Friday, January 22, 2016

The Capital Heavy A380 Stalls Orders Under Its Own Weight (Extra Included)

The A380 double decker is a "Heavy's-Heavy" in Airline parlance. Orders are stuck at three in the last year. BA looks for used A380's out of its affordability factor. They can't afford a new A380 for its business model. Return on Capital investment is a high risk. Singapore Airlines is interested in trimming its fleet of A380's through selling some inventory, others are not far behind. New purchasing schemes are for used A380 purchases, and not for new A380's. Leasing used equipment from a lessor is the new mechanism for airline profitability.

Aviation is entering into the Jurassic Period for These Two Dinosaurs 
 Image result for a380 747

It is not so dismal as it sounds, but it makes the case. Airbus made a corporate mistake building the A380 program. It brought the 747 program to its finality, but its freight program lives on! The A380 canceled its freight version, as it was engineered for carrying mass number of passengers, and is not an efficient freight hauler for its heavy empty weight or high price. The 747-8F does an optimal job for its frame configuration that an A380 can't provide.

A dismal outlook for the A380 purchasing is coming into view. The heady days of those initial first A380 orders have passed. In fact the backlog sits at about 179 A380's out of 317 ordered. The handwriting is on the Boeing wall as the 747-8 has dropped to six aircraft per year from a build rate of about 12, 747's built during last year. 

Without orders soon the A380 will also go the way of the 747-8. Freight orders will keep the 747 on life support. The A380 has no freight answers. Airlines have enough A380's in service, which is now creating a used market, as airlines shape its fleet size for actual operational efficiency and need. Thus, a used A380 market emerges from these fleet trimmings, as airlines seek a used but new to its fleet expansion program. 

The A380 is too expensive for most operations when considering a new order for Airbus. The 179 yet to be delivered A380's creates a market glut when the real market has matured, and a used A380's market emerges coming from fleet adjustments as it provides the supply side, and other top tier airlines provide the demand like the late arriving BA A380 need. The Heavy's-Heavy is sorting out its market on passenger traffic alone.

The news this week is about the 747 losing ground on production output as its backlog shrinks to a worrisome level. The passenger niche for the 747 is too small, and its freight version has filled the world’s leading freight purveyors with the 747-8F. Boeing would like to keep the program building until the next 747-8F round of orders can be amassed. Albeit, in a small niche, it is very profitable for Boeing nursing its 747-8F program along. 

However, Airbus will never recoup its capital investment with the A380 program.

The fate of both the 747 and A380 points towards doom. The shelf-life for Airbus will be a lot shorter than Boeing's 747 build period. Boeing has built the 747 since 1971, a forty-five year period. The A380 will be lucky to make twenty years for building its A380 until it will shut it down by 2028. Airbus is only a five years away from a Boeing like production rate for its heaviest of heavies, by making only an even dozen a year.

Extra: Comments to "Randy's Journal" from Winging It, as posted:

"Randy, the freight market is bracketed by various aircraft types all seeking efficiency that will make freight operations profits. There are several defaults with the market that has emerged. The 767 for the parcel industry. The 777 for a broader range of product addressing both parcel and pallet handling with a bulk capability. The 747-8F however, stands alone. As you alluded to it there is not a competition.
It covers the spectrum from parcel, pallet and large bulk transporting. The convertibility for freight shipments is off the charts for the Boeing 747-8F. There is no match. The used market will exhaust the inventory in the next four years. The Russian, European and older US made freight products become less available to the industry. Boeing has positioned itself to capitalize on the freight industry superbly. Your readers should buy stock on the 747-8F family function as it will become a great compliment to the "serious" air freight airlines, having the 767,777 and 747 inventory for its freight business.
Congratulations on having a great family of long-haul Freight aircraft. It will make our world a better place. The 747-8 has a very much needed place going forward."