Sunday, January 18, 2015

The A380 Is An Airbus Side Show.

It is not my want to dive into Airbus but in this case the A-380 needs some attention. It is the Airbus side show. The CEO stands outside the A-380 tent barking compliments on how wonderful the aircraft is and how much anyone with a thin little ticket stub can come in a see the "fat lady" sit on a "oh so small stool". Wouldn't you like to see its upper deck or walk through a vast space of vastness while flying at Mach .82? I would, but not until I see the main show with the 787-9 at center ring.

Much like the Ferris wheel at the fair, it has become the Icon of amusement in a sedentary repose since the 19th century. Even though it looks like a lost leader of aviation tickets, it will continue on in light of more exciting and pleasurable rides. People see the grand Canyon by the Millions because of its amplitude of bigness, color and depth. Not because the canyon is so efficient to cross over to the other side or does it have a level trail to the bottom. It's because PT Barnum said so.

The Airbus executives have announced break even in 2015. I take umbrage with that bravado since early prediction said the cost and contribution margins from sales would take over 260 A-380's delivered. Now that number is estimated at 460 A-380's delivered, even with crack wings fixed, and all. However, never underestimate French bravado. They will break-even at about 180 units, amazing. It all about who you hire in the business office. Accountants can do that little thing, by writing-off short electrical wires, cracked wings and engineering redo into another category, as it protects its mysterious static break-even point. It comes with a stamp of certified audit to boot. The real cost of the A-380 will deplete the stock price somewhere north of reality. It won't make real money in my lifetime. It still remains the Airbus side-show. The center show ring is for the 777X. The ticket price for that show will erode the "side-show" further back behind the carnival Ferris Wheel. People will come to the A-380  out of the need to have said, "seen it, done it, been there". Then comes the know it all snide self importance customer saying, "I rode on the A-380 enough. I don't like the A-380 crowd once disembarked, I prefer walking with my exclusive group from  the 777X."

All this before the A-380 reaches "Break-even Point". Eykes! The A-380 wants to be the center ring, and its relegated to somebody's "Bucket List" on a "to do" when at a side-show behind the Ferris Wheel. See where I'm going with this? Its big and its the Airbus fascination with everything big, wide and biggest. That is Airbus number one technological claim this century. "We are hooked on size matters". Just review the advertising billions. XWB,, Double Decks, Bigger looking windows that can fit inside Boeing's windows. I am beginning to think Airbus has a "Small Frenchman Complex". Egaads! Kind of creepy when they must go the extra inch all the time. But they have out done the market with the A-380 exposition. The show is winding down with the crowd who doesn't want to be in the crowd. It wants a fresh start with the 777X as it has sold in numbers.

I think Boeing manned up with the 747-8i, as its behemoth model was on life support, and remains so unless its repurposing campaign works for the 747. It is not trying to be bigger than the A-380 or have two decks the length of the body. Boeing went with what has been proven as a special design.Where it  lengthened it out efficiency not out of European-Like -Pride, as found on the A-380. They brought across the development canyon; 787 avionics, engines and systems. Now Boeing is waiting for the Jumbo market to sort itself out.The initial A-380 market push is over. The real question will emerge and be answered. What do people really want in this market segment?

Tim Clark of Emirates has boxed himself in with 140 ordered or flying A-380's. Here is another caveat for consideration from his order book.

The Boeing Company Online Data 

Emirates Customer Summary Through December 2014
Model SeriesEngFirst OrderOrdersDeliveriesUnfilledFirst Delivery
Emirates (United Arab Emirates)-Total28990199
777-200RR04-Jun-199233-05-Jun-1996
777-200ERRR04-Jun-199266-11-Apr-1997
777-200LRGE21-Nov-20051010-31-Aug-2007
777-300ERGE19-Jul-2004120714915-Feb-2006
777XGE08-Jul-2014150-150
777 Total28990199
Customer Total28990199
Model SeriesEngFirst OrderOrdersDeliveriesUnfilledFirst Delivery

Analysis of the  chart shows a propensity of 777X ordered in 2014. This is the A-380 tipping point for retirement. Emirates has received about 57 A-380's out of 140 ordered, having an actual remaining delivery schedule of 83 A-380's to go.

A total of 317 A-380's are ordered for all customers where Emirates have 140 of those numbers. Leaving the Airbus order book with the other 17 customers with 177 booked, many of which are delivered at this time. Not only will orders become scarce for the A-380, but its cancellations will dominate the book change.

The Tim Clark conundrum has been addressed with the 777X order. His business model will change in 2020 as he nears 140 A-380 delivered. He may cancel the balance of his A-380 order book when the 777X arrives in 2020, when it is operating as expected. He will be done with the Airbus side-show in 2020, as the market will be well satiated with A-380, subjecting it as the next Ferris Wheel.