Abreblog

The A380 is destined to be a money-loser for Airbus. It’s not that the market for a plane of that size isn’t there, it will be. It’s not because Airbus has botched the roll-out of the plane; it has but that won’t mean much in a few years. It’s not because the plane is too big for airports to handle; airports are rolling over themselves to get ready for it. It’s not because passengers are going to have to wait in long lines at customs or to board the plane; customer comfort and convenience are things airlines will readily sacrifice for a profit (and passengers will sacrifice to save a few hundred dollars. It’s not because the 787 hasn’t had any delays (it probably will).

The real reason why can be found on airbus’ website

A380 economics¹

Despite its ability to carry 35 per cent more passengers than its competitor, the A380 burns 12 per cent less fuel per seat – reducing operating costs and minimizing its effects on the environment at the same time through fewer emissions.

Translating from corporate doublespeak, “despite the fact that the denominator is bigger, the ratio is smaller”. Actually, it’s because the A380 carries more passengers that it is more fuel-efficient per seat. The larger the mode of transportation, the more efficient it is per unit, otherwise you would just use the smaller one: a bus is more fuel-efficient per seat than a car, a train is more fuel-efficient per ton of cargo than a truck, an a320 is more efficient per passenger than a regional jet. It’s a lot easier to fill up a truck than a train, it’s easier to fill up a bus than a taxi. If a vehicle is larger it must be more efficient when fully loaded or it just isn’t economical. If the truck were as fuel-efficient as a train, railroads would be even more marginalized. Of course, there aren’t any comparably -sized airplanes to compare the A380 with, but airbus is also making a terribly weak claim by using today’s airplanes as a baseline. Of course, newer planes should be more efficient than similarly sized older generation planes. A 737-500 is more efficient than a 737-200, and a MD95 is much more efficient than a DC-9.

Assuming that the fuel costs are going to increase, an airline flying an A380 could still have a competitive advantage over one flying the 747-400, but the A380 isn’t going to be competing against the 747-400, it will compete against the 787 and the 747-8. Contrast Airbus’ fuel efficiency claims with Boeing’s²

The [787] will use 20 percent less fuel for comparable missions than today’s similarly sized airplane.

Boeing is making a plane that is 20% more efficient than similarly-sized airplanes. Boeing claims that the 787 burns 20 percent less per passenger than current similarly-sized planes, and Airbus claims A380 burns 12 percent less per passenger than smaller-sized planes. Airbus is talking about the 747-400, which is a larger than a 787, but partly due to its four engines, isn’t all that efficient. The 787 (and the 747-8) will be more efficient per seat than a A380.

An airline could fly two 787’s for the fuel cost of an A380. It could make two flights, a few hours apart, or fly from two different cities, or it could make just one flight and have a easier time filling up the plane (probably selling fewer discount tickets).

The A380 will have an advantage on flight-crew cost per passenger, but that’s not going to make a big enough difference. A380 will have an advantage at slot-controlled airports (assuming it has similar spacing characteristics), but that puts the A380 into a niche market. That niche will be made even smaller when Boeing brings 787 technology to the 747-8. The 747-8 will actually be more fuel-efficient per passenger than the A380 and have less of a flight-crew disadvantage.

This lack of efficiency does make the delays even more painful. If the A380 were flying today, it would have been the more efficient plane flying today, but even with a perfectly executed delivery, the A380 would still be destined for niche status. Large hubs are what most people think will be A380’s strength, but hubs are effective when they server a large number of markets, not because they serve a few large cities. The number of cities an airline could serve with a fleet if A380’s is much smaller than the ones it could solve with a fleet of 787’s. The mathematics of hubs means that the number of markets (city-pairs) that an hub serves grows quadratically with the number of cities it serves..

If the Boeing didn’t have such a large backlog, more airlines would be using the A380 delay as an opportunity to drop the A380. The only problem is the long 787 backlog. That leaves another niche for Airbus, airlines that want a plane quickly.

Airbus will feel a large financial hit from the A380 decision, but it won’t be out completely. The A350 will be taking off in about 10 years and the technology will be even better then. Also, the airlines want Airbus in the marketplace to keep pressure on Boeing for even better planes, or at least as a negotiation tool. It’s not going to be smooth sailing for Boeing either. They still have to deliver the 787 and while they roll-out will probably go smoother than the A380, it’s not a slam dunk either. On the other end of the market, Embrarer is contemplating competing when it’s time to replace the A320/737. Already, they have a great plane (ERJ 195) that competes with the DC-9/717 size and it’s apparently driven Boeing out of that market.

List price: $146 million for the 787,

$296 million for the A380

1http://www.airbus.com/en/aircraftfamilies/a380/economics.html
2 http://www.boeing.com/commercial/787family/background.html