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A380 -- Evaluation From Financial Risk Perspective  
User currently offlinePtcflyer From United States of America, joined Apr 2001, 103 posts, RR: 0
Posted (11 years 1 month 1 week 4 days 5 hours ago) and read 3204 times:

I have read the dozens of A vs. B discussions on the A380. But one area that does not seem to get appropriately articulated is the economic risk of operating such a large aircraft.

We all know the costs of modifying airport infrastructure, etc. and the operational challenges... But from an airline perspective, we have witnessed several events during the past decade that would make the fixed capital overhead of these airplanes untollerable. Examples include: 9/11, SARS, Hong Kong Bird Flu... etc.

Clearly, this airplane will work under normal economic situations on routes where 1 plane is better than 2 (i.e. slot controlled airports and where lower economic per seat costs are compelling)... but during a major economic, terrorism, or health crisis, these will become absolutely cost prohibitive planes to run during that time to virtually any airport. Since there will relatively few airports that can take these planes, the ability to "shift" the flights to other destinations becomes challenging at best.

Whereas with the 777 or 787 sized airplane, the airlines will have greater flexibilty to operate the plane to different airports or even shift them to domestic services, etc. The other challenge lies in the winter vs. summer USA to Europe schedule.. and to a lesser degree the USA to Asia routes. We all know there is way too much capacity in winter. Flying A380s throughout the winter will be challenging from a yield perspective.

By operating two flights with smaller aircraft, the airlines have the ability to operate two at peak seasons, and shift the capacity to other "warmer markets" in the winter season. This lack of flexibility with the A380, I believe, will translate into operational risk on a scale significantly greater than the 747. There is a great economic case to be made for capacity "granularity"... which the A380 is not well suited for.

The additional per seat mile operating cost advantage of the A380 can be quickly destroyed with another global "situation"... and by flying the aircraft during off-peak seasons.

I truly believe that it is these "harder to quantify" risk elements of the A380 that rarely get discussed .... that will lead into the economic demise of the airplane.

I believe that when the 747 came onto the market, it truly broke ground not only for its capacity... but for its RANGE! The airlines were willing to take the risk of such a large aircraft because it was the key answer for offering non-stop flights to more markets from the US to Asia / Europe to Asia / Australia etc.

Today, as the A380 comes on line... while its range may up the ante a bit... there are many alternatives for airlines to get the "range" that they need for non-stop services. Hence, airlines main driver to take on the risk of the A380 is solely for capacity purposes. This lack of flexiblity coming from a such a captial intensive plane may hang airlines from a cost perspective under unpredictable global circumstances.

10 replies: All unread, jump to last
User currently offlineOsteogenesis From Germany, joined exactly 13 years ago today! , 648 posts, RR: 2
Reply 1, posted (11 years 1 month 1 week 4 days 4 hours ago) and read 3168 times:

I don’t understand your logic.

9/11, SARS, Hong Kong Bird Flu have nothing to do with a problem of diversion. Only in the case of 9/11 there would be a need for diversion. The A380 has no problem to land at many other airports. It would only mean that the de- boarding would take a little longer. That would have been no problem in the case of 9/11.

I think this is just another topic of somebody trying to desperately find a reason that the A380 will be a failure.

I am not sure if the A380 will be a success. But all the enemies of these aircraft on a.net are doing a bad job at finding its weaknesses.

User currently offlineSolnabo From Sweden, joined Jan 2008, 930 posts, RR: 1
Reply 2, posted (11 years 1 month 1 week 4 days 4 hours ago) and read 3164 times:

Oooh Nooo......not another 380 topic!!!


Micke//SE *huge sigh*

Airbus SAS - Love them both
User currently offlineLTBEWR From United States of America, joined Jan 2004, 13856 posts, RR: 17
Reply 3, posted (11 years 1 month 1 week 4 days 4 hours ago) and read 3085 times:

I think the point of the original poster is that after 9/11, SARS, and the economic problems in South Asia in the late 1990's, many flights to/from Asia, the main places where the A380 will be used, had huge drops in numbers of pax, lowered ticket prices thus lower profits and even losses. Many of the flights to/from Asia from North America and Europe where the A380 will be primarly used could be badly affected by such major economic problems or even in the future with political or natural causes (China invades Taiwan, major earthquake, etc). The affect could be less of a problem with smaller a/c like the newer ultra long range 777's, the 787, A340, and even the 747 as could reduce frequency, pull a/c out and use on other routes, mothball/park unneeded a/c until normal situations return. Such potential situations should be considered by some prospective buyers of the A380, due to it's high costs to purchase, recover that costs and operational expenses.

User currently offlineOsteogenesis From Germany, joined exactly 13 years ago today! , 648 posts, RR: 2
Reply 4, posted (11 years 1 month 1 week 4 days 3 hours ago) and read 3059 times:

Quoting LTBEWR (Reply 3):
Many of the flights to/from Asia from North America and Europe where the A380 will be primarly used could be badly affected by such major economic problems

Well by that logic you should allays adapt your business to the worst case possible. The fact remains that all predictions (including Boeings) predict a big increase in air traffic.

User currently offlineUdo From , joined Dec 1969, posts, RR:
Reply 5, posted (11 years 1 month 1 week 4 days 3 hours ago) and read 3050 times:

Theoretically we could be attacked by aliens tomorrow and they could possibly destroy all of our oil reserves which would turn our "civilisation" into a mess...ANYTHING COULD HAPPEN!  crazy 

It's getting really crazy on this forum, every day we see ten new threads on possible problems, failures and crisis related to the A380.
Damn, the aircraft will fly in some days, some of the most respected and most profitable airlines have ordered the bird, with some 150 units on order. These managers have more insight than all these armchair-CEOs on a.net and they probably know well what they are doing.  sarcastic 

I'm wondering what some guys in here would do without the daily A380 "analysis"...counting flies on a public toilet?  Wink


User currently offlineMrComet From Ireland, joined Mar 2005, 600 posts, RR: 7
Reply 6, posted (11 years 1 month 1 week 4 days 3 hours ago) and read 2985 times:

Well.....what is the risk of not having enough capacity compared to your competitors between two points in an up market? All airplanes are purchased on the assumption they will be filled. In a severe downturn, sure, those with the biggest investment in capacity are screwed but the opposite is true in an up market. I think there is enough data points for airlines to figure this out and EVERYBODY is screwed in a SARS like environment -- big planes or small.

The dude abides
User currently offlineDaedaeg From United States of America, joined Feb 2003, 666 posts, RR: 1
Reply 7, posted (11 years 1 month 1 week 4 days 3 hours ago) and read 2976 times:

It's no worse than the gazillion threads started everytime she moves 1 centimeter. I prefer threads that stimulate thought and discussion. Although these threads may come across as being critical, at least you learn something. I learn nothing from trying to figure out if that's really the A380 or not in a pic doing a rotation. Or which color scheme she looks best in. Or how Virgin is going to put a movie theatre and a shower onboard. However, there should be some consolidation of threads as a lot of this becomes repetitive.

Everyday you're alive is a good day.
User currently offlineLehpron From United States of America, joined Jul 2001, 7028 posts, RR: 20
Reply 8, posted (11 years 1 month 1 week 4 days 2 hours ago) and read 2920 times:

*** All of the preceding is my opinion based on personal research ***

A380 was designed for a market that has yet to mature (which is exactly why it cannot be successful immediately), yes it would be a big risk. But it would also be a risk to WAIT until enough carriers ask for the plane in realtime, in terms of lost revenue to competition. Instead some carriers forecasted their own need along with Airbus' belief that a larger type may be needed to fill the gap.

Voila: A380. I'll reiterate on my frist sentence at another time, unless someone asks.

*** All of the above was my opinion based on personal research ***

The meaning of life is curiosity; we were put on this planet to explore opportunities.
User currently offlineAlessandro From , joined Dec 1969, posts, RR:
Reply 9, posted (11 years 1 month 1 week 3 days 22 hours ago) and read 2798 times:

Ptcflyer, first 010911 was targeting US interests, so a B777 or B787 would
be in more danger than the A380 to become a terrorist target.
Winter, is different times depends on where on the planet the A380 operate,
if there´s a serious drop in passenger air-traffic for a long time I think the A380 could be converted to
combos (passenger and cargo).

User currently offlineJacobin777 From United States of America, joined Sep 2004, 15375 posts, RR: 58
Reply 10, posted (11 years 1 month 1 week 3 days 21 hours ago) and read 2755 times:

i did post a few messages about the insurance liabilities regarding The Monstrosity, my take was that like the 747 when it was introduced, there are going to be new regulations and a whopping increase in liabilities for the carriers...which is to be expected....

"Up the Irons!"
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