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Aviation: A380s scrapped

Work to break up two Airbus A380 'superjumbos' for parts, just 11 years after the double-decker entered commercial service, has started at Tarbes in Southern France. The aircraft involved were the first of the type to fly the world's airways, part of a batch of five retired by Singapore Airlines over the last year and returned to their lessor. Their owner, Dr. Peters Group, was able to place one aircraft with Portuguese charter airline Hi Fly. However, having failed to find new customers willing to lease the leviathans despite extensive negotiations in during 2018, Dr. Peters decided to reduce two to components while mothballing the remaining two for potential return to service with another airline in future.

The two aircraft being parted out (9V-SKA - serial number 003 and 9V-SKB - serial number 005) are around mid-life in terms of hours and cycles on the airframes, and would have had another ten years of useful service ahead of them had new operators been signed up. However they are early production examples that are substantially heavier than later models and have bespoke wiring in their cabins, which renders them challenging and costly to operate, maintain and upgrade.

The first A380 to be retired at Tarmac Aerosave's facility in the south of France. (Tarmac Aerosave)

The original purchase price of the aircraft is not in the public domain, but Dr. Peters is known to have paid between $150m and $200m for each when sale and lease back deals were agreed with Singapore Airlines and Doric Aircraft Leasing in 2008.

Dr. Peters estimates that each of the two A380s will yield around $45m in parts with major structures such as the landing gear legs, flight controls and auxiliary power units likely to fetch the most. Once stripped, the empty airframes will be cut up and recycled. The eight Rolls-Royce Trent 900 engines have already found further use though - since removal they have continued to generate income as spares to support the in-service A380 fleet and are expected to be sold for an estimated $5m each in 2020. Overall the German-based lessor expects a return of around 150% for its investment in each aircraft. This represents a compound rate of around 4% per annum over a ten year term.

Challenging secondary market

When the A380 entered service in 2007, it represented a step change in capacity and cabin comfort compared to the aircraft that came before it. However, it had a limited market. It can make airlines good money when it is full, but consistently keeping all of its seats occupied is a challenge in a cyclic market. Many airlines decided that it would be more lucrative to offer less capacity, which helps keep fares higher and yield up, rather than flood the market with overly cheap tickets just to maintain high A380 load factors. So most carriers elected to deploy slightly smaller twin-engined Airbus A350s or Boeing 777s in markets where the A380 was initially expected to reign supreme.

Emirates stands alone in terms of A380 operations and already has more than 100 in service with as many as 50 more to come (the next largest users are Singapore Airlines - 24, Lufthansa - 14, British Airways - 12 and Qantas - 12). But Emirates operates from an extremely congested base At Dubai International Airport, has a need to channel as many passengers as possible through its hub to make its network profitable, and is service-frequency limited in many markets due to restrictive bilateral agreements. This almost unique combination makes the Airbus double-decker a logical choice for the UAE-based airline, but few other carriers face all of these challenges.

Two A380s owned by Dr. Peters are being parted out and scrapped. Two more have been mothballed to preserve them for possible further service. (Tarmac Aerosave)

Emirates typically returns aircraft to lessors after ten or twelve years, and if it repeats the same business model with its first A380s some could retired as soon as next year. It has also been suggested that Air France will offload five leased aircraft over the next two years. This will put more second-hand A380s into the market, and although the Emirates and Air France aircraft are more standard than the early-build Singapore Airlines examples, they will still be difficult to place with another airline.

With used values in the doldrums, financing new A380 airframes will also become an increasingly expensive proposition. Dr. Peters failure to re-market their aircraft therefore comes as another blow to the program, leaving Airbus almost exclusively dependent on orders from Emirates to sustain production.

Text © The Aviation Oracle

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