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Aviation: Emirates explores fleet changes

Fascinating reports emerged today suggesting that Emirates and Airbus are locked into negotiations over 36 Airbus A380s the Middle Eastern carrier has commitments for. Some of these orders are conditional and various parties are postulating that they could be switched to smaller twin-engined Airbus A350s or even A330neos. At least one pundit also claims Emirates' interest in 40 Boeing 787s - for which a memorandum of understanding (MoU) was signed in 2017, but no firm order has yet been placed - might be at risk too.

Emirates' follow-on order for A380 has been delayed due to disputes over engine performance and durability, with the airline seeking guarantees manufacturers have been unwilling to provide. Cancellation of those 36 aircraft would almost certainly spell a premature end to production of Airbus' double-decker giant. With all but three outstanding firm orders destined for Emirates, output would undoubtedly cease before the middle of the next decade and maybe as soon as 2023.

Does Emirates need more A380s?

Its interesting to note that Emirates' load factor (the percentage of seats occupied) has hovered between 77% and 80% over the last ten years. The double-decker has an obvious advantage on routes where it can be consistently filled, but the higher fuel burn from four engines means it loses more money than smaller aircraft when it is flown with a lot of unoccupied seats or space has to be sold at low fares to fill it up.

The airline's A380s come in three different configurations and can accommodate from 489 to 615 passengers. Emirates' typical 80% load factor means that between 391 and 492 customers will be on each flight. But the airline also has 115 777-9 aircraft on order which are likely to seat between 380 and 440 passengers. So from next year the first tranche of larger 777s aircraft could deliver some of the A380 lift without leaving passengers behind, enabling the existing Airbus to cover the busier routes. Unless Emirates can nudge its load factors into the 90s it is unlikely to leak many high-value customers to its rivals. And a knock-on effect of downsizing some services is that is better occupancy rates might make fares rises possible - although the competitive landscape will also play into that equation.

Questions over whether Emirates will take 36 additional A380s are beginning to emerge. (Anna Zvereva)

Nevertheless airliners are typically flown for more than a decade - Emirates tends to dispose of its aircraft after 12 years or so. Acquisition strategies are based around forecast growth in demand as well as current day economics, and while Emirates' A380s might not all be full now they could be in the early 2030s. However, although the Middle East has grown rapidly over the last two decades Dubai International Airport is now almost full and signs are that the upward trend is flattening a little. Its therefore not a stretch to wonder whether Emirates really needs more than the 109 A380s it currently operates.