Could This Be the End of the Line for the Airbus A380?

Ziggy | 15 Dec, 2014 09:27AM | Leave a comment
Skeptics have been predicting for years that the double-decker A380 would never be a moneymaker for Airbus. Now the planemaker may be acknowledging they were right.

Chief Financial Officer Harald Wilhelm, speaking on Dec. 10 to investors in London, said Airbus (EAD:FP) might have to discontinue the A380 by 2018 unless it invests in improvements to make the plane more attractive to customers, Bloomberg News reports.

Other Airbus executives sought to downplay those comments, saying that the program was on track and that demand for the world’s biggest passenger jet would increase. “The A380 will dominate the market in years to come,” Airbus sales chief John Leahy told investors at the London gathering.

Airbus says production slots for the A380 are almost fully booked for the next three years, and Wilhelm said the program would break even during 2015, 2016, and 2017. He said that outlook wouldn’t hold for 2018, however, unless the company developed new engines to attract customers.

Yan Derocles, an analyst at Oddo Securities in Paris, estimates it would cost €2 billion ($2.5 billion) to upgrade the A380 engine. Because such an upgrade would take about four years, “Airbus will be obliged to make a decision one way or the other in 2015.”

The A380 began causing headaches for Airbus long before it entered service in 2006. It suffered major production delays, and development costs reached $25 billion, more than twice initial estimates.

Sales have been sluggish, as many airlines have concluded that smaller planes are a smarter investment, since only a limited number of routes are suited to an aircraft that can carry more than 500 passengers. “It’s an excellent plane, but it only works for the right destinations,” says Alexandre de Juniac, chief executive officer of Air France (AF:FP), which wants to cancel the last two of 12 A380s it ordered.

No airline has ordered A380s this year, and in July, Japanese budget carrier Skymark Airlines (9204:JP) cancelled all six of the planes it had ordered.

At the same time, any suggestion that the plane could be discontinued is sure to rattle airlines that are buying it—especially Emirates Airlines, the A380′s biggest customer with 140 planes on order. Emirates President Tim Clark told Reuters today that he had called Airbus to protest after hearing CFO Wilhelm’s remarks. “I get pretty miffed when we have put so much at stake,” he said.