Ask frequent flyers which is their favourite aircraft and most come up with the same answer: the A380 superjumbo made by Airbus, a giant European planemaker. Able to carry 525 passengers in a typical three-class layout, on two full-length decks, the aircraft still feels spacious, with wide aisles and plenty of headroom. Frequent flyers also admire the freshness of the cabin air, the lighting systems that are designed to reduce jet lag and the quietness of the cabin. “You can hardly hear it take off,” one fan recently told Gulliver. “And I can actually go to sleep on the plane unlike any other I’ve been on before.”
But less than a decade after it carried its first paying passengers, the age of the superjumbo looks like coming to an end. When Airbus announced its plans to build the plane in 2000, it hoped to sell up to 1,200 of them over two decades. Eighteen years later it has sold just a quarter of that figure, and has received no orders for three years. Running short of orders, on January 15th Airbus’s chief salesman said in response to a question posed by Gulliver that if the company does not receive another big order for the planes, superjumbo production may come to an end. “If we can’t work out a deal with Emirates, there is no choice but to shut down the programme,” John Leahy said.
Even though frequent flyers love the plane, airlines are more ambivalent. For most it is simply too much aircraft. Carriers have found that on routes such as London to New York, it is more profitable to operate a greater number of daily departures with smaller jets than to agglomerate traffic onto the A380—however nice its creature comforts.
The exception is Emirates, a carrier based in Dubai that now operates over 100 of the jets (around half of all those ever produced). It has made the superjumbo a key part of its brand, equipping them with innovative features such as a cabin ceiling that lights up with LEDs like a night sky and onboard showers in first class. Airbus was hoping that the president of Emirates, Sir Tim Clark, would save the A380 programme by ordering another 36 or so of them at the Dubai Air Show last November. But in a humiliating spectacle, Emirates pulled out the deal and ordered 40 Boeing 787-10 airliners made by its American arch-rival.
Sir Tim told Gulliver that the deal came unstuck over getting Airbus to commit to producing the A380 jet for another ten years. Without such a guarantee, Airbus could end production sooner, causing the resale value of all existing A380s to plummet. With demand for its flights via Dubai reduced due to lower oil prices and regional instability, Emirates has to be particularly careful when ordering aircraft. Its shareholder—the government of Dubai—sees the airline as a cash cow now that falling oil prices have hit state revenues. The government provided $10m in start-up capital in 1985, Sir Tim says, and nothing more since. Instead they have taken out $4bn in dividends. They do not want to invest any more in the airline and want the stream of profits to continue, something that would be put in doubt if Emirates buys too many superjumbos at too high a price.
Category: Business and finance, Gulliver