November 22, 2006

WALT DISNEY COULDN'T MAKE THAT ELEPHANT FLY:

The A380 superjumbo: The white elephant: The latest Airbus, hailed as a model of European co-operation, is running two years' late. So will this project ever truly fly? (Michael Harrison, 22 November 2006, Independent)

The problem has already blown a superjumbo-sized hole in the profits of the parent company. But further delays could threaten Airbus's very existence, and along with it, tens of thousands of jobs and the many billions of pounds sunk into this grand projet by the taxpayers of Britain, France, Germany and Spain. The plane was supposed to cost $10bn (£5.3bn) to develop - a lot for one aircraft, but a small price to pay, so Airbus and its sponsoring governments thought, for the chance to end Boeing's monopoly of the jumbo market once and for all. At the last count the development costs of the A380 had risen to $14bn.

But the financial pain does not end there. In October, the company which ultimately controls Airbus, EADS, came out with some figures even more stunning than the vital statistics of an A380. EADS admitted that the delays on the aircraft would cost it an additional $6bn in lost profits, meaning that the A380 would not begin to pay its way until some time into the next decade.

Airbus's latest 20-year forecast for the world jet market, to be published this morning, will put demand for the A380 at about 1,500 aircraft - almost four times the number that Boeing thinks will be sold.

But that continues to look like anoptimistic assumption, for everything appears to be conspiring against the A380, not least the value of the dollar, the currency in which all commercial aircraft are sold. When Airbus launched the programme six years ago, it needed to sell 300 aircraft to cover its costs. Because of the way the dollar has weakened, Airbus now needs to sell 420 planes. The order book stands at 149.

The American mail company FedEx has become the first launch customer to cancel its order for 10 freighter versions of the aircraft, and at least one passenger airline has indicated it could follow suit. If the cancellations turn from a trickle to a flood, then the consequences would be catastrophic.

The collapse of the A380 would be disastrous enough in itself. But the added problem for Airbus is that it needs the revenues the superjumbo is expected to generate in order to fund its next aircraft.


The funniest thing about the plane is that only those who consider themselves knowledgeable about aviation ever thought it wouldn't be a disaster. As always, expertise blinds.

Posted by Orrin Judd at November 22, 2006 9:29 AM
Comments

But the added problem for Airbus is that it needs the revenues the superjumbo is expected to generate in order to fund its next aircraft.

Which is why, with Saddam gone (damn Yankees), the French are falling over themselves trying to persuade Iran to fill the void.

(The sine qua non of French foreign policy.)

Posted by: Barry Meislin at November 22, 2006 10:30 AM

Ironically, it IS the model of European co-operation.

Posted by: jeff at November 22, 2006 10:34 AM

But the added problem for Airbus is that it needs the revenues the superjumbo is expected to generate in order to fund its next aircraft.

Which is why, with Saddam gone (damn Yankees), the French are falling over themselves trying to persuade Iran to fill that oh-so-empty void.

(The sine qua non of French foreign policy.)

Posted by: Barry Meislin at November 22, 2006 10:34 AM

"the development costs of the A380 had risen to $14bn" plus tens of billions to renovate airports and reinforce runways all over the world to accomodate the land-bound whale.

Posted by: ic at November 22, 2006 12:23 PM

The only option they have for the flying whale is to forget passengers and only mfg for cargo transport. Runway improvements will still be necessary but not terminals.

Fedex, Emory, DHL, UPS, etc., can develop or modify existing loading and unloading facilities. Beyond that it ain't gonna fly.

Posted by: Tom Wall at November 22, 2006 7:49 PM

I'm not an expert, but merely a well-read citizen.

Any airplane that requires 2 gates to fill efficiently in a world where gates are far harder to produce than the plane is doomed to fail.

The Cargo angle is interesting though.

Posted by: Bruno at November 22, 2006 10:16 PM
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