A380s it has on order. If so the biggest concern for Airbus and the engine manufacturers might be the price it pays for them.

Text © The Aviation Oracle

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