Two days ago, Emirates announced an additional $11 Billion order for 32 more A380 aircraft.  If all of its orders are delivered, this means a fleet of 90 A380 aircraft by 2017 or just 7 years from now.  It’s an impressive order and no airline enthusiast can deny that such a fleet is kind of exciting.  But it doesn’t make sense. for either Emirates or Airbus.

This certainly allows Airbus to plunge ahead for a while longer manufacturing the A380 but it really doesn’t put them any further ahead on earning any real profit from the airliner when you consider the deferrals and (potential) cancellations from other airlines.  In addition, this adds risk to their orderbook rather than reduces it because this indicates a growing dependency on just one airline for this aircraft. 

Several airlines have the A380 and most indications are that while they can make money with it, it isn’t a game changer for the airlines.  As the world of airline routes continues to fracture due to aircraft like the A330, 777 and now the 787 and A350, more and more flying is becoming “point to point” in the international world.  There are a relatively few routes that can support the A380.

Even the largest 747 fleet operators such as British Airways and JAL have made moves to start replacing their largest aircraft with Boeing 777 aircraft on most routes.  Yes, British Airways has orders for the A380 but one has to question how many they can support even on their busiest routes such as London-NYC or London-Australia. 

If British Airways (at one time they had over 50 747 aircraft) can’t support a large fleet of 747s anymore, how can Emirates do so?  Emirates doesn’t have magic working for it.  They don’t know something that others don’t.  They do have some cost advantages on fuel and labor but as time goes by, even those advantages narrow considerably.   So how does Emirates justify a fleet of 90 A380 aircraft? 

They don’t.  A fleet of 90 A380s means ownership of that aircraft for the next 30 years at minimum.  30 years of operating such aircraft is a long time and let’s not lose sight of the fact that there isn’t exactly hot demand for used jumbos these days.  Even relatively new(ish) 747s are now being retired into a life as cargo aircraft as 777s replace them. 

Further, Airbus and Boeing aren’t a bunch of huckleberries when it comes to forecasting their markets.  In fact, their forecasts tend to agree in most areas except the concept of the super Jumbo.  Boeing doesn’t see that market growing and has chosen to focus on serving the fat middle section of the widebody market (220 to 350 seats) with their 787/777 family. 

Perhaps Emirates will prove me (and others) wrong.  But I’d bet large money against them at this point.

Filed under: Airline Fleets by ajax