Story ID: 617_AirbusInnoDaysMarketSales.doc
Airbus Confident Sales Levels Can be Sustained
By: Thierry Dubois
Caption: Executives try to put positive spin on A380 economy seat shrink.
Word Count: 860
Airbus sales gurus are betting that forecasts of continued world population growth are correct, allowing them to keep order acitivity at a sustainable levels over the coming years and decades. In particular, this will help the A380 find new opportunities, they claim.

For the first four months of this year, Airbus is claiming a 62 percent market share in units, or 53 percent in revenues, compared with Boeing. The backlog was steady from one year before, at 6,399 aircraft.

For the decades ahead, Airbus COO, customers John Leahy explained airliner sales have a strong base, thanks to air traffic growth, itself fueled by the way the world’s population is evolving. He sees air traffic continuing to double every 15 years in terms of revenue passenger-miles. In Leahy’s view, the past 10 years has been the decade of the emerging countries, and that movement will carry on.

In 2013, some 22 percent of the populations of emerging countries took a trip. This proportion is planned to increase to 66 percent in 2033, according to Airbus statistics. Meanwhile, there are 12.5 aircraft per million inhabitants in the U.S., but only 1.6 in China. So there is still a lot of capacity to fulfill, Leahy said.

Another trend has been confirmed. The share of business- and first-class tickets sold globally has not caught up to rates that prevailed before the 2009 downturn, when they fell from about 9.7 to 8.2 percent. As a result, airlines are exploring how to make their economy classes more cost effective.

One efficiency move might be to transition to larger aircraft in the single-aisle category. For example, market share of the A321 has grown dramatically in recent years at the expense of A319 sales. This year, their deliveries will be 38 and five percent, respectively.

Seating more passengers in the same cabin remains the Holy Grail, and Airbus and its equipment manufacturers are finding ways to move in that direction. The “Smart-Lav” is a lavatory that “gives the same space feeling within a smaller footprint,” according to Kiran Rao, executive v-p, strategy and marketing. Also, since most airlines don’t need all the galley space currently offered on the A320, the “Space-Flex” configuration includes a second aft lavatory. “About 70-80 percent of airlines choose it, although we had expected that to be closer to 30 percent,” Rao said.

Thanks to a new regulation on emergency exits, maximum seating in Airbus’s single-aisle family has been increased. These are now 160 seats on the A319 (+4), 189 seats on the A320 (+9) and 240 seats on the A321 (+20). “EASA has certified the A320 to 195 seats, but we do not promote it,” Leahy promised.

Airbus officials are keen on advertising “personal space” for each passenger, especially the A320’s 18-inch seat width. But they are paradoxically marketing an 18-inch economy seat on the A380 as “progress,” whereas seats on the superjumbo are currently wider, such as Singapore Airlines’ 19 inches in its 10-abreast configuration.

An A380 in an 11-abreast layout would still offer 18-inch seats, wider than the seats in a typical 10-abreast Boeing 777X, Leahy emphasized. It would create a middle seat in the center but “families like it,” Leahy asserted in a U-turn from his earlier statements.

Airbus’s main point is about the trend toward adding a premium economy class. “If we are moving toward four classes, the A380 becomes more comfortable and more cost effective,” Leahy asserted. Premium economy is or will soon be offered by five A380 operators. Typical width and pitch are 19 inches an 38 inches.

Rao believes the A380 will come into its own in the next decade, partly thanks to the four-class trend. “You need the space,” he said. Moreover, a 777 or 777X cannot accommodate a super-first class, such as Etihad’s Residence. Further advocating the A380’s business case, Rao said he is “not too worried” by sales, as the forecast for the current model was initially 400, and Airbus has received orders for 317 so far, ten years after the first flight. A freighter, a longer-range version and at least one stretch may still be derived from the existing design, as anticipated in the initial forecast, he said.

“The A380 is the only way to handle a doubling in traffic in the future,” Leahy went on. In 2023, the world’s 71 megacities will garner a predicted 90 percent of the long-haul traffic (for those routes above 10,000 passengers per day). “We therefore have a trend to larger aircraft,” Leahy argued.

Asked about demand for used A380s, for when Emirates would possibly offload its older aircraft, Leahy said it’s possible low-cost leasing could drive ideas for new routes. Brégier added, “A 12-year old A380 will be cheap enough to open up new markets, because one obstacle [to opening new routes] has been the initial capital cost.”. In Asia, low-cost, long-haul carriers could use A380s around their sweet spots–six- to eight-hour flights, Rao concurred.

Despite the official good mood about the A380, Brégier did not disguise the fact that “finding other customers” remains one of the challenges the company is facing.