EADS and the A380
Published: February 26 2008 09:39 | Last updated: February 26 2008 09:39
Will the last great plane of the old generation, the A380 superjumbo, be the saviour of Airbus, and by extension its parent EADS?
Until recently, it was mostly a source of pain for the Franco-German aerospace company. Delays pushed the original €12-13bn estimated development cost towards €17bn. That combined with the shift in exchange rates – planes are priced in dollars – pushed the number of sales required for the programme to break even from 250 to around 400. At the full production speed of four per month, expected to be reached in 2010, the programme should be profitable sometime in 2017.
Still, the costs are largely sunk. Competitor Boeing’s choice not to develop a successor to the 747 jumbo jet has effectively ceded the market for very large planes to Airbus for the next decade. And the news, now, that two planes have actually been delivered is encouraging. Singapore Airlines, which will start an A380 London-Singapore service on March 18, has already found it is able to charge a premium on the Sydney-Singapore route. Part of this may be the novelty factor, but the extra room available is an advantage which counts in a market where pricing is transparent and brutally competitive.
Having more seats than a jumbo also means the A380 is a way to increase capacity on routes where long-haul landing slots are limited. And the plane’s lower operating cost per passenger has not gone unnoticed. British Airways reversed its earlier opposition and ordered 12 A380s in September. Japan’s airlines also seem likely to bite, a significant development in a market hitherto dominated by Boeing.
So sales could ultimately approach the 1,000 or so passenger jumbos sold by Boeing. This alone will not be enough to transform the fortunes of Airbus. Currency, cash flow, and a major restructuring remain pressing problems. But the long-term outlook is not entirely bleak.
Copyright The Financial Times Limited 2008