Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

 
racercoup
Topic Author
Posts: 408
Joined: Sun Jan 28, 2007 10:48 pm

A380 Breakeven

Mon Apr 13, 2015 12:17 pm

I started this post two weeks ago and it disappeared without a word from moderators. I guess some Airbus fans had a beef with the subject. At any rate here is a news flash from Airbus with some answers: http://finance.yahoo.com/news/airbus...ds-more-time-decide-190329376.html

According to the article the A380 is not on a break even footing yet but will be by year's end. The words"Airbus hoped to maintain its financial performance" would seem to indicate Airbus is unsure of maintaining a 30 frame per year schedule.

The 5-year span of 2010 - 2014 produced a total of 116 sales between the 747/A380 of which 82 were from EK. There are no orders in sight to make up for current manufacturing rates so the back log is only due to shrink more.

Seems time to write-off the 4- engine VLA segment.
 
User avatar
gdg9
Posts: 1035
Joined: Thu Jun 30, 2005 9:42 am

RE: A380 Breakeven

Mon Apr 13, 2015 12:23 pm

Quoting racercoup (Thread starter):
Seems time to write-off the 4- engine VLA segment.

I'm not sure I'd write it off entirely, but it certainly appears now to be a niche market. That the A380 itself wouldn't exist without Emirates seems clear.
@dfwtower
 
SR4ever
Posts: 388
Joined: Sat Mar 20, 2010 6:19 pm

RE: A380 Breakeven

Mon Apr 13, 2015 12:34 pm

Quoting racercoup (Thread starter):
Seems time to write-off the 4- engine VLA segment.

Not necessarily, as we may see new orders for 388 in this decade

- EK is full, and won't order any 388. But a 388neo and the 389 would probably be a blockbuster for them
- QR and EY may order a few more 388
- Same with CZ and KE or OZ
- AF will delay delivery of its last 2 orders to 2018, but KL could order some for DTW and ATL
- TK is also likely to buy some, as current orders of longhaul aircrafts will be complete in 2017.
- IB, now doing better and better within IAG, could also get some for its busiest LatAm routes
- India is more and more promising as a market, and we cannot rule out orders there
- MU and CA are also good candidates.
 
JHwk
Posts: 577
Joined: Wed Jan 30, 2013 2:11 am

RE: A380 Breakeven

Mon Apr 13, 2015 1:01 pm

I would say it is time to rationalize the supply chain to support profitable operations at 15-20 frames per year. The prospects of 25+ frames per year in 2025 seem limited, but if manufacturing can be scaled back the 380 can have a long life.

The starting point would seem to be manufacturing more in one place rather than the absurd convoys, but I am no expert.
 
User avatar
HALtheAI
Posts: 296
Joined: Wed Feb 04, 2015 8:30 pm

RE: A380 Breakeven

Mon Apr 13, 2015 1:08 pm

Very little chance of the A380 getting cancelled. As long as the program can limp along at breakeven, they'll keep it alive. Now sure, that seems like a poor use of available capital for Airbus. But what happens if they did actually discontinue the A380? EK turns around and doubles their 777X order. It'll be a cold day in hell when Airbus management help Boeing sell more planes. And that's hardly an Airbus-exclusive strategy. Boeing kept insisting that the VLA market was tiny, yet could still somehow justify pissing 4 bill down the toilet on the 748 program just to put the final nail in the whale's coffin.
 
User avatar
mercure1
Posts: 5170
Joined: Sun Jul 13, 2008 5:13 am

RE: A380 Breakeven

Mon Apr 13, 2015 1:16 pm

I don't think the A380 will ever make a single €uro net profit for Airbus.

Its good they might finally 10-years after first flight manage to reach equilibrium on production basis, but to pay back the billions after billions on R&D €uros invested into the program will not be achievable in product life time.
mercure f-wtcc
 
User avatar
Ncfc99
Posts: 786
Joined: Tue May 31, 2005 2:42 am

RE: A380 Breakeven

Mon Apr 13, 2015 1:24 pm

Quoting gdg9 (Reply 1):
That the A380 itself wouldn't exist without Emirates seems clear.

Thats far from clear. The growth in passenger travel could have been absorbed by other carrier resulting in them buying more 38o's. SQ could have had more, as could BA, AF, LH etc etc. We will never know, but its far from clear.
 
SR4ever
Posts: 388
Joined: Sat Mar 20, 2010 6:19 pm

RE: A380 Breakeven

Mon Apr 13, 2015 1:52 pm

If Airbus offers a 388 and a 389 neo, we re likely to see many more orders.

Until then, the 388 can probably get a few more 50-80 orders from 10-15 different airlines.
 
ukoverlander
Posts: 408
Joined: Thu May 13, 2010 10:57 pm

RE: A380 Breakeven

Mon Apr 13, 2015 2:24 pm

Quoting racercoup (Thread starter):
Seems time to write-off the 4- engine VLA segment.

Seems like a flamebait thread Racercoup.....just sayin'!

[Edited 2015-04-13 07:29:27]
 
User avatar
Revelation
Posts: 26053
Joined: Wed Feb 09, 2005 9:37 pm

RE: A380 Breakeven

Mon Apr 13, 2015 2:28 pm

Quoting SR4ever (Reply 7):
If Airbus offers a 388 and a 389 neo, we re likely to see many more orders.

"Many" is debatable. It seems Airbus is having a hard time making the A380neo business case work, yet depending on how you define "many", the business case should not be that hard to make. Also, there is no indication at all of any interest within Airbus for an A389 any time soon.

There were rumors that we'd have an A380neo announcement at the Paris air show this summer that Airbus didn't bother to squash until recently. EK's Tim Clark has already said he expected to have a decision in March and complained that he did not get one.

So, all indications are that the A380neo decision is a difficult one and the A389 is not even on the table, which suggests to me at least that there are not "many" orders out there for an A388neo/A389 offering to secure.

[Edited 2015-04-13 07:31:40]
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
SR4ever
Posts: 388
Joined: Sat Mar 20, 2010 6:19 pm

RE: A380 Breakeven

Mon Apr 13, 2015 2:38 pm

Quoting Revelation (Reply 9):
So, all indications are that the A380neo decision is a difficult one and the A389 is not even on the table, which suggests to me at least that there are not "many" orders out there for an A388neo/A389 offering to secure.

The reasons for such delay may be a tad different, and might be more industrial than commercial, Airbus has said that its would be quite busy with the 350 and 330neo...
 
User avatar
Stitch
Posts: 27542
Joined: Wed Jul 06, 2005 4:26 am

RE: A380 Breakeven

Mon Apr 13, 2015 3:10 pm

Quoting gdg9 (Reply 1):
That the A380 itself wouldn't exist without Emirates seems clear.
Quoting ncfc99 (Reply 6):
Thats far from clear. The growth in passenger travel could have been absorbed by other carrier resulting in them buying more 38o's. SQ could have had more, as could BA, AF, LH etc etc. We will never know, but its far from clear.

It certainly would have existed without Emirates since they originally only ordered seven of them (five passenger and two freighter).

What I believe we can say is that without Emirates, the program would have significantly less orders than it does now as I believe the other customers would each have at best maybe doubled their current orders. Emirates has clearly been the driver in pushing the program as far as it has.
 
AT
Posts: 905
Joined: Tue Jul 25, 2000 12:16 pm

RE: A380 Breakeven

Mon Apr 13, 2015 3:24 pm

Granted the A380 may not be a big money maker for Airbus but the complementary question is whether it's a money maker for the airlines that fly them. If the answer to that is yes, then it still qualifies as a successful aircraft.
 
ScottB
Posts: 7344
Joined: Fri Jul 28, 2000 1:25 am

RE: A380 Breakeven

Mon Apr 13, 2015 5:07 pm

Quoting SR4ever (Reply 7):
If Airbus offers a 388 and a 389 neo, we re likely to see many more orders.

Until then, the 388 can probably get a few more 50-80 orders from 10-15 different airlines.

I think that presents a bit of a quandary for prospective buyers. Do they buy the current version which would lose quite a bit of its value if/when an A388neo were to be offered/manufactured in the future, or do they wait hoping that Airbus will go ahead and offer it soon -- so they don't have to invest capital in the earlier, less desirable version.

There's a dilemma for Airbus as well, since customers who need planes the size of the A380 are going to need A380's whether they are the current version or the neo version. Do they achieve better return on investment from additional sales/higher prices for the neo than they would from continuing to offer the current A380 with incremental upgrades?

Quoting SR4ever (Reply 2):
AF will delay delivery of its last 2 orders to 2018, but KL could order some for DTW and ATL

KL will not order A380's for flights to DL hubs; DL has been resistant to AF/KL using the A380 on transatlantic sectors because they want to keep capacity down.

Quoting SR4ever (Reply 2):
India is more and more promising as a market, and we cannot rule out orders there

IMO India is zero-sum with respect to the ME3/TK -- A380's which go to Indian carriers will mostly negate the need for A380's in the Gulf or at TK since they'd be competing for the same traffic flows.

Quoting SR4ever (Reply 2):
Same with CZ and KE or OZ

Has CZ yet figured out what to do with theirs?

Quoting HALtheAI (Reply 4):
But what happens if they did actually discontinue the A380? EK turns around and doubles their 777X order. It'll be a cold day in hell when Airbus management help Boeing sell more planes. And that's hardly an Airbus-exclusive strategy. Boeing kept insisting that the VLA market was tiny, yet could still somehow justify pissing 4 bill down the toilet on the 748 program just to put the final nail in the whale's coffin.

IMO the 748 wasn't launched primarily to damage the A380, but rather to address the freighter market for which the A380 is relatively poorly-suited (due to the structural need for the upper deck to be retained). The 748-I is a relatively low-cost model to offer if the freighter is being built. The key problem for Boeing is that they failed to execute the program effectively so the cost overruns have made it a money-loser -- just as execution was a problem for Airbus and the A380.

Airbus does a disservice to its shareholders if it launches a money-losing A380neo program primarily to take sales away from the 777X. IMO they'd be better-off investing in a different market segment -- like perhaps the one which used to be occupied by the 757/767/A300/A310 along with the 787-8.
 
User avatar
PW100
Posts: 4123
Joined: Mon Jan 28, 2002 9:17 pm

RE: A380 Breakeven

Mon Apr 13, 2015 5:48 pm

Quoting ScottB (Reply 14):
IMO the 748 wasn't launched primarily to damage the A380, but rather to address the freighter market for which the A380 is relatively poorly-suited (due to the structural need for the upper deck to be retained). The 748-I is a relatively low-cost model to offer if the freighter is being built. The key problem for Boeing is that they failed to execute the program effectively so the cost overruns have made it a money-loser -- just as execution was a problem for Airbus and the A380.

When Boeing launched the 748 program, they expected twice the numbers of sales for the pax version vs the freighter version. Suggesting that the 748 program was launched primarily to address the freighter market, is therefore rather debatable.
Immigration officer: "What's the purpose of your visit to the USA?" Spotter: "Shooting airliners with my Canon!"
 
User avatar
AirlineCritic
Posts: 1779
Joined: Sat Mar 14, 2009 1:07 pm

RE: A380 Breakeven

Mon Apr 13, 2015 5:54 pm

Quoting sassiciai (Reply 13):
I'm getting bored by your message, repeated at every opportunity that others provide, and now in a new thread you started yourself!

Please be more original in your contributions, and less open in your hatred of the 380. It's a plane, so WTF! Are you interested in aircraft, or what?

..and I bet you don't have a crystal ball, either. Look at what has happened in this century alone that has had massive and unpredicted impacts on civil aviation. Just think about 9/11, the financial crisis, and most recently the halving of the oil price. So stick your neck out with care!

Wise words from Sassiciai. For all of us, pro- and against-, A-, B-, and other aviation fans.
 
User avatar
Revelation
Posts: 26053
Joined: Wed Feb 09, 2005 9:37 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:07 pm

Quoting SR4ever (Reply 10):
The reasons for such delay may be a tad different, and might be more industrial than commercial, Airbus has said that its would be quite busy with the 350 and 330neo...

Yes, that's definitely a factor, but it's one that was in place for quite a while, long before Mr Clark's expected decision.

Quoting sassiciai (Reply 13):
Look at what has happened in this century alone that has had massive and unpredicted impacts on civil aviation. Just think about 9/11, the financial crisis, and most recently the halving of the oil price. So stick your neck out with care!

Not sure I'm understanding your point. After 9/11 the first planes to get sent to the desert were the four-engined VLAs, and almost none of them ever returned.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
ec99
Posts: 262
Joined: Mon Mar 16, 2015 2:18 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:08 pm

Quoting ScottB (Reply 14):
Airbus does a disservice to its shareholders if it launches a money-losing A380neo program primarily to take sales away from the 777X. IMO they'd be better-off investing in a different market segment -- like perhaps the one which used to be occupied by the 757/767/A300/A310 along with the 787-8.

Airbus obviously does a disservice to shareholders if it launches a money-losing A380 neo program. But it also does a disservice to shareholders if it launches a A380neo program that the company projects to only breakeven with breakeven defined as all revenue from sales and maintenance programs covering all costs to develop and build the airplane.

Tying up billions of dollars for 20 years with little chance of significant return is not a sound business decision. That money should be invested elsewhere or returned to shareholders. Airbus is also traded on multiple exchanges (all with complex rules on corporate governance ) which could lead to trouble down the road if they launch the NEO program for political or other non-financial reasons and it ends up being a money loser.
 
User avatar
sassiciai
Posts: 1130
Joined: Mon Jan 07, 2013 8:26 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:21 pm

Quoting Revelation (Reply 17):
Look at what has happened in this century alone that has had massive and unpredicted impacts on civil aviation. Just think about 9/11, the financial crisis, and most recently the halving of the oil price. So stick your neck out with care!

Not sure I'm understanding your point. After 9/11 the first planes to get sent to the desert were the four-engined VLAs, and almost none of them ever returned.

I was only reacting to an extreme remark about the "certain death" of the 4-engined aircraft

At least with current technology engines, it certainly looks like 2-engines are enough for most, when they are at or above 100k thrust. If "new" technology engines with massive fuel economies come in at half that thrust level, who can dismiss another round of 4-engined offerings!
 
User avatar
Revelation
Posts: 26053
Joined: Wed Feb 09, 2005 9:37 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:25 pm

Quoting sassiciai (Reply 19):
At least with current technology engines, it certainly looks like 2-engines are enough for most, when they are at or above 100k thrust. If "new" technology engines with massive fuel economies come in at half that thrust level, who can dismiss another round of 4-engined offerings!

Ah, OK, I got it. I've seen a few blended-wing-body designs with more than 2 engines so it certainly is in the realm of possibility.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
User avatar
Stitch
Posts: 27542
Joined: Wed Jul 06, 2005 4:26 am

RE: A380 Breakeven

Mon Apr 13, 2015 6:30 pm

Quoting ScottB (Reply 14):
The 748-I is a relatively low-cost model to offer if the freighter is being built.

It wasn't that low-cost. Even with the (original) 20 orders from LH and some VIP orders, Boeing considered cancelling the program as they were having a hard time getting anyone else on-board.

They obviously went forward with it, but I remember reading in financial reports that they spent many, many hundreds of millions to bring the Intercontinental to market and it might very well have passed the billion-dollar mark.
 
holzmann
Posts: 599
Joined: Mon Jan 17, 2011 3:43 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:30 pm

I still maintain that the NEO question is one that A can't answer. It's a question for RR, EA, PW, GE, etc.
DISCLAIMER: Airliners.net is an AIRBUS forum. Boeing Commercial Airplanes, if it has considered doing so in the past, should in no way consider supporting this website.
 
astuteman
Posts: 7357
Joined: Mon Jan 24, 2005 7:50 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:40 pm

Quoting Revelation (Reply 9):
So, all indications are that the A380neo decision is a difficult one

In a way that is as it should be and should re-assure the sceptics that Airbus aren't just rushing to throw good money after bad.
By the same token it should also mean that any decision to launch an upgraded A380 has been well thought out and tested both in the market and in the CFO's office

Quoting ukoverlander (Reply 8):
Seems like a flamebait thread Racercoup

The fact that this thread or one of its relatives re-appears seemingly every week would indicate thus


Quoting ScottB (Reply 14):
IMO the 748 wasn't launched primarily to damage the A380, but rather to address the freighter market

According to Boeing the 748 was launched as a passenger plane in its own right with a freighter variant.

Quoting holzmann (Reply 22):
I still maintain that the NEO question is one that A can't answer. It's a question for RR, EA, PW, GE, etc.

I'd go further and suggest that it can only be answered by a combination of Airbus, RR,EA, PW, EK, SQ, QF, QR etc etc

And Racercoup of course  

Rgds
 
User avatar
Ncfc99
Posts: 786
Joined: Tue May 31, 2005 2:42 am

RE: A380 Breakeven

Mon Apr 13, 2015 6:43 pm

Quoting EC99 (Reply 18):
Airbus obviously does a disservice to shareholders if it launches a money-losing A380 neo program. But it also does a disservice to shareholders if it launches a A380neo program that the company projects to only breakeven with breakeven defined as all revenue from sales and maintenance programs covering all costs to develop and build the airplane.

Tying up billions of dollars for 20 years with little chance of significant return is not a sound business decision. That money should be invested elsewhere or returned to shareholders. Airbus is also traded on multiple exchanges (all with complex rules on corporate governance ) which could lead to trouble down the road if they launch the NEO program for political or other non-financial reasons and it ends up being a money loser.

The general consensus of opinion is that the 380neo is going to cost about $1b and EK have stated they will order 100(possibly 200) which should cover that cost. Other airlines will order replacements for existing frames. Still more airlines will add the A380 to their fleet IMHO. Sales of the neo will be in the 300-400 range during the next decade in my opinion, easily paying back the $1b development costs oif the neo and a chunk of the original development costs of the A380. Its a no brained to go ahead with it in my opinion.
 
User avatar
BaconButty
Posts: 897
Joined: Tue Aug 06, 2013 3:42 pm

RE: A380 Breakeven

Mon Apr 13, 2015 6:53 pm

Alan Epstein (vp of Technology at P&W) recently suggested that 4 engined aircraft could make a return FWIW - it was on Scott Hamilton's site. Too pikey to buy a subscription, but it'll be to do with the D8 work they've been doing with Nasa - http://aviationweek.com/technology/r...ted-future-pratt-s-geared-turbofan
Down with that sort of thing!
 
ODwyerPW
Posts: 1624
Joined: Thu Dec 09, 2004 6:30 am

RE: A380 Breakeven

Mon Apr 13, 2015 7:00 pm

Quoting astuteman (Reply 23):
Quoting ukoverlander (Reply 8):Seems like a flamebait thread Racercoup
The fact that this thread or one of its relatives re-appears seemingly every week would indicate thus

Agree.. move along folks.. nothing to see here but a bunch of panties getting twisted.

Ultimately, we will see an A380-900.. simple stretch.. with the engines develped for the A380-800neo.

I'm skeptical that our fuel holiday will last indefinitely.
learning never stops.
 
11Bravo
Posts: 1683
Joined: Tue Feb 15, 2005 8:54 am

RE: A380 Breakeven

Mon Apr 13, 2015 7:11 pm

Quoting ncfc99 (Reply 24):
The general consensus of opinion is that the 380neo is going to cost about $1b and EK have stated they will order 100(possibly 200) which should cover that cost.

That cost seems like a very low-ball figure. Before the problems, the development cost for the B747-8 was more than twice that figure and it ended up being almost four times that amount. How will Airbus deliver a significantly improved product on such a limited budget?
WhaleJets Rule!
 
User avatar
BaconButty
Posts: 897
Joined: Tue Aug 06, 2013 3:42 pm

RE: A380 Breakeven

Mon Apr 13, 2015 7:18 pm

Quoting 11Bravo (Reply 27):
That cost seems like a very low-ball figure. Before the problems, the development cost for the B747-8 was more than twice that figure and it ended up being almost four times that amount. How will Airbus deliver a significantly improved product on such a limited budget?

It's more akin to the A320-neo project which cost c$1.5bn and has to certify 6 engine/airframe combinations.
Down with that sort of thing!
 
User avatar
Stitch
Posts: 27542
Joined: Wed Jul 06, 2005 4:26 am

RE: A380 Breakeven

Mon Apr 13, 2015 7:32 pm

Quoting 11Bravo (Reply 27):
How will Airbus deliver a significantly improved product on such a limited budget?

The main changes they will need to make is the interfacing between the airframe and the new engines.

The largest cost driver - the new engines themselves - will be borne by whomever wins the contract (assumed to be Rolls-Royce).

[Edited 2015-04-13 12:32:53]
 
SR4ever
Posts: 388
Joined: Sat Mar 20, 2010 6:19 pm

RE: A380 Breakeven

Mon Apr 13, 2015 7:59 pm

Quoting Stitch (Reply 29):
The main changes they will need to make is the interfacing between the airframe and the new engines.

And some of the innovations developped with the 350 can also be recycled into the 380-neo.

The biggest in-house issue would be a XWB allowing 11-seat abreast.
 
Tancrede
Posts: 235
Joined: Wed May 10, 2006 3:16 pm

RE: A380 Breakeven

Mon Apr 13, 2015 8:18 pm

Quoting racercoup (Thread starter):
Seems time to write-off the 4- engine VLA segmen

So I believe that you are talking also about the 747-8.
 
User avatar
Stitch
Posts: 27542
Joined: Wed Jul 06, 2005 4:26 am

RE: A380 Breakeven

Mon Apr 13, 2015 8:22 pm

Quoting SR4ever (Reply 30):
The biggest in-house issue would be a XWB allowing 11-seat abreast.

The current A380 cabin is wide enough to provide 3+5+3 seating with 18" seat cushion width and I believe Airbus has already internally certified such a configuration.
 
ec99
Posts: 262
Joined: Mon Mar 16, 2015 2:18 pm

RE: A380 Breakeven

Mon Apr 13, 2015 9:40 pm

Quoting ncfc99 (Reply 24):
The general consensus of opinion is that the 380neo is going to cost about $1b and EK have stated they will order 100(possibly 200) which should cover that cost.

If it was only going to cost 1 billion dollars I would agree it would be a no brainer to go ahead with it. But, if your numbers were right Airbus would have announced the NEO months ago. The people in Toulouse are not stupid. If the financial case is there they will move forward with the A-380 (and maybe even if it is not). This delay in making a decision is almost certainly because it is not as clear as you believe and they need to make sure the numbers add up.

On a related note, if EK buys 200 frames, the deal they will get would likely means Airbus is not making a whole lot of money per frame on the EK order.
 
User avatar
MrHMSH
Posts: 2786
Joined: Sat Oct 12, 2013 7:32 pm

RE: A380 Breakeven

Mon Apr 13, 2015 9:46 pm

Quoting EC99 (Reply 33):
On a related note, if EK buys 200 frames, the deal they will get would likely means Airbus is not making a whole lot of money per frame on the EK order.

Probably not, but 200 A380s keeps the line going, meaning that the existing A380 customers will have a strong option to replace them. That's about 150 A380s, but then you may also get some new ones e.g top ups to expand fleets and airlines like TK and maybe IB.
 
User avatar
BaconButty
Posts: 897
Joined: Tue Aug 06, 2013 3:42 pm

RE: A380 Breakeven

Mon Apr 13, 2015 11:40 pm

Quoting EC99 (Reply 33):
If it was only going to cost 1 billion dollars I would agree it would be a no brainer to go ahead with it. But, if your numbers were right Airbus would have announced the NEO months ago.

The problem is more that Emirates will want to take these through 2030. They currently have 140 on order, iirc 30 of which they are looking at being Neos. Add another 100 and that's 130 delivered 2020-30, 13 a year. So Bregier et al need to ask themselves:
1. What is the minimum viable production rate?
2. What other sales can they expect a neo to drive out?
3. Can they get any other pre 2020 sales?
4. Can they afford to idle the line prior to 2020?

If the answer to 1. is 25, the answer to 2. needs to be >120, which, with the other Middle Eastern airlines, top ups and rollovers from existing customers, and emerging markets should be doable. But it's all guesswork.

I expect them to do it, even if it's a bit of a punt: there's the real possibility this aircraft will come into its own in the 2020's, and it might be worth the gamble (in the way that tech companies do some acquisitions). I still think they need to do the stretch though - it'll be vastly more competitive and could be genuinely disruptive. That would be a punt.
Down with that sort of thing!
 
User avatar
HALtheAI
Posts: 296
Joined: Wed Feb 04, 2015 8:30 pm

RE: A380 Breakeven

Tue Apr 14, 2015 12:01 am

Quoting EC99 (Reply 32):
If it was only going to cost 1 billion dollars I would agree it would be a no brainer to go ahead with it. But, if your numbers were right Airbus would have announced the NEO months ago. The people in Toulouse are not stupid. If the financial case is there they will move forward with the A-380 (and maybe even if it is not). This delay in making a decision is almost certainly because it is not as clear as you believe and they need to make sure the numbers add up.

I don't think the problem is the business case for the NEO, because EK will order enough to make that a fairly easy decision. No, the issue is with the CEO and its huge, gaping production hole circa 2018-19.

LIVE ORDERS
Asiana 4
British Airways 5
Emirates 56: 25 more are scheduled for delivery starting in 2020
Etihad 5
Qatar 7
Singapore 5
Qantas 2: 6 more are set for delivery in 2018/19 but I expect they'll end up getting NEO'd
Transaero 4: probably go bankrupt before taking delivery of all of them, but that can still be profitable for Airbus*

DEAD ORDERS
Amedeo 20: can't find a customer to take any, even after a couple years of trying
Air France 2: don't want any more, will probably will end up getting converted to A350s
Air Austral 2
Virgin Atlantic 6
Undisclosed Chinese 10

So there's a total of 88 A380s that Airbus can be relatively confident will actually end up getting delivered, barring any new orders. EIS of the NEO would likely be targetted for 2020, but might end up slipping to 2021. So Airbus's only hope is if EK pushes up delivery of their 25 post-2020 frames along with a halving of production rates during 2018-19.

*The Skymark orders were the only whales Airbus would've actually made a profit off of. BC made $225M in stage payments towards their first two before going bankrupt, and although some of that would've been for the engines and cabin interiors, Airbus still made off like a bandit. Though they do now have a couple parked A380s they need to offload on somebody (Turkish?).

[Edited 2015-04-13 17:04:29]
 
racercoup
Topic Author
Posts: 408
Joined: Sun Jan 28, 2007 10:48 pm

RE: A380 Breakeven

Tue Apr 14, 2015 2:51 am

Quoting AT (Reply 12):
Granted the A380 may not be a big money maker for Airbus but the complementary question is whether it's a money maker for the airlines that fly them. If the answer to that is yes, then it still qualifies as a successful aircraft

So aircraft manufacturers can lose billions of dollars and somehow that is a successful equation? How would money be raised if programs were routinely unprofitable?

Quoting Tancrede (Reply 30):
So I believe that you are talking also about the 747-8.

Yes, the 747 as well. Unless Boeing can make money on the freighter version at low production rates.

How low can production rates go and have the manufacturer still make a profit. Boeing is already at 18 per year and sales are not supporting that number to continue. As was pointed out earlier in this thread the Airbus convoy system was not designed with 15 frames a year in mind.


For those that have a problem with this post be my guest and ignore it.
 
abba
Posts: 1385
Joined: Mon Jun 06, 2005 12:08 pm

RE: A380 Breakeven

Tue Apr 14, 2015 6:54 am

Quoting SR4ever (Reply 10):
The reasons for such delay may be a tad different, and might be more industrial than commercial, Airbus has said that its would be quite busy with the 350 and 330neo...

I believe it is unthinkable that Airbus will announce any decision for a 380NEO before they have to begin full scale development. For many very good reasons (existing orders being converted, potential orders being delayed, unforeseen problems in the engine development program etc.), it is in Airbus' interest to keep the time between official launch and first delivery as short as they possibly can. And as there are still a few years before the engine candidate is ready, we will need to wait yet some time before Airbus is going to publicly announce anything.
 
User avatar
JerseyFlyer
Posts: 1643
Joined: Fri May 25, 2007 7:24 pm

RE: A380 Breakeven

Tue Apr 14, 2015 7:31 am

There is no reason why the business case for the neo, spread over 20 years, could not encompass a few early years very low producion of ceos. Remember the hiatus in 747 production between the last 744 and first 748?
 
User avatar
HALtheAI
Posts: 296
Joined: Wed Feb 04, 2015 8:30 pm

RE: A380 Breakeven

Tue Apr 14, 2015 8:10 am

Quoting HALtheAI (Reply 35):
British Airways 5
...
Etihad 5
Qatar 7

Should actually be
British Airways 3
Etihad 9
Qatar 6

So net change of +1 for safe A380 deliveries.

Was rushing too much before going to bed.
 
brindabella
Posts: 723
Joined: Fri Apr 30, 2010 10:38 am

RE: A380 Breakeven

Tue Apr 14, 2015 12:42 pm

Quoting ODwyerPW (Reply 25):
I'm skeptical that our fuel holiday will last indefinitely.

Interesting.
I'm influenced by the apparent technical progress made by the fracking operators, both in terms of reservoir recovery, and especially in terms of cost.
The reports that most wells are now able to be completed in the $50-$60/bbl range seems to support the conclusion that the shale-fields now represent the "swing" factor.
EG If the price sneeks above that, then the shale drills power-up ...

Quoting EC99 (Reply 32):
Quoting ncfc99 (Reply 24):
The general consensus of opinion is that the 380neo is going to cost about $1b and EK have stated they will order 100(possibly 200) which should cover that cost.

If it was only going to cost 1 billion dollars I would agree it would be a no brainer to go ahead with it. But, if your numbers were right Airbus would have announced the NEO months ago. The people in Toulouse are not stupid. If the financial case is there they will move forward with the A-380 (and maybe even if it is not). This delay in making a decision is almost certainly because it is not as clear as you believe and they need to make sure the numbers add up.

One part of it, for sure.

If RR was as mad-keen to finance the Advance in the way that has been asserted on these pages, it should indeed be a no-brainer.
All upside for Airbus, no?

Surely another part is the (unanswered) objection above, noting that EK will order the A380-ceo anyway.
(And, sadly, it seems we are really only talking about EK now, at least for a substantial time to come.)

And, so, why wouldn't the A380-ceo remain viable into the future?
No-one should doubt that TC's glowing descriptions of it;s passenger appeal will remain true. So why not stick with that?
EK's strategy is to intro with the (small) 77W, then upgrade to the A380 once the route is humming.
Can't see that the 777-9 will materially affect that.

cheers Bill
Billy
 
User avatar
HALtheAI
Posts: 296
Joined: Wed Feb 04, 2015 8:30 pm

RE: A380 Breakeven

Tue Apr 14, 2015 5:24 pm

Quoting brindabella (Reply 40):
Surely another part is the (unanswered) objection above, noting that EK will order the A380-ceo anyway.

The only thing I recall Clark saying is that if Airbus decided against the NEO, EK would buy more CEOs, but without stating how many. It could be as little as 25 more A380s, which is hardly going to be enough to keep the program going. From the estimates I've read, it would probably cost Airbus €2-3 billion to shutdown the A380 line, plus leave a lot of disgruntled governments across Europe who invested in the program. Hence keeping the whale alive and hoping the market for VLAs firms up over time seems like the more viable route for Airbus.

The statements by Clark where he provided hard numbers (60-70, then 100, then 100-200) were all conditional on a new engine. It's likely EK and Airbus have already held talks on the matter and Clark would've laid out some sort of 'incentives' program for the A380NEO, along the lines of
100 orders: A380-800NEO
+25 orders: Airbus spends an extra billion to wring out more aerodynamic improvements
+25 orders: RR uses the Advance engine instead of the TrentXWB
+50 orders: A380-900NEO

Quoting brindabella (Reply 40):
And, so, why wouldn't the A380-ceo remain viable into the future?
No-one should doubt that TC's glowing descriptions of it;s passenger appeal will remain true. So why not stick with that?
EK's strategy is to intro with the (small) 77W, then upgrade to the A380 once the route is humming.
Can't see that the 777-9 will materially affect that.

EK has to look at it from a CASM perspective and what the competition will be flying. The A380 at the moment is the most efficient (if you can fill it!) on medium- to long-haul routes, beating even the 77W. The 779X will change all that, and likely by a wide margin. When your business model is based on low prices, you can't afford to fly anything but the most cost-effective planes. If fuel consumption matters so little, why have EK been pushing so hard for the re-engining?
 
User avatar
EPA001
Posts: 3893
Joined: Tue Sep 12, 2006 8:13 pm

RE: A380 Breakeven

Tue Apr 14, 2015 5:38 pm

Quoting HALtheAI (Reply 41):
he 779X will change all that, and likely by a wide margin

That remains to be seen. You might have to compare a 2020 B777-9 with a 2021 A380-800-neo, possibly even an A380-900-neo. Which might kill the CASM economics of a full B777-9X even if the A380-900-neo is only at 60% full. All theoretical of course, and the A380-neo might never see the light of day, but to state that the B779 "will change all that, and likely by a wide margin" is much more based on wishful thinking then on reality. Time will tell how the market will look in the 2020-2030 timeframe and which airliners will be competing for market share in that decade.
 
User avatar
Stitch
Posts: 27542
Joined: Wed Jul 06, 2005 4:26 am

RE: A380 Breakeven

Tue Apr 14, 2015 5:44 pm

Quoting brindabella (Reply 40):
Surely another part is the (unanswered) objection above, noting that EK will order the A380-ceo anyway.
Quoting HALtheAI (Reply 41):
The only thing I recall Clark saying is that if Airbus decided against the NEO, EK would buy more CEOs, but without stating how many. It could be as little as 25 more A380s, which is hardly going to be enough to keep the program going.

Unless something catastrophic happens to their traffic models, EK is going to have to replace A380-800s with A380-800s so it's a pretty safe bet, IMO, they're good for a fair bit more than 25 just for future replacement, to say nothing of future expansion.
 
User avatar
speedbored
Posts: 2230
Joined: Fri Jul 19, 2013 5:14 am

RE: A380 Breakeven

Tue Apr 14, 2015 6:30 pm

Quoting HALtheAI (Reply 41):
hen your business model is based on low prices, you can't afford to fly anything but the most cost-effective planes.

Not true. You can afford to fly any aircraft that is more cost effective than whatever your competitors are flying. EKs hub location and the current size of their operation means that there are not that many routes where their competitors will be able to operate such large aircraft.

Quoting HALtheAI (Reply 41):
If fuel consumption matters so little

Fuel is not the only cost - purchasing and operating one aircraft instead of two offers massive savings that could more than offset even quite a significant difference in fuel efficiency.

Quoting HALtheAI (Reply 41):
why have EK been pushing so hard for the re-engining?

Any well run business will always be seeking to reduce costs and increase profits, regardless of whether it gives them a competitive advantage.
 
ec99
Posts: 262
Joined: Mon Mar 16, 2015 2:18 pm

RE: A380 Breakeven

Tue Apr 14, 2015 6:40 pm

Quoting BaconButty (Reply 34):
The problem is more that Emirates will want to take these through 2030. They currently have 140 on order, iirc 30 of which they are looking at being Neos. Add another 100 and that's 130 delivered 2020-30, 13 a year. So Bregier et al need to ask themselves:
1. What is the minimum viable production rate?
2. What other sales can they expect a neo to drive out?
3. Can they get any other pre 2020 sales?
4. Can they afford to idle the line prior to 2020?

I failed to factor this issue in my previous post and I concede the issue is of great importance. If they announce a NEO now, they may well not have enough orders to keep the A380 line rolling until the NEOs 2020 proposed EIS and the problem would only be exacerbated if the EIS was delayed into 2021. Airbus has to figure out what it would cost to slow the line down (if they cant get more orders for the CEO) and put that on the cost side of the equation. I have no idea how much this would cost, although perhaps someone with expertise in this area does.
 
ytz
Posts: 3529
Joined: Thu Jun 25, 2009 12:31 am

RE: A380 Breakeven

Tue Apr 14, 2015 7:01 pm

Quoting ncfc99 (Reply 6):
Thats far from clear. The growth in passenger travel could have been absorbed by other carrier resulting in them buying more 38o's. SQ could have had more, as could BA, AF, LH etc etc. We will never know, but its far from clear.

You're talking about carriers that engage in "capacity controls" to "improve yield". Why would they order the A380 and throw massive capacity on a route, when they really want to create a bit of artificial scarcity and boost prices?

Also, EK and DXB is a unique situation in that it's a single (congested) hub, operating to many cities (several of which are congested) with a handful of flights per day, and quite a few that are ultra long haul. It's a "right place - right time" situation. EY and QR aren't ordering as many A380s. They could never fill them. Were that traffic to be spread out over several carriers, you'd see upgague in average aircraft size, but nowhere close to A380 size. Mostly, you'd see a few more frequencies, a bit of an upgauge (772 sized to 773 sized) and higher fares (from capacity controls).

I think the A380/EK/DXB nexus is just unique and contextual. Can't see it happening anywhere else. BA, AF, LH, SQ, etc. would order more A380s. Doubt they'd order 140 more combined though.....
 
User avatar
HALtheAI
Posts: 296
Joined: Wed Feb 04, 2015 8:30 pm

RE: A380 Breakeven

Tue Apr 14, 2015 7:07 pm

Quoting EPA001 (Reply 42):
That remains to be seen. You might have to compare a 2020 B777-9 with a 2021 A380-800-neo, possibly even an A380-900-neo. Which might kill the CASM economics of a full B777-9X even if the A380-900-neo is only at 60% full.

The remark about the 779X being better by a "wide margin" is in relation to the A380CEO, so I'm not arguing with you that a NEO (particularly a stretch) wouldn't be able to regain the CASM crown. I apologize if I wasn't clear.

Quoting Stitch (Reply 43):
Unless something catastrophic happens to their traffic models, EK is going to have to replace A380-800s with A380-800s so it's a pretty safe bet, IMO, they're good for a fair bit more than 25 just for future replacement, to say nothing of future expansion.

Their latest deliveries, assuming a 12-year replacement cycle, means that they'll have 80+ till near 2030. Obviously it's still early and it might end up missing performance targets, but if the 779X ends up with a 10% CASM advantage over the A380CEO, will EK really be able to continue flying it all over the world? It would probably end up relegated to some premium-heavy routes, like to LHR/FRA/CDG/JFK, or ones restricted by bilaterals, like YYZ. Their current gate congestion at DXB will ease once they move operations to DWC. The current ratio of 777 to A380 of 2:1 could end up shifting to 3:1 or more as EK decides to spend a greater share of their money on the more fuel-efficient 779X.

Quoting speedbored (Reply 44):
EKs hub location and the current size of their operation means that there are not that many routes where their competitors will be able to operate such large aircraft.
TK and QR likely can, and QR already have 50 779X on order.

Quoting speedbored (Reply 44):
Fuel is not the only cost - purchasing and operating one aircraft instead of two offers massive savings that could more than offset even quite a significant difference in fuel efficiency.

First of all, EK have already ordered the 777X in large quantities, so they're going to have at least two different aircraft in their fleet for a while, probably three if they go through with their regional purchase. And based on this article, I'm guessing the A380 will always have significantly higher maintenance costs than other aircraft.

Quote:
From the Flightglobal article:
Maintenance tasks that can be completed on the ramp for smaller aircraft – such as replacing a rudder servo-control actuator – need to be conducted in a hangar with appropriate support equipment to handle the superjumbo's large components, says Air France A380 fleet manager Pascal Menegat. This makes the aircraft's support more dependent on dedicated facilities than other, smaller types. Due to the limited fleet size and number of operators, this may be further aggravated by the fact that appropriate maintenance capabilities and facilities are less widespread than for more commonly used types.


[Edited 2015-04-14 12:17:12]
 
User avatar
sassiciai
Posts: 1130
Joined: Mon Jan 07, 2013 8:26 pm

RE: A380 Breakeven

Tue Apr 14, 2015 7:37 pm

It's quite interesting to note that each time there is a claim of minuscule increase in A380 performance that the World and his dog ask for all sorts of verifiable sources, yet it seems to be a given that the B777-9 will be a slam dunk!

How many existing models got so much better when they were "revamped"? The B777-9 "revamp" is not negligible! The B777-8?
 
User avatar
Stitch
Posts: 27542
Joined: Wed Jul 06, 2005 4:26 am

RE: A380 Breakeven

Tue Apr 14, 2015 7:44 pm

Quoting HALtheAI (Reply 47):
Obviously it's still early and it might end up missing performance targets, but if the 779X ends up with a 10% CASM advantage over the A380CEO, will EK really be able to continue flying it all over the world?


Sure, because the A380-800 will have much better than a 10% RASM advantage due to having a 40% greater seat count than the 777-9 in the announced EK configurations(1). So the A380 will generate far more money than it spends compared to the 777-9 just as it does to the 777-300ER:

(1)
A380-800: 615 [58 C | 557 Y]
777-9: 440 [49J | 391Y]

[Edited 2015-04-14 12:48:31]

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos