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KarelXWB
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EK mulls 20 additional A380s

Wed Jun 07, 2017 1:40 pm

Emirates needs to replace its A380 fleet during the next decade and is in talk with Airbus for additional A380s.

Emirates, the biggest operator of Airbus SE’s A380 superjumbo, is in talks about the purchase of 20 more of the double-decker jets in a move that could extend the lifespan of a program dogged by slow sales, people familiar with the discussions said.

The contract would be worth $8.7 billion before discounts, though negotiations are at an early stage and it hasn’t been established exactly how many aircraft the Persian Gulf carrier requires, according to the people, who asked not to be named because the talks are private. Airbus might also be required to commit to measures to make the A380 more efficient before a deal is signed.


Article
https://www.bloomberg.com/news/articles ... uperjumbos
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scotron11
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 1:43 pm

KarelXWB wrote:
Emirates needs to replace its A380 fleet during the next decade and is in talk with Airbus for additional A380s.

Emirates, the biggest operator of Airbus SE’s A380 superjumbo, is in talks about the purchase of 20 more of the double-decker jets in a move that could extend the lifespan of a program dogged by slow sales, people familiar with the discussions said.

The contract would be worth $8.7 billion before discounts, though negotiations are at an early stage and it hasn’t been established exactly how many aircraft the Persian Gulf carrier requires, according to the people, who asked not to be named because the talks are private. Airbus might also be required to commit to measures to make the A380 more efficient before a deal is signed.


Article
https://www.bloomberg.com/news/articles ... uperjumbos[/quote

So crazy, one report saying they,re considering deferring deliveries and possibly grounding aircraft, and now considering 20 more A380s!
 
ExDubai
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 1:45 pm

Come on, with all the add. traffic the grabb from QR :D
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KarelXWB
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 1:46 pm

scotron11 wrote:
So crazy, one report saying they,re considering deferring deliveries and possibly grounding aircraft, and now considering 20 more A380s!


Emirates will still need to replace the A380 fleet during the next decade. The first A380 will come off lease around 2020.
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MrHMSH
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 1:49 pm

Thankfully they'll stop orders at 160 A380s, because any more than that would just be ridiculous...
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:00 pm

Simple arithmetic would stabilize EK's 380 purchases at about 9+ per year, with a 12 year life. Airbus needs only a couple more sales a year to maintain current production projections. My suspicion is that with conventional accounting Airbus will be losing a little money. Considering the cost of closing a line down, measurable loss of prestige etc the case can be made that they will be earning money.
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peterinlisbon
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:00 pm

Why not just carry out the maintenance required to keep the A380s it already has in service? I flew on a Kuwait Airways A320 that was 20 years old the other day and (because it had been refurbished) I couldn't have told the difference between that and a brand new one.
 
Bricktop
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:03 pm

If there's a price that Airbus can sell the A388 at that makes sense to both sides, it will happen. But there also will be better airplanes for EK to choose down the road too. A dead cat bounce at best for the program, even if it comes to pass.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:04 pm

KarelXWB wrote:
scotron11 wrote:
So crazy, one report saying they,re considering deferring deliveries and possibly grounding aircraft, and now considering 20 more A380s!


Emirates will still need to replace the A380 fleet during the next decade. The first A380 will come off lease around 2020.

If Wiki is correct, EK still has 48 A380s to be delivered. IIRC, 25 of those will be used as replacement of the earliest frames delivered. What is the delivery schedule now, with some of the orders deferred by EK and with the reduced production rates?

I can understand EK is looking beyond the first 25 frames to replace another 20 units. But won't it be more financially interesting to renew the leases of frames 26-45? These aren't early builds, so amongst the most efficient A380s. And with many A380s returned to lessors by EK and SQ, resale value will be declining, and lease rates for newer frames possibly higher than they used to be. OTOH renewal lease rates for older (but still very efficient) A380s could be lower than foreseen...
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:05 pm

peterinlisbon wrote:
Why not just carry out the maintenance required to keep the A380s it already has in service? I flew on a Kuwait Airways A320 that was 20 years old the other day and (because it had been refurbished) I couldn't have told the difference between that and a brand new one.

Because then EK can't brag about their fleet age.
 
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KarelXWB
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:09 pm

frigatebird wrote:
I can understand EK is looking beyond the first 25 frames to replace another 20 units. But won't it be more financially interesting to renew the leases of frames 26-45? These aren't early builds, so amongst the most efficient A380s. And with many A380s returned to lessors by EK and SQ, resale value will be declining, and lease rates for newer frames possibly higher than they used to be. OTOH renewal lease rates for older (but still very efficient) A380s could be lower than foreseen...


Apparently EK has a policy to retire aircraft when the lease period expires. The carrier just retired a 12-years old 77W and replaced it by a brand new one.
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:11 pm

Also means 20 A380s for the scrapyard because no one other than EK wants the damn thing. If they were RR birds I'm sure BA would be all over it.
 
scotron11
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:13 pm

frmrCapCadet wrote:
Simple arithmetic would stabilize EK's 380 purchases at about 9+ per year, with a 12 year life. Airbus needs only a couple more sales a year to maintain current production projections. My suspicion is that with conventional accounting Airbus will be losing a little money. Considering the cost of closing a line down, measurable loss of prestige etc the case can be made that they will be earning money.


I like the plane and I hope Airbus finds a way to keep the line going until there are so many airports congested airlines will be qeueing up for the A380 :D
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:18 pm

Hopefully this will happen. Would be great for Airbus and Emirates. It would basically save the A380 program. I'm pretty confident Airbus would rather keep the program alive with minimal profit than to let it go at this point.

Emirates needs their "Supers" to keep their business model going. The 777-9X is not large enough.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:21 pm

Reality is that unless an A388 aftermarket develops, lease rates have to go up or sales prices have to come down neither of which is good for the line's prospects. IMO the best aftermarket for an off-lease EK A388 is EK. Not for the very early frames, but later builds. Way cheaper than getting factory fresh models. Policies change with the times, or should.
 
FromCDGtoSYD
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:30 pm

If Emirates orders more and Airbus produces less. Wouldn't the gap between A388 end of production and the fabled 2025 A380neo narrow ?
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:33 pm

KarelXWB wrote:
frigatebird wrote:
I can understand EK is looking beyond the first 25 frames to replace another 20 units. But won't it be more financially interesting to renew the leases of frames 26-45? These aren't early builds, so amongst the most efficient A380s. And with many A380s returned to lessors by EK and SQ, resale value will be declining, and lease rates for newer frames possibly higher than they used to be. OTOH renewal lease rates for older (but still very efficient) A380s could be lower than foreseen...


Apparently EK has a policy to retire aircraft when the lease period expires. The carrier just retired a 12-years old 77W and replaced it by a brand new one.

I know. But I just wonder if this still would make financial sense regarding the finance of new aircraft. EK's 12 year policy is probably based on current renewal rates. But in a couple of years, if lessors face the problem of placing all those returned A380s with other airlines, things can be totally different. Renewal rates will be low, but lease rates for new A380s could be a lot higher than now, as a result of low resale value.

It's one of the reasons KL kept flying the MD11s for so long, lease rates were ridiculously low. New aircraft were more expensive, even despite the efficiency advantages. Replacing 12 year old A380s with new, but hardly improved A380s won't bring many efficiency advantages.
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karungguni
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:34 pm

Does anybody know how many will be replacement and how many will be growth? I believe in another thread the maximum number of A380s in the EK fleet was mentioned until if and when they move to DWC.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 2:53 pm

Bricktop wrote:
Reality is that unless an A388 aftermarket develops, lease rates have to go up or sales prices have to come down neither of which is good for the line's prospects. IMO the best aftermarket for an off-lease EK A388 is EK. Not for the very early frames, but later builds. Way cheaper than getting factory fresh models. Policies change with the times, or should.

frigatebird wrote:
I know. But I just wonder if this still would make financial sense regarding the finance of new aircraft. EK's 12 year policy is probably based on current renewal rates. But in a couple of years, if lessors face the problem of placing all those returned A380s with other airlines, things can be totally different. Renewal rates will be low, but lease rates for new A380s could be a lot higher than now, as a result of low resale value.

Tim Clark said his lease payments fully pay off the A380 in 12 years so they can all just get scrapped and become parts donors. I would suggest that he knows more about what the purchase price is and what EK's lease payments are than most of us. On the other hand he has a lot to lose if the A380 market collapses.

FromCDGtoSYD wrote:
If Emirates orders more and Airbus produces less. Wouldn't the gap between A388 end of production and the fabled 2025 A380neo narrow ?

It does lead to beautiful math: If EK continues to replace airframes every 12 years and takes 12 per year, its fleet stabilizes at 144 frames and we are being told the production line can more or less break even at that level and Airbus can even make a bit of money off the parts and services aspect of the business. All that is needed is reduced expectations, and it seems that's exactly what we have. Maybe EK wants to stabilize at less than 144 frames? If Airbus produces 10 per year and average replacement for the whole fleet stays around 12 years the world wide fleet can stabilize around 120 frames. Maybe that's what the world really wants/needs? I guess time will tell at what rate EK and the rest of the users will continue to replace A380s going forward. I suspect there will be a few others who will refresh their fleet going forward. We've seen SQ is already doing so. It'll be interesting to see what others such as BA and QF do going forward.
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:09 pm

I would add that Singapore has also started to renew its A380 fleet. IMO it would not be that unlikely to see an add on order from them, replacing more of the 19 they have now.. They run a young fleet too.

Regarding the deferral of A380, we have to look at that it replaces accelerated deliveries. One could also call it a return to the original delivery plan or not even that, because the acceleration was more than adding 12 frames in two years.

As it looks right now I would guess all of the 20 frames being for replacement, adding to the 25 frames that are aimed for replacement as the plan is now, keeping the A380 fleet at around 115 frames.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:11 pm

Revelation wrote:
Tim Clark said his lease payments fully pay off the A380 in 12 years so they can all just get scrapped and become parts donors. I would suggest that he knows more about what the purchase price is and what EK's lease payments are than most of us. On the other hand he has a lot to lose if the A380 market collapses.

Thanks for that, it's new info to me. If he leased with zero residual value, then he effectively fully paid for them. That implies a pretty low imputed interest rate, and the lessors gambled they could flip them at the end of the lease. Ouch. Otherwise he'd just buy them outright (excluding tax considerations, about which I know the same as my cat). Nice job by STC.

Revelation wrote:
It does lead to beautiful math: If EK continues to replace airframes every 12 years and takes 12 per year, its fleet stabilizes at 144 frames and we are being told the production line can more or less break even at that level and Airbus can even make a bit of money off the parts and services aspect of the business. All that is needed is reduced expectations, and it seems that's exactly what we have. Maybe EK wants to stabilize at less than 144 frames? If Airbus produces 10 per year and average replacement for the whole fleet stays around 12 years the world wide fleet can stabilize around 120 frames. Maybe that's what the world really wants/needs? I guess time will tell at what rate EK and the rest of the users will continue to replace A380s going forward. I suspect there will be a few others who will refresh their fleet going forward. We've seen SQ is already doing so. It'll be interesting to see what others such as BA and QF do going forward.

There should be a replacement market elsewhere outside EK, though I am unsure exactly where. Just about all the others will be candidates for the B779/10 or the A350-1100 should it materialize (guessing it will).

As far as we know, it's only mulling. An additional 20 buys everyone (Airbus and EK) time, so as an avgeek I hope it happens. #SaveTheQuad
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:25 pm

Bricktop wrote:
Thanks for that, it's new info to me. If he leased with zero residual value, then he effectively fully paid for them. That implies a pretty low imputed interest rate, and the lessors gambled they could flip them at the end of the lease. Ouch.


If I remember the leasing fonds material correct, then the people caughing up the money already got their RoI at the end up the initial lease. Resell value would have been icing on the cake.

Otherwise he'd just buy them outright (excluding tax considerations, about which I know the same as my cat). Nice job by STC.


"Hi Mr. Bank CEO, i would like to borrow 25 billion USD to blow my fleet up by an order of magnitude" ... nope, not going to happen. The interest rates would probably have been high enough to make any other financing more expensive, resell value or not.

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KarelXWB
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:29 pm

Bricktop wrote:
Revelation wrote:
Tim Clark said his lease payments fully pay off the A380 in 12 years so they can all just get scrapped and become parts donors. I would suggest that he knows more about what the purchase price is and what EK's lease payments are than most of us. On the other hand he has a lot to lose if the A380 market collapses.

Thanks for that, it's new info to me. If he leased with zero residual value, then he effectively fully paid for them. That implies a pretty low imputed interest rate, and the lessors gambled they could flip them at the end of the lease. Ouch. Otherwise he'd just buy them outright (excluding tax considerations, about which I know the same as my cat). Nice job by STC.


If I remember correctly, the Doric construction repaid the A380 after 10 years with the remaining 2 years being profits. We had several threads on the subject couple years ago.
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Bricktop
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:29 pm

mjoelnir wrote:
I would add that Singapore has also started to renew its A380 fleet. IMO it would not be that unlikely to see an add on order from them, replacing more of the 19 they have now.. They run a young fleet too.

Regarding the deferral of A380, we have to look at that it replaces accelerated deliveries. One could also call it a return to the original delivery plan or not even that, because the acceleration was more than adding 12 frames in two years.

As it looks right now I would guess all of the 20 frames being for replacement, adding to the 25 frames that are aimed for replacement as the plan is now, keeping the A380 fleet at around 115 frames.

SQ ordered 10 with 15 options in 2001, taking the first in 2007. They firmed 9 options in 2006, taking them from 2009-12. Then they firmed 5 in 2012 (do they have 1 more to firm?) which are going to replace the first 5 very early build frames. Their 6th frame came about a year after their first, BIG BUT is owned and not leased as are all the subsequent ones. So either they are going to keep #6 forward longer,or they need to place an order pretty soon. I don't know the leadtime from order to delivery these days for a new A380 but it ain't what it used to be I am sure. Or maybe they look elsewhere?
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:31 pm

ikolkyo wrote:
Also means 20 A380s for the scrapyard because no one other than EK wants the damn thing. If they were RR birds I'm sure BA would be all over it.

Which would make the new lease rates higher because of a scrap value residual rather.
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:33 pm

ikolkyo wrote:
Also means 20 A380s for the scrapyard because no one other than EK wants the damn thing. If they were RR birds I'm sure BA would be all over it.


That's two contradictory statements, right there!
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Bricktop
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:39 pm

Thanks all for the background on the financing.

tommy1808 wrote:

"Hi Mr. Bank CEO Sheik Muhammad, i would like to borrow you to give me 25 billion USD to blow my fleet up by an order of magnitude"


Slight correction, but probably just as unlikely. :rotfl: :stirthepot:
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 3:41 pm

ikramerica wrote:
ikolkyo wrote:
Also means 20 A380s for the scrapyard because no one other than EK wants the damn thing. If they were RR birds I'm sure BA would be all over it.

Which would make the new lease rates higher because of a scrap value residual rather.

EK's early deliveries had EA engines - those fitted with RR Trents were only delivered in the past year, so there is still a long way to go before their retirement.

IIRC, the leasing companies assume zero residual value for A380s - so they will get their returns upon completion of the initial lease period. Any further leases will be calculated on a new formula - so I doubt very much the rates will be higher since these are already 12 year old aircraft.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 5:02 pm

flee wrote:
ikramerica wrote:
ikolkyo wrote:
Also means 20 A380s for the scrapyard because no one other than EK wants the damn thing. If they were RR birds I'm sure BA would be all over it.

Which would make the new lease rates higher because of a scrap value residual rather.

EK's early deliveries had EA engines - those fitted with RR Trents were only delivered in the past year, so there is still a long way to go before their retirement.

IIRC, the leasing companies assume zero residual value for A380s - so they will get their returns upon completion of the initial lease period. Any further leases will be calculated on a new formula - so I doubt very much the rates will be higher since these are already 12 year old aircraft.



I know they are EA powered, that's why I said if they were RR birds BA would want to take a look.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 5:04 pm

scbriml wrote:
ikolkyo wrote:
Also means 20 A380s for the scrapyard because no one other than EK wants the damn thing. If they were RR birds I'm sure BA would be all over it.


That's two contradictory statements, right there!


Poorly worded on my part, I should have said BA would take a look possibly. Not be all over it.
 
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Mortyman
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 5:06 pm

Airbus should seriously consider moving forward With an Airbus 380-900 neo
 
goosebayguy
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 5:12 pm

BA or IAG were thinking of buying a few more not so long ago. I get the feeling there will be a few occasional orders by other airlines over the next 20 years.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 5:34 pm

Mortyman wrote:
Airbus should seriously consider moving forward With an Airbus 380-900 neo


The engine technology isn't good enough right now to make a neo worthwhile at this time. They are more likely to have something like an 850 rather than a 900. It should have a modest stretch to allow more rows of seat, but also improve the layout of the cabin to add even more seats.

I don't know if there ever will be a true 900 stretched as originally planned. That's a lot of capacity. It was originally touted as a solution for airlines that had two 747-400 flights scheduled between the same airports less than an hour apart like HKG-LHR. How many routes need that kind of capacity compared to the costs of developing, manufacturing, and maintaining such a model?
 
N383PA
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 5:55 pm

Well here is something controversial .... I wonder with all of these (cheap) A380's coming onto the second hand market, would that impact the 779 or A350-1100?
 
scotron11
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 6:02 pm

N383PA wrote:
Well here is something controversial .... I wonder with all of these (cheap) A380's coming onto the second hand market, would that impact the 779 or A350-1100?


No deferrals on the 779 as of now....which is surprising. Only smidgen has been the LH rumor on the 779.....seems the most deferrals has been all Airbus.
 
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flyingclrs727
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 6:06 pm

N383PA wrote:
Well here is something controversial .... I wonder with all of these (cheap) A380's coming onto the second hand market, would that impact the 779 or A350-1100?


Only if there are routes that can fill the A380's. Also, the 779 especially has lots more cargo capacity. While the frames may be cheap, the 779 and A350-1100 Will have better operating costs per seat.
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 6:34 pm

flyingclrs727 wrote:
Mortyman wrote:
Airbus should seriously consider moving forward With an Airbus 380-900 neo


The engine technology isn't good enough right now to make a neo worthwhile at this time. They are more likely to have something like an 850 rather than a 900. It should have a modest stretch to allow more rows of seat, but also improve the layout of the cabin to add even more seats.

I don't know if there ever will be a true 900 stretched as originally planned. That's a lot of capacity. It was originally touted as a solution for airlines that had two 747-400 flights scheduled between the same airports less than an hour apart like HKG-LHR. How many routes need that kind of capacity compared to the costs of developing, manufacturing, and maintaining such a model?

In Airbus reviews further production rate cuts on A380, I quoted Airbus's CEO Bregier as saying:

This aircraft will increase its competitiveness, so the challenge for us is to convince the airlines to introduce such a big aircraft seamlessly and grow their market share profitably, without it weighing on their yields.

The lack of recent orders suggests the challenge is on-going. The fact that EK "mulls" more A380s is interesting but IMHO not as significant as STC saying he can't find a use for the 13 aircraft they recently withdrew from the US routes.
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 6:50 pm

As said before many people are unable or unwilling to understand and/or acknowledge that what is, is not necessarily the same as what will or can be. This goes for the A380 future prospects as well as in general. A mid-20's GTF A380 will be a game changer in terms of fuel per seat mile. It will change the market. Therefore it is too important for Airbus and the Airlines (especially EK) to let it die prematurely. I think you'll have to view this possible deal in that light.


viewtopic.php?f=3&t=1355693&start=250#p19379761

Taxi645 wrote:
About bridging the gap to 2025. Say they would launch a Ultrafan NEO around 2019, wouldn't it be a likely possibility to make a 20-30 batch of CEO's part of a NEO deal with EK? That would be 2-3 years worth of production. I could even imagine Airbus selling the CEO's at a slight loss to sweeten the deal for EK.

Advantages for Airbus:
- They bridge much of the gap to an ultrafan NEO, which could be a really successful program if optimized properly.
- Cheaper than mothballing and then restarting production.

Advantages for EK:
- A very capable A380 will be built. Much more competitive even in relation to the 2025 market place than the CEO ever was at it's launch.
- They get the CEO at lower capital cost to replace some more older A380's.


viewtopic.php?f=3&t=1357419&p=19429439#p19428453

Taxi645 wrote:
I tend too disagree with that last bit. For Emirates, wiith close to a hundred of these babies flying, the A380 is central to their business model. A GTF A380neo would be highly desirable to them. Airbus can't offer a A380neo without an A380 supply chain. If they want the GTF NEO they have to help Airbus bridge the production gap. If that means buying a few dozen higher density plusses to replace their earliest A380's on their busiest routes as part of a NEO deal, I think they will be able to come to an agreement. Though negotiations fot sure, but with a mutual interest like they have they'll manage
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Slug71
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 6:52 pm

flyingclrs727 wrote:
Mortyman wrote:
Airbus should seriously consider moving forward With an Airbus 380-900 neo


The engine technology isn't good enough right now to make a neo worthwhile at this time. They are more likely to have something like an 850 rather than a 900. It should have a modest stretch to allow more rows of seat, but also improve the layout of the cabin to add even more seats.

I don't know if there ever will be a true 900 stretched as originally planned. That's a lot of capacity. It was originally touted as a solution for airlines that had two 747-400 flights scheduled between the same airports less than an hour apart like HKG-LHR. How many routes need that kind of capacity compared to the costs of developing, manufacturing, and maintaining such a model?


They are considering it.

Airbus has already stated that it would be a "moderate" stretch over the -800, not as long as the original -900 specs.
They're also exploring the increased use of composites and a redesigned wing optimized for the stretch.
Airbus has stated they don't want to launch it until 2022+, most likely when the Ultrafan is ready.

https://www.flightglobal.com/news/artic ... ch-413552/

https://blogs.crikey.com.au/planetalkin ... wing-tips/

https://www.flightglobal.com/news/artic ... ut-419320/
 
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IslandRob
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 7:01 pm

I suspect this so-called A380 "mulling" might in fact be Tim Clark angling for better prices on additional 779s. -ir
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flyingclrs727
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 7:12 pm

Revelation wrote:
flyingclrs727 wrote:
Mortyman wrote:
Airbus should seriously consider moving forward With an Airbus 380-900 neo


The engine technology isn't good enough right now to make a neo worthwhile at this time. They are more likely to have something like an 850 rather than a 900. It should have a modest stretch to allow more rows of seat, but also improve the layout of the cabin to add even more seats.

I don't know if there ever will be a true 900 stretched as originally planned. That's a lot of capacity. It was originally touted as a solution for airlines that had two 747-400 flights scheduled between the same airports less than an hour apart like HKG-LHR. How many routes need that kind of capacity compared to the costs of developing, manufacturing, and maintaining such a model?

In Airbus reviews further production rate cuts on A380, I quoted Airbus's CEO Bregier as saying:

This aircraft will increase its competitiveness, so the challenge for us is to convince the airlines to introduce such a big aircraft seamlessly and grow their market share profitably, without it weighing on their yields.

The lack of recent orders suggests the challenge is on-going. The fact that EK "mulls" more A380s is interesting but IMHO not as significant as STC saying he can't find a use for the 13 aircraft they recently withdrew from the US routes.


Unfortunately for the A380, some of the extra structure for the 900 stretch was already built into much of the A380-800. Rearranging floor space to add more seats on existing planes is one way to cut CASM. Doing the floor space rearrangement plus adding a modest stretch and making changes to the wings could further decrease CASM, but it would definitely increase capacity risk. Where would airlines put the new higher capacity neos? As the capacity of the 779, possibly the 7710, and A350-1100 come online, where will mid life A380's that were built after 20 or 30 on the line be put? Will there be any market for an A380 converted freighter? Boeing is having a hard enough time getting enough orders for additional 748F's which have much less volume to fill. The whole air freight market is shifting to using belly capacity on passenger aircraft.

More and more The A380 project looks like a white elephant pride program that became economically nonviable prior to the official launch. Unofficially Airbus envied the 747 back in the 1980's and wanted to have their own large flagship aircraft. They made the A380 enough larger than the 747 that a new update of the 747 couldn't compete in size or CASM, but cooking in the 900 stretch into the 800 model meant smaller twins could catch up on CASM. The Airbus economic forecasts were wildly optimistic about the demand for ultra large aircraft. The 250 unit break even point seemed rather optimistic even before the CAD disaster that made the wiring harnesses too short. It's pretty obvious now the 800 will never pay back the development costs. Will a neo even make sense to make back more of the original capital costs, or would it just add more costs to be written off in the future?
 
Tedd
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 7:32 pm

An interesting & surprising turn of events. Reading the sentence "Airbus might also be required to commit to measures
to make the A380 more efficient before a deal is signed" it brought to mind if indeed Emirates had seen any worthwhile
improvements in their change of engine from GP 7020 to Trent 900, & whether one could expect further improvements
in the engine department, or that more efficiencies would have to be gained from the wing or perhaps less weight in the
frame somehow?
These latest RR powered frames have been plying Bangkok & Kuala Lumpur with some trips to Europe for some months
now so I would expect Emirates would be able to compare units. I`ve heard nothing on A.Net as to how they are working
out for them. Can anyone enlighten us?
 
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Boeing778X
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 7:37 pm

Mortyman wrote:
Airbus should seriously consider moving forward With an Airbus 380-900 neo


Great! Now who do you think will buy that waste of space besides EK?
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Iemand91
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 7:48 pm

frigatebird wrote:
It's one of the reasons KL kept flying the MD11s for so long, lease rates were ridiculously low. New aircraft were more expensive, even despite the efficiency advantages. Replacing 12 year old A380s with new, but hardly improved A380s won't bring many efficiency advantages.

Probably a bit off-topic; but weren't they all owned by KLM by the end? I'm not sure about PH-KCA and -KCI but I'm pretty sure at least the rest were owned.
(At least PH-KCD was according to KLM's own fleet overview)
Looks like between 2005 and 2010 they became owned by KLM after leasing them before.
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SFOATLFlyer
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 8:01 pm

Revelation wrote:
Bricktop wrote:
Reality is that unless an A388 aftermarket develops, lease rates have to go up or sales prices have to come down neither of which is good for the line's prospects. IMO the best aftermarket for an off-lease EK A388 is EK. Not for the very early frames, but later builds. Way cheaper than getting factory fresh models. Policies change with the times, or should.

frigatebird wrote:
I know. But I just wonder if this still would make financial sense regarding the finance of new aircraft. EK's 12 year policy is probably based on current renewal rates. But in a couple of years, if lessors face the problem of placing all those returned A380s with other airlines, things can be totally different. Renewal rates will be low, but lease rates for new A380s could be a lot higher than now, as a result of low resale value.

Tim Clark said his lease payments fully pay off the A380 in 12 years so they can all just get scrapped and become parts donors. I would suggest that he knows more about what the purchase price is and what EK's lease payments are than most of us. On the other hand he has a lot to lose if the A380 market collapses.

FromCDGtoSYD wrote:
If Emirates orders more and Airbus produces less. Wouldn't the gap between A388 end of production and the fabled 2025 A380neo narrow ?

It does lead to beautiful math: If EK continues to replace airframes every 12 years and takes 12 per year, its fleet stabilizes at 144 frames and we are being told the production line can more or less break even at that level and Airbus can even make a bit of money off the parts and services aspect of the business. All that is needed is reduced expectations, and it seems that's exactly what we have. Maybe EK wants to stabilize at less than 144 frames? If Airbus produces 10 per year and average replacement for the whole fleet stays around 12 years the world wide fleet can stabilize around 120 frames. Maybe that's what the world really wants/needs? I guess time will tell at what rate EK and the rest of the users will continue to replace A380s going forward. I suspect there will be a few others who will refresh their fleet going forward. We've seen SQ is already doing so. It'll be interesting to see what others such as BA and QF do going forward.


I believe Qantas has already stated they aren't taking their 8 undelivered aircraft. BA seems to be about the only carrier that is topping off orders aside from EK. Airbus should move the assembly to Dubai. Then a tacky 150 floor skyscraper could be built on top of the factory. :duck:
 
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 8:01 pm

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MoKa777
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 8:03 pm

Just when you thought it was over ... *dun*dun* ... 20 more!
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Slug71
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 8:09 pm

Tedd wrote:
An interesting & surprising turn of events. Reading the sentence "Airbus might also be required to commit to measures
to make the A380 more efficient before a deal is signed" it brought to mind if indeed Emirates had seen any worthwhile
improvements in their change of engine from GP 7020 to Trent 900, & whether one could expect further improvements
in the engine department, or that more efficiencies would have to be gained from the wing or perhaps less weight in the
frame somehow?
These latest RR powered frames have been plying Bangkok & Kuala Lumpur with some trips to Europe for some months
now so I would expect Emirates would be able to compare units. I`ve heard nothing on A.Net as to how they are working
out for them. Can anyone enlighten us?


A lot of weight can probably be saved by redesigning the wings and increased use of composites. Since only around 20% of the A380 is made of composites and the wing was designed for the -900 (which is not going to happen), I'd imagine a savings of several tons would easily be achievable.

Even if a stretch happens, Airbus has stated it won't be as long as the original -900, so the wings really should be redesigned.
 
Planesmart
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 8:23 pm

Revelation wrote:
Tim Clark said his lease payments fully pay off the A380 in 12 years so they can all just get scrapped and become parts donors. I would suggest that he knows more about what the purchase price is and what EK's lease payments are than most of us. On the other hand he has a lot to lose if the A380 market collapses.

All the A380 fleet is leased, some with external published parties, some external unpublished, and the balance internally through subsidiaries.
For the internal and unpublished external, we have no data, so must assume TC is correct., though I'm sure scrap value, and a forgiven final balloon payment are included (pro-rata cost of inspections accrued, interior refurbishment, etc). For external published leases, the value of the junior loan, is the value the leasor still has in the game, but again deduct scrap value and final balloon payment.

These are all sale/leaseback. EK buys the aircraft. The price paid by the leasor isn't necessarily the purchase price.

Also, is there an Airbus buyback or residual value guarantee at the end of the lease? And finally, does EK already have a buyback agreement in place? In other words a sale/leaseback/sale.

If the leases are as above, it's win win for all. Only risk for the leasor is attracting syndicate participants, which hasn't been a problem to-date. They don't share in losses/gains post end of lease, so 10-12 years is nice and clean.

As others have stated, in a normal market lease, for aircraft not in demand, lease rates for new aircraft of the same model would increase (assuming all other factors like cost of money, country risk, customer risk, etc are unchanged), as residual values fall, and in turn used lease rates fall.

But on VLA's, there is a new normal. The final balloon payment on an A380 could be USD20m or more, almost the remaining residual value on the books. Would you rather invest USD10m (less Airbus contribution) on fitting out a factory fresh, bare interior in a new A380 you would use for 12 years, or USD15m removing an old interior, then fitting new on an old aircraft you would use for 6 years?
 
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Mortyman
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Re: EK mulls 20 additional A380s

Wed Jun 07, 2017 8:25 pm

flyingclrs727 wrote:
Mortyman wrote:
Airbus should seriously consider moving forward With an Airbus 380-900 neo


The engine technology isn't good enough right now to make a neo worthwhile at this time. They are more likely to have something like an 850 rather than a 900. It should have a modest stretch to allow more rows of seat, but also improve the layout of the cabin to add even more seats.

I don't know if there ever will be a true 900 stretched as originally planned. That's a lot of capacity. It was originally touted as a solution for airlines that had two 747-400 flights scheduled between the same airports less than an hour apart like HKG-LHR. How many routes need that kind of capacity compared to the costs of developing, manufacturing, and maintaining such a model?



How far are we from such an engine improvement ?

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