Troubled Airbus jet could be bargain for airlines

EADS officials last month estimated that the A380 delays will cut $6.1 billion from earnings through 2010. This week the company reported a third-quarter loss of $245 million, largely because of the production delays. Officials have said the company will not make a profit on the A380 until it has sold 420 units, up from last year’s forecast of 270.

That could take decades, although some analysts point out that the 747 jumbo jet, which nearly bankrupted Boeing, also took many years to become profitable.

Without FedEx, Airbus still has 149 orders for the A380 from 15 customers, including Emirates, Singapore Airlines Ltd. and Australia's Qantas Airways Ltd.

Richard Aboulafia, vice president of the Teal Group, an industry consulting business in Fairfax, Va., says the A380 debacle casts doubts on the company’s ability to fund new planes, such as the A350 — a new widebody jet designed to compete with Boeing’s fast-selling 787 and 777.

“That’s the airplane they should have built from the word go,’’ Aboulafia said, who added that the A380 “should never have been born.” 

Paul Nisbet of JSA Research in Newport, R.I., said Airbus in time will earn back respect and orders for the A380 by demonstrating the operation and viability of the aircraft.

“Eventually it will be an operational success,’’ Nisbet said. “How long it will take or if they ever achieve economic success remains to be seen.”

A decision on whether to go ahead with the proposed long-range A350 is expected in the next few weeks.

Without an A350 launch, Airbus will soon have nothing competitive to sell in the crucial 200- to 400-seat segment, Aboulafia said. “Getting the A380 back on track after a two-year delay won’t save the company from marginalization without the A350.”

In wake of the latest delays, Virgin Atlantic Airways postponed delivery of its first A380s until 2013. Emirates, the Dubai-based airline that is the program’s biggest customer with 45 planes on order, said it was sending an audit team to France to check on the latest delivery schedule. Its first A380 is expected to be delivered in August 2008 — a time when the airline originally was supposed to have 18.

Meanwhile, Qantas, which has already been compensated for the delays, recently ordered eight A380 superjumbos on top of the dozen it had already said it would buy. It was the first A380 order this year.

Qantas officials said they had negotiated an "attractive package" for the additional jets. It also ordered four A330s to help fill the gap left by the two-year delay to the A380 delivery timetable.

“I wouldn’t be surprised if Airbus threw in those planes (A330s) practically for free,’’ Greenslet said. “The pricing power has shifted from the seller to the buyer. Airlines can more or less dictate a price right now, and Airbus is in no position to haggle.”

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