Further A380 delays

04.10.2006
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Centre for Asia Pacific Aviation notes Airbus has unveiled further delays in the A380 production programmed of up to a year. This prompted parent EADS to issue a EUR4.8 billion profit warning – more than double the EUR2 billion figure announced less than four months ago. One A380 will be delivered (to Singapore Airlines) in 2007 (compared to nine announced in Jun-06), 13 in 2008 (down from 35), 25 in 2009 and 45 in 2010.

According to Peter Harbison, Executive Chairman of the Centre for Asia Pacific Aviation noted “the biggest impact of the delays could be felt most keenly in the Middle East. Emirates’ and Dubai’s growth trajectory and competitive impact could be slowed – but not stalled – by the delays, which could be positive news for its competitors”.

“Emirates was on track to become the world’s largest long-haul carrier (by seats) by 2012 – a goal it will no doubt strive to maintain,” concluded Mr Harbison.
Aside from the pain for Airbus/EADS, the delays have unearthed a range of strategic responses from airlines:

Emirates, which has orders for 45 A380s (or 28% of the 159 total firm orders) stated a further ten-month delay in the delivery of its first aircraft, until Aug-08, was now a “very serious issue” and the airline had launched a review of strategies to “minimise impact on expansion plans”. President, Tim Clark, stated the group was “reviewing all its options”, but stopped short of indicating the order would be cancelled. Simply, Emirates needs the capacity to maintain its rapid growth agenda and cancelling the order would require an alternative aircraft plan. At present, there are few options; Boeing’s production line is sold out for the next few years, while Airbus has an order-book of some 2,100 aircraft, filling its production lines for the next 4.5 years. Boeing recently confirmed planning for the passenger-version configuration of the B747-8 programme will not be finalised until mid-2007, while first deliveries of the B747-8s (in freight configuration) will commence in late 2009.

Singapore Airlines (SIA), which signed a Letter of Intent in Jul-06 for nine more A380s, on top of 12 firm orders, was originally to have launched A380 services in Mar-06. SIA will not receive its first until Oct-07, and will now roll-out its new economy product instead on B777-300ER aircraft scheduled for delivery later this year, in order to be competitive with rival Cathay Pacific. SIA acknowledged that while the delays had not meant the stalled introduction of new routes, the airline was faced with an “inability to grow” capacity on certain key routes, such Singapore-London.

Qantas confirmed its first delivery would be in Aug-08 and four aircraft would be delivered by the end of 2008 and seven by mid-09. Crucially, for Qantas, this “maintains the original delivery schedule [sequence] with the other two launch airlines.” Qantas expressed disappointment with the delay and has commenced a review of its capacity needs in light of the revised timetable. In Aug-06, Qantas recognized USD80 million in damages to be paid by Airbus.

Lufthansa‘s first of 15 A380s will not be delivered until Su

mmer 2009 – one year later than expected. However, Lufthansa stated it was “still convinced” that the A380 is a “success story” and a “growth aircraft”. According to a spokesman, “as we want to grow, we still believe this is the aircraft we need, especially when capacities and traffic rights are limited”.
Air France’s first (of ten) A380s will be delayed until Spring 2009. The carrier stated the delay, while “regrettable”, will however “not have any incidence on our growth strategy”. Air France explained its flexible fleet management policy allows it to pursue growth in capacity by extending the operating period of older aircraft. The carrier indicated it would seek to “define the terms of our financial compensation” resulting from the delays.

Virgin Atlantic will next week reconsider its fleet strategy, including possible order cancellations for its six A380s.

ILFC, which has been critical of Airbus’ handling of the A380 and A350 programmes, has so far been silent on the latest delays. A powerful customer, with ten firm orders, any moves by ILFC to cancel its order could be an influence on other buyers.

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