TG is considering the cancellation of the six A380's they have on order. Reason stated is a load factor of 89% required to break even as per a statement in the Bangkok Post. I could not find any reference to this on the on line version Bangkok Post though.
"Two things are infinite: the universe and human stupidity; and I'm not sure about the universe." (Albert Einstein, 1879
Wallop Bhukkanasut, chairman of THAI's executive board, revealed the national carrier's revised stance on procuring the world's largest civil aircraft, which it agreed to purchase back in 2007 when the carrier was struggling to weather its worst financial crisis in 49 years.
"It is not economically viable to have and deploy this aircraft in our network," Mr Wallop said at the sidelines of the International Air Transport Association (IATA) annual general meeting being held in Kuala Lumpur.
Airlines operating A380s have found it difficult to achieve the yields they expected due to the global economic crisis, high operating costs and a lack of flexibility in moving the aircraft through airports, he said.
"It is a special mission airplane and can currently operate through eight airports around the world, meaning you can't put the aircraft on routes as you may wish," he said.
With THAI's planned configuration of the A380, the airline must fill 88.8% of 501 seats just to break even, he said.
"We need to make a major turnaround decision," he said.
"Two things are infinite: the universe and human stupidity; and I'm not sure about the universe." (Albert Einstein, 1879
N14AZ From Germany, joined Feb 2007, 2497 posts, RR: 25 Reply 5, posted (4 years 6 months 1 week 13 hours ago) and read 15413 times:
Quoting Heavierthanair (Reply 3): Airlines operating A380s have found it difficult to achieve the yields they expected [...] he said.
Naive question of mine: how can he refer to operational experience made by his competitors? I find this quit strange and a strong indication that - like always - that there is a complely different reason which he doesn't want to mention (see below).
Quoting Heavierthanair (Reply 3): Airlines operating A380s have found it difficult to achieve the yields they expected due to the global economic crisis, [...] he said.
So he wanted to operate his A380s only during this current crisis? Aaah, understood. Then he rather should cancel them quickly.
Does he really think we are so stupid? Here is my translation: "We made a horrible mistake when ordering the A380, we simply cannot afford it and that's why we are looking for a solution to convert our orders. But this is only between you and me and please do not post this on a.net."
NYC777 From United States of America, joined Jun 2004, 5572 posts, RR: 49 Reply 6, posted (4 years 6 months 1 week 12 hours ago) and read 15298 times:
If this and the ILFC cancellations rumors are true then the pressue is on Airbus to make the A350 a huge winner. It's becoming apparent that with the deferrals (which cost money to Airbus) along with the costs of the delays and penalty payments and the low number of orders that the A380 could be a huge money loser for Airbus.
FLALEFTY From United States of America, joined Jan 2006, 395 posts, RR: 3 Reply 14, posted (4 years 6 months 1 week 9 hours ago) and read 14527 times:
Any airline (or leasing company) that cancels the A380s they got as launch customers, with ideal terms, has to be hurting financially to the point that long-term planning is out the window. Defer, perhaps, but getting these big birds will prove to be major money makers in a few years.
Teva From France, joined Jan 2001, 1869 posts, RR: 16 Reply 15, posted (4 years 6 months 1 week 8 hours ago) and read 14397 times:
Quoting Heavierthanair (Reply 3): "It is a special mission airplane and can currently operate through eight airports around the world, meaning you can't put the aircraft on routes as you may wish," he said.
Can he provide his list of 8 airports only, this will give us the opportunity to add all the missing ones, just based on airports currently served by the A380 (or planned by year end) on a regular base
one of the most ridiculous statements I have seen. Makes me doubt the credibility of this article
Ecoute les orgues, Elles jouent pour toi...C'est le requiem pour un con
Jtdieffen From United States of America, joined Jan 2001, 176 posts, RR: 0 Reply 16, posted (4 years 6 months 1 week 7 hours ago) and read 14213 times:
Quoting Teva (Reply 15): Can he provide his list of 8 airports only, this will give us the opportunity to add all the missing ones, just based on airports currently served by the A380 (or planned by year end) on a regular base
I agree that this is a false and foolish statement, but are we perhaps taking it too literally? Does he maybe mean that only eight airports world-wide of Thai's current destinations are A380 capable? I don't konw if this makes the statement any truer, but sometimes things do get lost in translation!
Osiris30 From Barbados, joined Sep 2006, 3184 posts, RR: 26 Reply 17, posted (4 years 6 months 1 week 6 hours ago) and read 14168 times:
Quoting Jtdieffen (Reply 16): I agree that this is a false and foolish statement, but are we perhaps taking it too literally? Does he maybe mean that only eight airports world-wide of Thai's current destinations are A380 capable? I don't konw if this makes the statement any truer, but sometimes things do get lost in translation!
Or further; 8 airports that Thai serves that need the capacity from Thai's perspective.
Personally I see these being converted to 350s rather than outright cancelations.
I don't care what you think of my opinion. It's my opinion, so have a nice day :)
Ikramerica From United States of America, joined May 2005, 21313 posts, RR: 60 Reply 18, posted (4 years 6 months 1 week 6 hours ago) and read 14148 times:
Quoting Zvezda (Reply 13): TG have difficulty filling their 747-400s at sustainable fares. They don't need anything larger than an A350-1000 or 777-300ER.
The act of adding seats to a route that doesn't need those seats will depress RASM more than most people realize.
Those 100 extra seats will mean that before, when they MIGHT fill the 744 on a peak day and those last seats were high yielding, in those same conditions, there are still 100 more seats left. That means more seats in all fare buckets over the course of selling a flight, and ultimately, fewer people ever paying the most expensive prices.
If you are an airline that was chafing at the capacity limit of the 744 and had limited access to routes, the A380 works great. You could add more seats and even improve your premium product.
But if you would have been better off with the 350 seater than the 744 to begin with, bumping up to 500 seats is just brainless. Not only does it cut into yields, but it limits flexibility.
This goes back to the NH/JL experiment with dumping 744s for 77Ws and finding that the yield improved greatly. Revenue was nearly identical to a 744, but costs were 10% lower or more, increasing profit per flight. They may be leaving a few pax behind on some days, but the alternative is to fly a 744 where you are leaving seats empty on other days, or an A380 where you are either leaving seats open on most days, or decreasing RASM and filling the seats, meaning the CASM savings is offset by the RASM decline.
Of all the things to worry about... the Wookie has no pants.
MAN2SIN2BKK From Thailand, joined Feb 2009, 213 posts, RR: 0 Reply 19, posted (4 years 6 months 1 week 5 hours ago) and read 14018 times:
Quoting FLALEFTY (Reply 14): Can he provide his list of 8 airports only, this will give us the opportunity to add all the missing ones, just based on airports currently served by the A380 (or planned by year end) on a regular base
I believe that something is missing in the translation from Thai to English, replace the "can" by "is" and we have the correct context.
Thai have ordered the A380s for 3 specific routes; BKK-LHR, FRA and CDG and from personally flying the LHR and FRA routes on a regular basis for the past 8 years they can expect a reasonable yield. Up to a year ago these flights were fully booked well in advance and very few deals, who knows these times may return very soon
Personally, I believe there is a sizeable order for either B777s or A350s in the pipeline and this newspaper interview with the Bangkok Post may be the start of pushing for a better deal for the A350s
Cloudyapple From Hong Kong, joined Jul 2005, 2447 posts, RR: 9 Reply 20, posted (4 years 6 months 1 week 5 hours ago) and read 13912 times:
It's a little bit unfair to use today's numbers to judge the procurement decision made a few years back. The forecast in terms of passenger numbers and yield would have been completely different back then. The market was on the up, there was no financial crisis, no red/yellow political issues and no swine flu. So they bought the aircraft based on the information available to them at the time.
It may not make sense now but it was probably the right decision to make when they made it.
The A388 is a niche aircraft. You do need to deploy it on ultra high capacity longhaul routes to make the most out of it. It burns about 15t per hour compared to a little more than 8t for the B77W. It has about twice the cabin space but it hasn't got enough cargo space which is the big issue.
I was a believer of this aircraft when the times were good. But in the current climate it will be difficult to operate this aircraft economically. It's time will come but perhaps not in the next few years.
Pellegrine From United States of America, joined Mar 2007, 2174 posts, RR: 8 Reply 21, posted (4 years 6 months 1 week 4 hours ago) and read 13821 times:
Quoting Stitch (Reply 7): What the heck kind of CASM does TG have to need to fill 446 seats on an A380 just to break even?
At that rate, they might as well just run them in a charter configuration with 850 Economy seats.
Look at Thai's yields, look at the fares! They aren't bringing in the highest (by far) fares in many of their markets. Their strategy has been to drive traffic by offering lower fares than European/Australian/SQ/CX rivals.
Quoting Ikramerica (Reply 18): This goes back to the NH/JL experiment with dumping 744s for 77Ws and finding that the yield improved greatly. Revenue was nearly identical to a 744, but costs were 10% lower or more, increasing profit per flight.
Yes but NH/JL never had the yield problems TG has. Cost problems sure.
Quoting MAN2SIN2BKK (Reply 19): Thai have ordered the A380s for 3 specific routes; BKK-LHR, FRA and CDG and from personally flying the LHR and FRA routes on a regular basis for the past 8 years they can expect a reasonable yield.
Scipio From Belgium, joined Oct 2007, 810 posts, RR: 8 Reply 23, posted (4 years 6 months 1 week 3 hours ago) and read 13393 times:
Quoting Zvezda (Reply 11): CASM and RASM are inextricably linked such that neither can be a problem except in the context of the other.
Quoting Ikramerica (Reply 18): The act of adding seats to a route that doesn't need those seats will depress RASM more than most people realize.
What people tend to forget is that airlines do not operate in a vacuum. They operate in a context of competition. RASM does not depend on the capacity that an airline offers, but of the capacity that is available on the market as a whole. Over time, that will inevitably tend to push RASM in the direction of the CASM of the LOWEST-COST operator.
That is why, if the A380 has compelling economics (which remains to be confirmed), over time the intercontinental market will be split into two categories: A380 operators and niche operators.
We may have to wait for the A380-900XWB to see this happen, though.
Also, do not forget that Thai is not a profit maximizing airline. It is an airline that, among other things, seeks to promote tourism into Thailand. On that metric, Thai has been quite successful. Airfares to and from Bangkok are pretty much the cheapest of all Asian gateways.
MAN2SIN2BKK From Thailand, joined Feb 2009, 213 posts, RR: 0 Reply 24, posted (4 years 6 months 1 week 3 hours ago) and read 13380 times:
Quoting Pellegrine (Reply 21): Look at Thai's yields, look at the fares! They aren't bringing in the highest (by far) fares in many of their markets. Their strategy has been to drive traffic by offering lower fares than European/Australian/SQ/CX rivals.
If you look at the pricing on the core long haul routes of BKK-LHR/FRA/MUC/CDG then Thai are very expensive in the economy class in comparison to their competition. In the premium cabins such as Royal Silk they offer good value and are booked up well in advance. BKK-LHR-BKK is quoted at 132K baht (roughly 3700 USD).
I tried to make a booking for next week and the overnight BKK-LHR flights only have seats available in First Class; Royal Silk and Economy are fully booked
25 Cloudyapple: That is good value. HKG-LHR, which has just about the most competition of any longhaul routes worldwide, and is about the same length as BKK-LHR, the
26 Cloudyapple: An A380-900 is expected. An A380-900XWB will be interesting.
27 Scipio: You can get great business class fares by routing your itinerary via Bangkok. I have been able to fly around the world on a business trip, staying wi
28 Scipio: The "XWB" refers to the engine and other A350-generation technologies only. Not to the fuselage width.
29 Scipio: A post-scriptum to this. It is blatantly obvious that what Emirates is trying to achieve is to become the CASM champion among the intercontinental ca
30 Pellegrine: Yes, this is my point. Their long haul RASM is lower than many of their neighbors/competitors. Interesting I for one did not know this, I am sure the
31 Bigsmile: XWB = Xtra Wide Body XWB is NOT used in anything connected to the technolgies. XWB is used purely for the marketing for the A350. Trust me on this.
32 Aviationbuff: XWB refers to eXtra Wide Body. For the first time I am hearing that it refers to the engine and other A350-generation technologies.
33 A350: The most urgent issue is to get Thailand out of the political mess and get democracy up and running. This is the condition for a recovery of tourism a
34 Zvezda: That's correct except that the additional seats cannot be allocated across the existing fare buckets. They have to either all go into the lowest fare
35 A350: Both types have seen 14 frames in airline service so far according to airliners of 05/29, therefore the only way for the A380 not to fly in greater n
36 Astuteman: The A350XWB is called so because it has "An Xtra Wide Body" (when compared to the original A350 design, presumably). The only engine on offer, from R
37 TISTPAA727: Quite an argument going on here. Seems like whenever an A380 thread starts, things go south really quick. I don't think anyone here is denying the cap
38 Motorhussy: Can't yield anything if your plane's not loaded (at least partially). Back to the topic, TG will need these at some point. IMHO MH
39 Revelation: Lots of people in the airline business (and many others) seem to take data from a few good years and then draw a straight line extending into the fut
40 CHRISBA777ER: Absolutely agree - you are spot on. We are, generally, in a downward cycle now, but there are too many people and too big a demand for air travel on
41 CHRISBA777ER: Adding seats probably wouldnt result in lower fares from TG - they tend to price themselves in most classes 10-20% (guess) more from Europe - BKK tha
42 Jfk777: Thai needs airplanes no bigger then an A350-900, or a 777-300ER. They should get 777-200ER for their average European, Australian and South African ro
43 EA772LR: All these damn cancellation rumors are getting ridiculous...I guess I am going to have to stop buying my 1/200 scale models of the A380, since apparen
44 N14AZ: And what about the VC10? Could you say that the A380 could end up like the VC10 (64 units delivered acc. wikipedia). Could you please repeat your disc
45 2175301: As a person who has always questioned the market potential of the A380 (especially the very high numbers) I don't think that Thai or a few companies c
46 Theredbaron: Just because the current financial crisis has put the Airline industry in a very bad shape, doesnt mean it will not recover in some way or form later
47 757GB: You mean you are CANCELING the purchase of YOUR A380 scale model TOO???? Sorry... I couldn't resist
48 CHRISBA777ER: A great post - at last some sanity and reason. It may surprise you to know that I broadly agree with many of the points you make - i think they are w
49 Scipio: Thanks for the reminder All I tried to do was to capture in three letters the idea of incorporating technology developed for the A350 into the A380-9
50 Cornish: Unless they keep the aircraft for prestige/political reasons, I can well see TG getting rid of their A380 order. They are financially in poor shape ri
51 CHRISBA777ER: So its official - may i ask where you sourced this piece of arbitrary information? With respect my Lithuanian friend - you've backtracked furiously h
52 Stitch: IF TG's problem is yields, would not a smaller plane be more beneficial since it would constrict supply, raising yields due to the demand curve moving