As the A380 faces yet another crunch, airlines are moving on

[LONDON] For all its imposing size and commanding presence in the skies, the Airbus SE A380 hasn't managed to leave much of an imprint with most airlines, relegated instead to an afterthought for carriers who built their stables around nimbler planes.

As the A380 faces yet another existential crisis - this time because a life-saving order with key customer Emirates is at risk of imploding - airlines won't have much trouble moving on from the double-decker. No carrier is rushing to save the behemoth, being content instead with the small numbers they have and focusing on powerful twin-engine models that do the job just as well and can be cheaper to operate.

"We're very happy with what we've got," Qantas Airways Ltd. CEO Alan Joyce said at a gathering of Oneworld alliance chiefs in London on Friday. Mr Joyce said the Australian carrier won't be converting options it holds to buy eight further A380s to add to its fleet of 12, with the plane increasingly ill matched to the bulk of its routes. "We don't see a use for any more."

Malaysia Airlines Bhd. said at the event that it could sell its six superjumbos, which are too large for its needs, while British Airways is focused on buying smaller wide-bodies after concluding that the A380 is too expensive. (The aircraft is by far Airbus's costliest, with a list price of US$445 million - though customers typically get massive discounts).

Since entering commercial service in 2008, the A380 has faced an ever-shrinking fan base. Passengers love the plane for its modern layout, perks like spacious bars in business class and even enclosed cabins and showers in some first-class offerings, but airlines have been much harder to win over. Some early prospective customers dropped out, others scaled back their order book. Only Emirates became a true champion of the A380, building a large part of its globe-spanning fleet around the plane, with already more than 100 in operation.

But even Emirates has proven harder to convince. A follow-up order that looked all but secured didn't materialise in November 2017, leaving Airbus executives red-faced and empty-handed at a planned signing ceremony at the Dubai Air Show. When Emirates did pull through the following January, it was hailed as a life-saving deal for the program, whose production numbers have steadily slowed to a mere trickle to help space out the output.

Now Emirates, too, appears to be having second thoughts. The Gulf carrier may convert some or all of its most recent 20 superjumbo orders into smaller A350s, people familiar with the matter said. The A330neo, another wide-body, is also in the mix, said one of the people. Airbus said in a statement that it's in discussions with Emirates in relation to the A380 contract, which includes 16 options. The Toulouse, France-based company didn't elaborate.

On paper, the A380 seemed like the perfect plane when it was devised two decades ago. Air traffic was on the rise, particularly in Asia, and airports in the Western hemisphere were increasingly constrained. The A380, with its unparalleled capacity, could help overcome the bottleneck.

Airbus also sought to crack the hold of arch-rival Boeing Co.'s 747 on the market for very large aircraft. As the European manufacturer pushed hard into the larger jets that were Boeing's natural habitat, the jumbo category looked like an obvious extension of its portfolio.

Asia, in particular, appeared ripe for the A380. Japanese carriers, traditionally loyal to Boeing, had deployed the aging 747 on heavily commuted short-distance routes. China, with its growing class of tourists and a rapidly expanding economy, seemed like an obvious place to land. In the end, actual orders were disappointing. One early Japanese customer, a discount carrier, collapsed under the financial weight of its commitment, leaving ANA Holdings Inc. to step in and take the planes.

Malaysia Air has withdrawn its six A380s from the mainline fleet after concluding they're too big for its routes. The carrier failed to find a buyer, and is using three to transport Muslim customers on the Hajj and Umrah pilgrimages, and to fill in when demand is high. The other three are on standby.

Chief executive officer Izham Ismail said that he'd consider all options for the planes, including selling them. The expansion of Gulf carriers in the region has led to a fragmentation of market share so that fewer routes have the critical mass to support it, Mr Ismail said. Besides Emirates, Qatar Airways and Etihad Airways PJSC also operate the A380, albeit in much smaller numbers.

"The A380 depends on the market," Mr Ismail said. "For Emirates and BA it's fine. But for Malaysian it's too big. It's a beautiful aircraft but it does not fit with our network."

To be sure, Boeing too has seen only very limited appetite for its latest jumbo, the 747-8. Deutsche Lufthansa AG is one of the few customers for the passenger version, but the freighter variant has done better.

Airbus had previously envisioned a cargo version for the A380, a plan that never materialised. Because of its double-decker structure, the belly space in the passenger version is more limited than in other long-range aircraft.

"Every airline builds a fleet based on their network," said Rupert Hogg, the CEO of Cathay Pacific Airways Ltd., which doesn't operate the A380. From Hong Kong, the airline can reach both US coasts "with existing big twin technology and do it very efficiently and with no payload constraints - and we carry an awful lot of cargo."

Cathay has opted instead for Airbus's twin-engine A350, and Mr Hogg called the Boeing 777 a "wonderful workhorse." It's a view shared by many airline executives who value nimble, versatile aircraft - and passengers looking for more direct-route options.

HUB AND SPOKE

When Airbus pushed ahead with the A380, Boeing went the other way, arguing that future traffic would be built less around the hub-and-spoke model of mammoth airports, and instead focus more on point-to-point travel. Its 787 Dreamliner has turned out to be a massive hit for the Chicago-based company, and set the tone for fuel-efficient models built in large parts of light-weight carbon composites.

Because only Emirates has made the A380 the linchpin of its fleet, other airlines are struggling to generate the same economies of scale with the plane. The jet can be expensive to operate with its four engines, particularly with the spacious layouts favoured by many airlines that puts luxury over efficiency. Most customers have configurations of 450 to 550 passengers in three classes, and Emirates only recently pushed beyond 600 seats on some of the A380s on select routes.

"We've made it clear to Airbus that we might consider more, but only at a price that we have not been able to reach," said Willie Walsh, the CEO of British-Airways parent International Consolidated Airlines Group SA. "The A380 works extremely well but the price has not been as attractive as it needs to be."

Airbus itself has acknowledged that its timing might have been ill-advised. Former commercial head Fabrice Bregier said that the plane was probably introduced a decade too soon, and faced instant headwinds from the global financial crisis that forced companies around the world to cut back, hurting travel flows and investments. Singapore Airlines Ltd., the first customer to take the planes in 2008, has dropped two ageing aircraft from its fleet after the lease ran out and the owner was unable to find another buyer.

Those models now face an inglorious fate near the site where they were born in Toulouse, southern France. Here, in the foothills of the Pyrenees mountains, the pair of giant planes sit idle, waiting to be broken up into parts, just a decade after their maiden flight.

BLOOMBERG