Skymark's cancellation of its order for 6 (4 orders and 2 options) A380s comes as little surprise. it always looked as if it might be a step too far for an airline only recently moving into the long haul business. A small fleet of very big aircraft looked problematical among its larger 30 strong fleet of smaller shorthaul B737s.
It does though leave Airbus with sort and longer term dilemmas about what to do. They have had no new additional customers for the aircraft for two years. Despite a brave public face they must be worried about the programme and how to get sales back on the rails.
The first is to find homes for the six as they won't want white tails hanging around Toulouse. Earlier this year Turkish Airlines was said to be looking for an initial fleet of four to lease almost immediately. It was not clear whether this was to create a "We've really made it" image for the world's fastest growing airline and network or to temporarily ease a capacity shortage on major city pairs or to give the aircraft a real operational, financial and commercial trial prior to possibly following the Gulf majors who have bought the aircraft. Whatever the reason ,we imagine that unless midsummer torpor has taken over, the rather desperate A380 sales team are already on their way to Istanbul. Whether or not these particular six aircraft are attractive to anyone else will depend on how far advanced they are on the line and how much customisation has already been built into them. Other interest might come from existing customers who see a need for an additional two or three or even all six aircraft as soon as possible. IAG's Walsh has already said that he doesn't see the BA fleet going beyond the 12 already ordered. BA's sales people would though almost certainly welcome with open arms additional capacity on a number of BA longhaul routes which have been kept on a very tight capacity rein for a good ten years or more. It is fairly easy to see where and how up to six more 380s could be advantageously deployed. Nothing more than a cheap ballpoint and the back of an envelope is required to do the calculation. Air France, never over the moon about Airbus' long products, could also absorb a couple but are unlikely to do so. Lufthansa could accomodate them if they scaled back their hard to understand order for the end of the line B747-8i but that may also be difficult to achieve. South African might just also be a door worth knocking on. They are looking for an A340-600 replacement, compete on key routes with Emirates, BA, Air France and Lufthansa A380s and have long experience of small flagship long haul fleets. Their crews and engineers know the A340, 330 and 320 well but the airline would want a rock bottom price.
The bigger question though is how to win more customers, and ideally at least get their long term feet into some big ones even if in a small way to start with. Ideally the aircraft needs the -900 stretched version , whose economics gain from better use of the existing very substantial wing and wing box. Emirates have been banging that drum for some years and Cathay Pacific expressed an interest long ago. Here Airbus are faced with the chicken and egg question. The project has not broken even yet so they are reluctant to throw more money at it before it does. If they don't spend the money (and it's a lot) though they may be faced with literally the end of the line in no more than five years from now. Ironically that is just about when demand might just have to pick up as airlines get more and more slot squeezed in major airports.
The biggest mountain Airbus faces is that while quite a few airlines, including however reluctantly the US majors, can probably see a place for the 380 on their densest routes, the fleets they would require are currently small,- probably between 6 and 12 aircraft. The economics and engineering and crewing resources those would take up amidst very much larger fleets of compatible and interchangeable big and very big long range twin widebodies may just not be worth the candle.
The answers aren't easy. One would be to offer totally packaged buy or lease plus maintain and operate deals. These would give the operators a 380 fleet without the burdens of flying and looking after it. Many aspects would be similar to a wet lease but with the operator being the manufacturer. The operating contracts could if desired include the flight and cabin crew possibly seconded from the owning airline or contracted from a third party- see also our post of 14th July on subcontracting cabin crew). The bottom line risk would of course remain with the manufacturer, something they almost certainly fear greatly. The A380 is a good investment for airlines which intend to keep it for all or substantially all of its operational life. It is much less good for those who would hope to sell it on at midlife or thereafter as the secondary market for such a large and often inflexibly fitted- out aircraft is likely to be very limited. Hence the risk for the manufacturer in retaining ownership of an aircraft which may be returned by its initial operator well before it is fuly depreciated would be substantial. On a smaller scale, BAe struggled with its more easily transferable 146/RJ series, most of which were leased out and became overhanging liabilities for the group.
This problem of small fleets among big standard ones is the big reason why the new customers list stalled. It is the challenge the whole project now faces even though many potential new customers might agree that for a (smallish) percentage of their long haul routes the 380 is the best aircraft for the job. If they can't market their way out of the impasse, Airbus's decision has to be "Double (investing in the -900) or Quits". Both choices give them a shudder. That's why there is the current stasis. One way or another the manufacturer needs to snap out of it .For the moment though they might just let it drag on until they have to call "Last Orders". Emirates can't keep the line going for ever.
It does though leave Airbus with sort and longer term dilemmas about what to do. They have had no new additional customers for the aircraft for two years. Despite a brave public face they must be worried about the programme and how to get sales back on the rails.
The first is to find homes for the six as they won't want white tails hanging around Toulouse. Earlier this year Turkish Airlines was said to be looking for an initial fleet of four to lease almost immediately. It was not clear whether this was to create a "We've really made it" image for the world's fastest growing airline and network or to temporarily ease a capacity shortage on major city pairs or to give the aircraft a real operational, financial and commercial trial prior to possibly following the Gulf majors who have bought the aircraft. Whatever the reason ,we imagine that unless midsummer torpor has taken over, the rather desperate A380 sales team are already on their way to Istanbul. Whether or not these particular six aircraft are attractive to anyone else will depend on how far advanced they are on the line and how much customisation has already been built into them. Other interest might come from existing customers who see a need for an additional two or three or even all six aircraft as soon as possible. IAG's Walsh has already said that he doesn't see the BA fleet going beyond the 12 already ordered. BA's sales people would though almost certainly welcome with open arms additional capacity on a number of BA longhaul routes which have been kept on a very tight capacity rein for a good ten years or more. It is fairly easy to see where and how up to six more 380s could be advantageously deployed. Nothing more than a cheap ballpoint and the back of an envelope is required to do the calculation. Air France, never over the moon about Airbus' long products, could also absorb a couple but are unlikely to do so. Lufthansa could accomodate them if they scaled back their hard to understand order for the end of the line B747-8i but that may also be difficult to achieve. South African might just also be a door worth knocking on. They are looking for an A340-600 replacement, compete on key routes with Emirates, BA, Air France and Lufthansa A380s and have long experience of small flagship long haul fleets. Their crews and engineers know the A340, 330 and 320 well but the airline would want a rock bottom price.
The bigger question though is how to win more customers, and ideally at least get their long term feet into some big ones even if in a small way to start with. Ideally the aircraft needs the -900 stretched version , whose economics gain from better use of the existing very substantial wing and wing box. Emirates have been banging that drum for some years and Cathay Pacific expressed an interest long ago. Here Airbus are faced with the chicken and egg question. The project has not broken even yet so they are reluctant to throw more money at it before it does. If they don't spend the money (and it's a lot) though they may be faced with literally the end of the line in no more than five years from now. Ironically that is just about when demand might just have to pick up as airlines get more and more slot squeezed in major airports.
The biggest mountain Airbus faces is that while quite a few airlines, including however reluctantly the US majors, can probably see a place for the 380 on their densest routes, the fleets they would require are currently small,- probably between 6 and 12 aircraft. The economics and engineering and crewing resources those would take up amidst very much larger fleets of compatible and interchangeable big and very big long range twin widebodies may just not be worth the candle.
The answers aren't easy. One would be to offer totally packaged buy or lease plus maintain and operate deals. These would give the operators a 380 fleet without the burdens of flying and looking after it. Many aspects would be similar to a wet lease but with the operator being the manufacturer. The operating contracts could if desired include the flight and cabin crew possibly seconded from the owning airline or contracted from a third party- see also our post of 14th July on subcontracting cabin crew). The bottom line risk would of course remain with the manufacturer, something they almost certainly fear greatly. The A380 is a good investment for airlines which intend to keep it for all or substantially all of its operational life. It is much less good for those who would hope to sell it on at midlife or thereafter as the secondary market for such a large and often inflexibly fitted- out aircraft is likely to be very limited. Hence the risk for the manufacturer in retaining ownership of an aircraft which may be returned by its initial operator well before it is fuly depreciated would be substantial. On a smaller scale, BAe struggled with its more easily transferable 146/RJ series, most of which were leased out and became overhanging liabilities for the group.
This problem of small fleets among big standard ones is the big reason why the new customers list stalled. It is the challenge the whole project now faces even though many potential new customers might agree that for a (smallish) percentage of their long haul routes the 380 is the best aircraft for the job. If they can't market their way out of the impasse, Airbus's decision has to be "Double (investing in the -900) or Quits". Both choices give them a shudder. That's why there is the current stasis. One way or another the manufacturer needs to snap out of it .For the moment though they might just let it drag on until they have to call "Last Orders". Emirates can't keep the line going for ever.
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