Oversize Expectations for the Airbus A380

http://www.nytimes.com/2014/08/10/business/oversize-expectations-for-the-airbus-a380.html

by ak86 • 12 years ago

49 51 12 years ago

afafsd2• 12 years ago

Seems like a rather US-based perspective.

It's true that no US-based airline has bought one. That's because the US has so many cities, that it makes sense for airlines to serve (say) SEA-NRT and SFO-NRT with separate smaller planes rather than just one honking big plane from SFO-NRT.

Countries whose airlines have bought A380s are countries where the vast majority of international air traffic is concentrated through one or two hubs. Singapore, Germany, France, Great Britain, Australia, Dubai, Malaysia, and so forth.

It's true they've sold "only" four hundred of 'em. I have no idea whether that makes them a profit or not, and I doubt anyone outside Airbus knows that either, the economics of airliner manufacturing seems to be a pretty closely guarded secret (even the actual prices of planes are a secret...)

x0x0• 12 years ago

The article pointed out estimated R&D costs are $25B, and they're having to sell them for not much over manufacturing cost (so no, they aren't making a net profit, though almost certainly an operational profit). While that's an estimate, I doubt R&D expenditures are really that closely held; they can probably be estimated pretty well both from financial reports and from leakage from all the EU government entanglements of Airbus.

tptacek3• 12 years ago

Just 10 airlines besides Emirates have taken delivery of 380s. Only 5 of those have taken delivery of 10 or more. The largest 380 customer after Emirates, Singapore, has orders for 70 350s and is a launch customer of the 787 with 30 orders, but just 5 orders for the 380.

It's true that the market for the 380 is larger outside of the Americas. It would have to be, because the 380 has zero Americas customers.

UnoriginalGuy2• 12 years ago

What was the point of that very strange "random numbers about 380 orders" paragraph? I don't get it. You didn't try to make a point with it, and you were jumping all over the place with data (is receiving 10 or more for a single airline an important metric?).

Here's a list of orders Vs. deliveries: http://en.wikipedia.org/wiki/List_of_Airbus_A380_orders_and_...

Total Orders: 318

Options: 28

Deliveries: 138

  - Emirates: 50 delivered    
 - Singapore Airlines: 19   
 - Lufthansa: 12
 - Qantas: 12
 - Air France: 10   
 - Korean Air: 10   
 - British Airways: 6
 - Malaysia Airlines: 6
 - Thai Airways International: 6   
 - China Southern Airlines: 5
 - Asiana Airlines: 2 deliveries

UnoriginalGuy2• 12 years ago

Plus any US airline which purchased the A380 would get negative PR from it. While most US airline companies operate airbus aircrafts, the A380 was really marked within the US as "Us. Vs. them" type aircraft (not least of it as it was a flagship) where it was American manufacturing under attack (Boeing 747) by a foreign competitor. So the first US airline company who buys one is going to get attacked by every single "I only buy American" type, of which there seem to be plenty of in the US (e.g. "it is anti-American to buy abroad!" "Don't you support American jobs?!" and so on).

I would also like to add that the A380 isn't really even competing for inter-US routes as it is too expensive to get up to altitude and you'd never fill THAT many seats on those routes. It is better as a longer range international aircraft (e.g. routes across the pacific or atlantic, europe to asia, etc). The only internal routes it might do well on are for example New York City to Las Vegas, California to DC, basically high volume and long range.

I won't comment too much on the article specifically as it is quite obviously bias and had an agenda before pen hit page. I'm sure most Americans enjoyed it however.

tptacek3• 12 years ago

You picked an argument that has a high bar to clear, because, as you noted, Airbus planes are very prevalent among US carriers. Jetblue, for instance, flies mostly Airbus planes. So to clear the bar, you have to show that somehow flying Airbus planes is OK, but the 380 in particular is somehow anti-American.

It seems far more likely that long-haul hub-and-spoke products just aren't a good fit for the US market. The inefficiency of that model is practically SWA's whole operating thesis, and it's one of the 3 most profitable large airlines in the country.

RockyMcNuts• 12 years ago

meh... a number of US airlines fly primarily/exclusively Airbus (JetBlue, Virgin America) and they don't don't seem to have suffered a lot of negative PR.

The 777 and 787 beat it on fuel economy, and only NYC is really slot-constrained. I'm not even sure if more A380s mean more passenger throughput since the super-jumbo needs longer separation between aircraft on takeoff and landing for wake turbulence. So what's the point?

Yeah, it is a negative article, but just seems obvious they took a risk and overestimated the market. When they jumped in with the A350 to compete with the huge orders of the 787 it was a tacit admission Boeing had made the correct market call.

Not like there haven't been a ton of negative articles about the 787's problems, Boeing spent $25b on it and they really need to sort out the kinks and ramp up the production rate to make a proper return.

I flew an Emirates A380 a couple of years ago and it is a sweet, quiet ride.

PhantomGremlin3• 12 years ago

Plus any US airline which purchased the A380 would get negative PR from it.

Yes, the airline would get negative PR. But not for the reason you claim. The article has the real reason:

   Shares of United would plunge at least 10 percent
   if it bought A380s, according to one analyst,
   because of concerns that they would bring too much
   capacity into the market.

If you add up all the US airline profits and losses in their history, until recently the sum would be negative. US airlines routinely enter and exit bankruptcy. Now they're finally making money again. Big money.

So it would be insane for US airlines to buy the A380 now. But not for "Us. Vs. them" reasons. For much smarter business reasons.

mpyne• 12 years ago

I'm sure most Americans enjoyed it however.

As an American I was interested enough to keep researching Airbus models on Wikipedia. I was pleasantly surprised to find that Airbus has manufacturing even in the U.S. for its airline production programs, and has even been expanding that production capacity.

I have flown on many intra-US flights on non-American planes (including Airbus, Bombardier and even Brazil's Embraer)... sometimes the market actually works!

I also read the NY Times article, and they covered quite in detail the successes and strengths of the A380 as espoused by the CEO of Emirates. Far from being a "hit piece" against the A380, the article appeared to me to be a simple-enough exposition of two major airline manufacturers taking different gambles about the future of aviation. Would this story only be accurate if it were published by Le Monde or Der Spiegel?

To return to your point, the whole point to Boeing's 787 development was to compete with "longer-range international" routes... at such a long range, in fact, that two cities could be directly connected instead of requiring the spoke-and-hub model that the A380 is optimized for. And in any event, U.S. carriers do indeed run long range international routes that would theoretically be up the A380's alley, but the problem is as you state: "you'd never fill THAT many seats" to make A380 profitable for U.S. airlines (as the NYT articles states, these airlines returned to profitability by reducing excess capacity).

ubernostrum3• 12 years ago

As the article noted, this isn't just a US thing and actually isn't just an A380 thing. The A380 is just a very high-profile victim of it.

The problems are twofold:

1. Four-engine airliners, regardless of size, are losing, basically worldwide, to twin-engine airliners with better fuel consumption. This is why the A380 and 747-8 sales are sluggish. This is why the A340 buyback program exists (airlines can't get rid of the planes since nobody else will buy them), etc.

2. The airline market as a whole is shifting away from the "have a single massive international hub and send all flights there" model -- only a few airlines can really support that, and not coincidentally they're the only ones continuing to buy A380s. This is part of the reason why the 787 and the A350 are selling so well; they enable flights to and from secondary or tertiary hub cities for which there is plenty of demand, just not enough demand to fill daily super-jumbo aircraft. This is why the 787 and the A350 are such a big deal, and why Airbus doubled down and announced a revamp of the A330.

Boeing is facing the same problem with its 747-8; the passenger variant just isn't selling, the only airline that's taken delivery (Lufthansa) has announced it may retire them within 5-6 years of acquiring them, and rumor has it Boeing is only keeping the production line open to win the contract to replace the VC-25 (the modified 747 better known as "Air Force One").

walterbell3• 12 years ago

airline market as a whole is shifting away from the "have a single massive international hub and send all flights there" model

Dubai airport is closing in on Heathrow at the #1 spot. If long-haul traffic through Dubai continues to increase, will this change demand for A380s by non-Emirates airlines? http://en.m.wikipedia.org/wiki/World's_busiest_airports_by_i...

seanmcdirmid3• 12 years ago

The 380 makes a lot of sense in heavily congested air corridors. Anywhere in China, Japan, SE Asia...there is more demand than airports and runways, so a bigger plane will just work better.

The US market is better for point to point because we have many more small airports and lots of redundant infrastructure that doesn't really need to be maximized. Europe is somewhat in the middle.

Theodores• 12 years ago

If you live anywhere near Heathrow then you will see a lot of A380's. In fact it is hard to imagine there are so few of them given how many go flying overhead. Heathrow is a busy airport operating at full capacity. The A380 therefore makes complete sense, there is no other way to increase capacity apart from bigger planes.

Hence, from the perspective of anyone living in West London, you have to wonder why airlines would buy anything else. It is all a matter of perspective, very much so. The order books are full for the A380 and it is obvious that there will only ever be a finite need for such a large aircraft. Therefore, if the order books are no longer growing then so what?

Maybe the maths doesn't add up, however, keeping those A380s in the air is going to be pretty good business when it comes to spares and repairs. Again, perspective. Compared to those stupid fighter jet programmes the maths really looks a whole lot more plausible for the A380.

I think that American sentiment towards European planes is easy to figure out. Cheap and dependable planes, yes, high tech wonders (Concorde, A380), no.

idlewords• 12 years ago

That's the same attitude we have towards American planes. I wish the sky was dark with SSTs.

gsnedders2• 12 years ago

Hence, from the perspective of anyone living in West London, you have to wonder why airlines would buy anything else.

That assumes that all customers flying into LHR are long-haul customers; BA has a large number of domestic flights from LHR (including some wide-body 767s to EDI/GLA, but mostly narrow-body) and they undoubtedly have an effect on the loading of the A380 flights (if BA decided that the LHR-GLA flights weren't profitable because of the cost of landing slots at LHR, I'd simply fly via somewhere else, hence decreasingly the loading on the A380s).

ulfw3• 12 years ago

Very true. I am actually surprised BA hasn't ordered more. Especially as Willie Walsh alluded to how much their customers like them. LHR is slot constrained as are others around the world. No better way than using a slot with as many customers as possible in a magnificent plane like the A380.

mynameishere• 12 years ago

Do any ordinary travelers care about the type of plane they're on? Do they even know before they get to the airport? If I had to choose between an old 737 with a 4 hour flight, and an A380 with a 6 hour flight (including the layover) there's just no question. And I can appreciate the presence of a bar in the back! It just doesn't matter that much.

It seems obvious that an airline is going to focus on initial costs, fuel efficiency, customer preferences, etc. And it's not like they don't sell liquor on 737s...

walterbell3• 12 years ago

Frequent fliers who use seatguru and flyertalk would beg to differ. Not only the plane/airframe, but the seating configuration chosen by the airline makes a difference in the passenger experience of a transcontinental flight.

snoonan• 12 years ago

I've flown the NYC -> SIN route on Singapore Air a few times a year for a long time. When they upgraded the route to the A380, it changed a lot about that long haul experience. All things being equal (crew, airline, route, etc), this plane is so much more comfortable for long haul trips. Even economy class. As stupid as it sounds, it feels more like a sky ship than a plane. You can sort of forget you're on a plane.

I'd actually prefer NOT to fly one on a local route, though. Too much of a hassle boarding 400 people for a short flights.

nnethercote• 12 years ago

Do any ordinary travelers care about the type of plane they're on?

Depends on the definitions you choose. If you define an "ordinary traveler" as "one who doesn't care what type of plane they're on", then no, an ordinary traveler doesn't care what type of plane they're on.

Speaking for myself: the A380 is much quieter than any other plane I've been on. For 15-hour trans-Pacific flights, that's a big deal.

bluthru• 12 years ago

Does anyone have any data for which plane is more fuel efficient per passenger? Probably the 787?

Sanddancer• 12 years ago

It's hard to find a lot of hard data on either plane, but the 787 has been stated as being 20% more efficient than the 767, and the A380 has been stated as having a per passenger fuel consumption of 81 passenger miles per gallon. So, using the figures I found on wiki [1], it looks like the 787 is fairly considerably, as in using ~75% of the fuel, more efficient than the 787. The A380 may be a big plane, but it's a fairly conventional plane, all things considered. I imagine that if there were a revamp of it with more carbon fiber usage, it could get a lot more interesting.

[1] http://en.wikipedia.org/wiki/Fuel_economy_in_aircraft

ulfw3• 12 years ago

If Airbus NEO's the engines with Rolls Royce Advance and stretches the frame to a possible A380-900 I'd venture a guess and say that gap could be closed, especially on a CASM basis. Provided they keep the production facilities rolling until such a change might happen in the 2020s.

cletus• 12 years ago

It's interesting how the airline industry has evolved.

Years ago going from Australia to Europe typically meant going on the "kangaroo route" [1], typically via Singapore (the Qantas/BA/Singapore connection last year was replaced with a Qantas/Emirate/Dubai alliance). If you flew to continental Europe you often ended up flying to London and catching a local flight.

I visited the US in the 90s and ended up using US Air for a bunch of domestic flights. Primarily this was because at the time you could buy, as a foreigner, a number of flight coupons (that worked out to be about $50 each after 3 or so) that were redeemable for a single one-way flight (within a 3 month window).

US Air was (and is) pretty much the last holdout of the "hub" airline model in the US. I recall catching all those flights with layovers through Charlotte or Pittsburgh (or was it Philadelphia?).

The article is right that many passengers including myself prefer direct flights but there is some variability here. For example, I can fly NYC to SFO for as little as $260 coach return in non-peak periods. More typically it's $500-600. I can fly "First class" (it's not really that but it's a bigger seat with more legroom at least) on AA for $1100 via ORD or DFW. That's actually worth it at times. This compares favourably with the $4000+ AA charges for business on the new A321Ts.

Also, why do people prefer direct flights? It is at least in part due to the horrible experience and security theater that is modern air travel.

The A321T rollout is an example of what the article is talking about with reducing capacity too. Once complete, AA will end up with less transcon seat capacity.

But now there are not many places on the planet I can't get to from a major airport that require more than one layover. Hell, I can get from NYC to Perth, Australia (almost the complete other side of the planet) with one stop in Dubai, Doha or Hong Kong, possibly Tokyo and/or Seoul too.

I remember the fanfare the A380 came with 7-10 years ago and the competition with Boeing with what I think was the 747-400X? It was a concept that Boeing lost out on and was scrapped. They dodged a bullet on that one.

These days it's hard not to be on a Boeing 777-300ER (sometimes called 77W) for any serious long haul flights.

The article makes no mention of this but I MUCH prefer wide body planes (2 aisles not 1) as it gives you a chance of getting a center aisle seat where no one has to clamber over you to get to the bathroom. Ugh.

Anyway, this also evokes such boondoggles as the LA-SF "high speed" rail, which looks to be costing $30B, will take 15+ years to build, isn't that fast and is designed to solve a problem that isn't really a problem. The so-called problem is seat capacity between these two cities. It seems like the market is capable of solving this problem with bigger planes no one (currently) wants and prioritizing particular routes.

[1] http://en.wikipedia.org/wiki/Kangaroo_Route

pdonis4• 12 years ago

why do people prefer direct flights? It is at least in part due to the horrible experience and security theater that is modern air travel

The security theater part doesn't make sense, because connecting passengers don't have to go through security a second time. I'll agree with the "horrible experience" part, but I think the main reason people prefer direct flights is simply that it saves time.

dragonwriter• 12 years ago

They do if it's an international connecting flight (that is, if the change occurs at the port of entry), our if the flights are in different terminals in the same airport, or...

jzwinck2• 12 years ago

If connecting passengers never went through additional security, this man would still be alive: http://en.wikipedia.org/wiki/Van_Tuong_Nguyen

PhantomGremlin3• 12 years ago

such boondoggles as the LA-SF "high speed" rail

That thing is way beyond a "boondoggle". It makes no business sense. So there's got to be some serious graft involved.

To your point about "bigger planes", instead of spending $30B to build this train to nowhere, the govt could instead go out and lease ten A380 airplanes and dedicate them to flying between San Francisco, Los Angeles, San Diego, and Sacramento. Even if they lost $1B a year subsidizing this, it would still be much much cheaper than building this train.

Although, in fairness, if high speed rail were done "right", it might be able to sort-of work (even though it never makes money anywhere in the world!). But right now this thing is being built in the middle of nowhere, presumably because acquiring right-of-way on a more direct route would be too expensive. http://upload.wikimedia.org/wikipedia/commons/d/d1/Statewide...

chipsy• 12 years ago

HSR is not simply graft, although it certainly could be implemented as such. Allow me to give some examples.

When you deploy bigger planes you also need bigger infrastructure: The A380, for example, has had some delays due to new requirements. [0] And the A380 itself is not the largest plane ever built [1] - the sizes we've standardized on are an economic tradeoff of land availability, energy consumption, and carrying capacity.

Finally, it's not just planes that a train competes against, but automobiles; simply, if more people drive, we waste more energy. The state's planners have run the numbers and determined that HSR will diversify the transit capacity cost load and make it less risky to hit capacity targets 20 years out. [2]

In current urban planning practice, rails are preferred as a way to encourage dense and sustainable development; when you go downtown-to-downtown, the land value around those hub stops skyrockets. The Japanese rail system was built around this principle, encouraging the rail companies to be real estate investors as well as transportation companies - as a result, the trains go to nearly every major destination. In the case of CA HSR, the stops in the Central Valley will become secondary hubs for businesses that want equal transit times between SF and LA. This puts the Central Valley towns on a more stable economic footing and is good for the overall welfare of the state.

[0] http://www.airliners.net/aviation-forums/general_aviation/re...

[1] http://en.wikipedia.org/wiki/List_of_large_aircraft

[2] http://www.transformca.org/sites/default/files/moving_ahead_... (page 31)

ulfw3• 12 years ago

I'm with you all the way until the HSR between LA-SF. There's 100s of reasons why it's mismanaged (starting to build the line in the middle of nowhere, which later politicians will use to prove that 'no one' uses the line; it's horrendous cost (why?), the slow speed (why?), the lack of local public transport on both ends etc). But arguing that more seats between LAX and SFO is the answer is something I'd have to disagree with these days. Flying in the US is a huge pain with it's security theatre. 90% of the time I drive from LA to SF rather than fly. It almost takes the same amount of time, especially considering I'd need car transport on both ends anyway to get to my destination.

foxylad• 12 years ago

One factor in favour of the single direct flight in smaller aircraft is the horrendous efficiency of airports. The amount of time spent queuing (checking in, enduring security humiliation, and in departure lounges) is usually a very significant part of the total travel time. And having to do it more than once makes it more than twice as tedious.

I recently travelled from London to south-east France by train, and it was a joy. No check-in, hardly noticed security scanning because there wasn't a queue, changing trains in Paris took half an hour (including a metro ride).

ekianjo• 12 years ago

I recently travelled from London to south-east France by train, and it was a joy. No check-in, hardly noticed security scanning because there wasn't a queue, changing trains in Paris took half an hour (including a metro ride).

Yet it's completely irrational why there are not the same security measures taken for train passengers. A bomb on a high speed train would lead to the death of hundred of people as well. Maybe it has to do with the fact that the government openly supports the train because it's one of the key investors in its infrastructure.

snogglethorpe• 12 years ago

It's completely irrational why there are not the same security measures taken for train passengers

No, it's quite rational (whereas knee-jerk calls for trains to adopt airport-style security theatre are not). High-speed trains and airplanes are very different in their "exposure" to terrorist activity, and in their operating environment.

For instance:

(1) Airplanes are, relatively speaking, very fragile; a relatively small bomb can bring one down, and if one goes down, 99% of the time, all on board will be killed. For a terrorist, it's a tempting target.

Trains, on the other hand, even high-speed trains, are relatively quite robust, and even severe train accidents typically only kill a small fraction of the passengers. Trains are extremely long (and the passenger density of high-speed trains relatively low compared to local trains), and the direct effect of a blast would be limited to those in the immediate vicinity. The most you can hope for is to derail the train (which is not at all a given), and even a derailing passenger-train is likely to have many survivors. The worst train accidents in terms of deaths have been due to the effects of extremely specific locations.

(2) As famously shown in 9/11, airplanes can be used as (extraordinarily effective) missiles; if you manage to take one over, you can aim at a wide variety of targets. Trains basically cannot be used this way. So if you attack a train, you basically are limited to killing passengers—and as point (1) noted, even that is fairly difficult.

(3) Once an airplane is in flight, they're pretty much out of reach. Trains, on the other, because they travel on the ground, are exposed to trackside attack. If you want to attack a train (for whatever reason), your best bet is to place a large bomb by the side of the track, not to try smuggling one on board. [That this has, mostly, not been done is probably more a testament to the low "terrorism yield" from attacking trains than to the difficulty of doing it.]

Because of this, the benefit of securing passengers is far lower for trains than it is for airplanes.

(4) Because one of the big advantages of trains is easy and fast boarding and disembarking of passengers, at multiple points, with relatively minimal infrastructure and staffing, the costs of extreme security would be far more prohibitive for trains than for airplanes. Given that the advantages of such security would be, at best, very dubious, the costs obviously tend to dominate the discussion.

Attacking a train, even a high-speed train, is much more akin to simply attacking any crowded location—a club, a restaurant, a theatre—than it is to attacking an airplane. [Because of this, an attack on a crowded local train is likely to be more effective than an attack on high-speed rail.]

You can cause economic effects by damaging infrastructure, but even that is unlikely to be significant.

So basically, (a) trains are just not that attractive a target for terrorism, and (b) the (extreme) costs of airport-style security would not justified by the (very minimal) benefits. Despite the overlap in the service they provide, airplanes and trains are simply very different in many ways.

inopinatus• 12 years ago

If you take that itinerary again I recommend considering changing to/from the Eurostar at Lille instead. It still has the TGV connection, but via a short walk down the concourse rather than a cab/metro ride across Paris.

Did this a few weeks ago and also saved myself a great deal of strike-related uncertainty (Paris region connections were at a standstill).

dredmorbius• 12 years ago

I noticed this sentence in the article: "The A380 was also Airbus’s answer to a problematic trend: More and more passengers meant more flights and increasingly congested tarmacs".

Problem is, that hasn't been the case in the United States.

Or rather, while passenger miles are still up over the past 14 years, both aviation fuel consumption and departures are down.

The US hit peak aviation fuel in 2000. Peak departures occurred in 2005, likely due to a shift to smaller aircraft. Total passenger miles remain up since then, due largely to increased load factors -- reduced seat pitch (spacing) allowing more rows aboard aircraft, and improved scheduling packing more people into those seats.

I discovered the peak aviation fuel element when looking into one of several rather unconvincing projects aimed at providing biofuels for commercial aviation (the proposals simply don't scale).

http://www.reddit.com/r/dredmorbius/comments/1wo2hl/boeings_...

Using the US Department of Transportation's "RITA" data, 2013 aviation fuel consumption was 17% below 2000 levels, and less than half of the 2000 prediction.

    Year        2000 FAA Est    2014 RITA Actual     % Difference
    -------     ------------    ----------------     ------------
    2000        20,177          19,026                     -5.7%
    2012        33,519          16,003                     -52.3%
    2013        --              15,998                     --

http://www.faa.gov/data_research/aviation/aerospace_forecast...

Steve Kopits points out that departures peaked in 2005, two years before the recession started,

http://energypolicy.columbia.edu/events-calendar/global-oil-...

See p. 37 of the slide deck: http://energypolicy.columbia.edu/sites/default/files/energy/...

I'm long-term quite bearish on aviation.

Oversize Expectations for the Airbus A380

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