Story ID: 757 A380 update.doc
Airbus Adds More Economy Seats
By: Ian Goold
Caption: Going conservative on the neo option for the A380, Airbus has cabin-revenue enhancements up its sleeve
Word Count: 747
Airbus sees no short-term requirement for a re-engined “neo” variant of the very-large aircraft (VLA) A380, and is concentrating on cabin developments to boost airline revenue, including 11-abreast economy seating. The European manufacturer expects to log further A380 orders this year from existing or new customers, according to Chris Buckley, Europe, Asia, and Pacific executive v-p. Such business could include confirmation of Iran Air’s January agreement to acquire a dozen A380s.

In June, A380 backlog stood at 132, but several aircraft may not go to their original buyers, as customers rationalize their orders. Largest customer Emirates Airline is taking two examples previously built for Japan’s Skymark Airlines, while French carrier Air Austral also cancelled orders for both of its A380s and Air France-KLM has reduced its requirements by two. Orders from Hong Kong Airways, Kingfisher Airlines, and Virgin Atlantic Airways are widely expected not to be taken up.

Asked if Airbus could accept a large A380 order, now that space previously used for the VLA at its Hamburg factory is now devoted to increasing A320 final-assembly, chief operating officer Tom Williams says it was “a balanced judgment.” The company can still assemble 24 A380s a year and Williams would “love the challenge to build more than two per month [but we] will never build ‘white tails.’”

Meanwhile, Airbus is working hard to bring the program into profit. Switching Hamburg’s capacity between models provides a “very significant step” toward reducing the cost of [program] break-even, said Williams. Such moves help the A380 balance sheet because fixed and variable costs now can be charged to the smaller aircraft.

Programs executive v-p Didier Evrard, who succeeded Williams last year, reports that A380 industrial break-even—understood to mean that each aircraft sale covers its own production cost—has been “achieved and stabilized.”

Previously, high fuel costs had stimulated orders for the more-economical A320neo as potential A380 operators were wary that they might not make money from the VLA, says Williams. Now, “we are going around to those airlines again” as lower oil prices make A380 seat-mile costs more attractive, especially as operators seek to optimize their capacity.

The Airbus official recognizes that continued traffic growth might mean limited runway capacity becoming a “frustration” for Airbus COO (customers) John Leahy. Nevertheless, Williams claims that airports have not become as constrained as he had feared; rather, they are being “innovative.”

Leahy notes London Heathrow’s 50 daily A380 flights to 15 destinations, compared with 24/day from Los Angeles to 10 destinations, and 14 daily operations from Hong Kong serving seven cities. He cites statistics suggesting that this year, 10 percent “of all passengers” will fly on A380s.

Low fuel prices notwithstanding, Emirates remains keen on “up to 200” re-engined A380neos, but Airbus is taking a prudent approach, and the airline said in June that talks had “kind of lapsed.” Strategy and marketing executive v-p Kiran Rao confirms that there is “nothing imminent. We continue to study it,” while Williams sees “no need for an upgraded model before, say, 2023.”

For his part, Leahy says that the aircraft is “the most efficient aircraft flying today” and is good “for another 30-40 years. Yes, we will update it, there will be a version with new engines, but there's nothing planned [right now].”

In the short term, under its strategy of incremental development, Airbus is working to improve cabin economics, claiming that planned changes to increase cabin capacity could be worth as much as $23 million per aircraft in additional annual revenue.

Removing upper-deck sidewall stowage bins, for example, could make room for another 10 business-class seats, while introducing 11-abreast economy seating—with five-seat units between the aisles on the main deck—adds 23 revenue-generating seats.

Changes in the forward cabin introduce nine-abreast seating for 63 premium-economy units, compared with the current 81 economy-class seats. A combined crew-rest area below the main deck and forward of the wing frees capacity for three premium-economy and five economy-class seats and an additional cargo pallet. Finally, a new rear stairway between the two decks allows a further 14 economy-class seats to be fitted.

Leahy anticipates a “valuable [A380] improvement package” becoming available in 2020 or soon after, that could be worth “$4 million additional present value.” He foresees a 2 percent improvement in fuel consumption, an additional 500 miles’ range, and an extra five tons of passengers and/or freight payload.