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Emirates order ‘should end doubts about A380’

BY TIM HEPHER AND PRAVEEN MENON, NOVEMBER 21 2013, 07:14
 
SUPERCARRIER: Visitors walk past the Emirates Airline Airbus A380 aircraft during the 13th Dubai Airshow on Monday. Picture: BLOOMBERG

SUPERCARRIER: Visitors walk past the Emirates Airline Airbus A380 aircraft during the 13th Dubai Airshow on Monday. Picture: BLOOMBERG

DUBAI — Emirates’ whopping order for 50 of the world’s biggest jets should end doubts about the A380 that have tested the nerve of manufacturer Airbus, the airline’s president, Tim Clark, said on Wednesday.

He added that the airline was so sure of filling the aircraft it might have bought 10 more.

The record $23bn A380 order at the Dubai Airshow turned round the fortunes of a recently slow-selling jet that is synonymous not only with Europe’s industrial ambitions, but also the rapid growth of its largest customer. “For us, the A380 is the future,” Mr Clark said.

“I want to make this absolutely clear, to Airbus and the EADS board, that we are here for the long term. We will take more if we can.”

Emirates already dominated the A380 backlog with a total of 90 ordered out of 259 since it was launched in 2000. After the new deal it has 140, or almost half the aircraft on order.

Yet some other airlines have cancelled or deferred as they worry whether they can fill the giant jet in tough economic times. Industry analysts say doubts have grown over whether as many as 30 further aircraft will be delivered as planned.

“I’ve been very vocal with the Airbus management, saying don’t bottle out of this … it’s a really good aircraft,” Mr Clark said.

Sunday’s deal galvanised an already dramatic start to the Dubai Airshow, coming on top of $100bn in orders for a new Boeing jet, including 150 for Emirates. It also ended a dearth of orders for Europe’s iconic double-decker jet.

The apparent shortage of demand had fuelled internal discussion over whether to cut production and review A380 strategy, it was reported last month.

“We were aware of it,” Mr Clark said. “We wouldn’t place orders of this size if we were concerned.”

The new agreement was sealed in less than a week. “They (Airbus) knew nothing about it until Monday last week,” Mr Clark said.

“We gave them a call and said we want these airplanes and this is how we want to do it. At the time, they were having issues with regard to what to actually do, slow production rate maybe.”

Mr Clark said he had always considered Emirates would need at least another 25 or 30 A380s for its fleet. “So what we then did was to re-examine the real estate at the Dubai International Airport and see how we could use every trick in the book” to fit in more aircraft.

“When we did that study, the magic number came up. So we said, let’s have them in.

“We could have done another 10 if we found another bit of space somewhere in the (air)field.”

Airbus officials said there had been preparatory talks for a few months, but confirmed that last week had seen a step-up in the pace of negotiations. Industry sources said the carrier had at first looked at something closer to 20-25 jets.

The sale does not immediately resolve a problem of what to do with an estimated five A380 aircraft remaining to be sold in 2015, for which the first parts must soon be ordered. The unallocated aircraft are worth about $2bn at current list prices, most of which is usually paid on delivery.

Emirates is unlikely to take delivery of those five aircraft since they do not fit its schedule for introducing a complex new in-flight entertainment system, which must be planned well ahead.

Airbus has said it needs to deliver 30 aircraft in 2015 to meet its target of breaking even on the jet that year, but that any shortfall would not have a significant effect on profits. But it could have a stronger effect on EADS’ cash flow.

Emirates and Airbus both expect traffic to grow fast enough in coming years to prove the A380’s worth, but increasingly share an interest in ensuring the project succeeds. Boeing says airlines prefer twin-engined aircraft like its new type of 777.

“We believe business will come,” Mr Clark said, adding Emirates was already detecting signs of recovery in Europe. “You have to fill it — time will demonstrate that you can fill the 500-seater.

“I can name 10 airlines today that I’m convinced can fill the airplanes, who are not operators of the 380.”

Meanwhile, Bombardier said on Tuesday it had signed a letter of intent to sell five CSeries jetliners to Iraqi Airways, the first new deal since June for the aircraft, which the Canadian aircraft manufacturer has spent billions developing. Iraq’s national carrier will buy five of the CS300 jets with options for 11 more.

The news from the Dubai Airshow lifted Bombardier’s shares modestly with investors continuing to be tentative, awaiting more closely watched “firm” orders for the new plane. The transaction, which is valued at $387m at list prices but swells to $1.26bn with options, follows the first flight of the CSeries in mid-September.

The CSeries, a $3.4bn development programme that brings Bombardier into competition with the lower-capacity aircraft built by industry giants Boeing and Airbus, has suffered from several delays and sluggish demand. Testing was slow to start, but is advancing according to plan, CSeries programme director Sebastien Mullot told a Scotiabank Transportation and Aerospace Conference in Toronto on Tuesday.

Bombardier also announced on Tuesday that low-cost Thai carrier Nok Air placed a firm order for two Q400 turboprops with options for two more aircraft and purchase rights for another four, a deal worth up to $258m.

Reuters

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