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Aviation: A380 - who blinked first?

Yesterday the news was all about the cancellation of an Emirates order for 36 A380s and the termination of A380 production in 2021. It marked the end of a high-stakes game. Both sides had reasons to carry on with the A380, but either party also had grounds to cut their losses and walk away.

What remains is that Airbus has just abandoned the A380 and orders for 39 aircraft worth billions of dollars have been cancelled. Which side blinked first - Airbus or Emirates? It may be that a consensus was reached, but equally one party could have led the other. Now the dust has started to settle, its consider where the drivers might have come from.

Airbus' A380 dream is over - but was it Emirates or Airbus that drove the decision? (John5199)

Was it Emirates?

Just a year ago, Middle Eastern airline and A380 cheerleader Emirates threw Airbus a lifeline when it ordered and optioned 36 additional examples of the double-deck aircraft. The commitment was crucial for the manufacturer, enabling it to stretch production through to the middle of the next decade when upgrades - with more efficient engines, a stretch or both - might have been better received by potential customers.

Since then though a few things have changed:

  • Its become even clearer that there is little appetite for A380s from anywhere other that Emirates .

  • There has been almost no interest in the first few A380 airframes that have come onto the second hand market.

  • The lack of new orders and a secondary market have reduced residual values and increased lease rates, making the acquisition of new A380s less attractive.

  • There are issues with the Rolls-Royce Trent 900 engines powering Emirates' recent A380s. They are being removed more frequently than expected due to erosion of the fan blades caused by sand. Rolls-Royce is paying the airline compensation. Due to the limited market and opportunity to recover investment, RR has not proceeded with a forth upgrade (EP3+) to the powerplant.

  • Emirates relies on its hub in Dubai to channel passengers between cities across the globe. Its business model is coming under increasing pressure from airlines flying point-to-point markets with 787s - A321LRs will soon enter the equation too.

  • Alternative hubs - particularly Addis Ababa and Istanbul - and other airlines including Ethiopian and Turkish are offering increasingly attractive alternatives to Emirates and Dubai.

  • Emirates' load factor is around 80% and its traffic isn't growing particularly rapidly so it does not need to increase capacity substantially.