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Airbus's multibillion-dollar bet: Whether to overhaul A380 Jumbo

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Airbus Group NV's pursuit of new buyers for the A380 jet looms large as the planemaker approaches a crucial decision: whether to plow billions of dollars into revamping the world's largest passenger aircraft.

[PHOENIX] Airbus Group NV's pursuit of new buyers for the A380 jet looms large as the planemaker approaches a crucial decision: whether to plow billions of dollars into revamping the world's largest passenger aircraft.

While Emirates Airline President Tim Clark floats the idea of taking as many as 200 more superjumbos provided they get new, upgraded engines, Airbus said on Monday it needs more customers for an A380neo before committing to the programme.

"Tim clearly wants us to do it," Airbus's sales chief, John Leahy, said in an interview at the annual conference of the International Society of Transport Aircraft Trading in Phoenix.

"He is one of the most intelligent and accomplished CEOs in the industry so we take his advice very, very seriously. But this has to be built around a business case. We can't do it for one airline."

Turkish Airlines may play a role in Airbus's deliberations. The Istanbul-based carrier is in talks to lease two A380s from Malaysia Airline Systems Bhd. as a trial run to see how an aircraft seating about 500 people would mesh with the rest of its fleet.

"THY has ambitions to be the next Emirates, and Emirates has proven that the A380 is part of their strategy," Mr Leahy said, referring to Turkish by its airline code. "It is obvious to me that the A380 will be part of THY's strategy."

Airbus won no airline orders in 2014 for the four-engine A380, which has been in service for less than a decade and faces carriers' strong preference for more-efficient twin-engine models such as the planemaker's A350 and Boeing's 777.

EXPENSIVE OVERHAUL

Updating existing jetliners with new engines and more aerodynamic wings can consume billions of dollars and take years to complete.

Airbus committed to the narrow-body A320neo in December 2010. The first plane is slated to enter the market later this year. Toulouse, France-based Airbus hasn't said how much it would cost to develop an A380neo with engines from Rolls-Royce Plc.

Mr Clark predicted that Airbus's board should make a call in the next few months on an A380neo, but Mr Leahy said he couldn't comment on any timeline. Airbus has said it's poised to break even on the A380 this year.

Boeing recently broke the order drought for its four-engine 747-8 jet by selling three freighters to Silk Way West Airlines. Mr Leahy doesn't see Boeing's jumbo damping the A380's sales prospects, even if its Chicago-based rival were to end the 747 programme, as analysts have suggested is likely.

"We refer to it in Toulouse as a zombie," Mr Leahy said of the 747, also known to aviation enthusiasts as the "Queen of the Skies." Randy Tinseth, a marketing vice-president with Boeing's commercial aircraft unit, said upgrading the A380 superjumbo would be folly at a time when the market was pivoting to smaller planes.

"The A380 has a cost problem, it has a size problem," Mr Tinseth said in an interview at the same conference in Phoenix.

BLOOMBERG