Production of Airbus A380 hinges on Emirates deal

Emirates is 'only airline with the ability' to commit to the long-term order pipeline Airbus needs, says John Leahy

Emirates is one of the airlines included in the TSA's emergency order. Courtesy Emirates

Airbus, the European plane manufacturer, will stop making its A380 superjumbo if it fails to strike a long-term deal with Emirates, the largest operator of the aircraft, which would guarantee a steady order over a decade.

“Quite honestly…if we can’t work out a deal with Emirates, there is no choice but to shut down the programme,” Airbus’ outgoing chief salesman John Leahy told reporters via web cast on Monday.

Emirates are “probably the only ones in the marketplace with the ability” to commit to a minimum of six planes a year for 8-10 years – which is what Airbus needs to make the programme viable, he said.

“But I’m hopeful we can work out a deal with Emirates and then other airlines can add on top,” Mr Leahy added.

Emirates is the largest operator of A380s globally with 100 A380s in operation and 42 more on order. The airline was expected to sign a preliminary order at the Dubai Air Show in November for as many as 36 A380s, but the deal never materialised.

The airline has been pressing Airbus to commit to the future of the double-decker aircraft by guaranteeing a 10-year production line before it will place another order. Emirates has urged Airbus to market the aircraft more widely across the world to ensure future production of the jet. The Toulouse-based manufacturer hasn't sold an A380 in over two years and the aircraft lacks a secondary market.

Last week, Airbus officials were in China on a trade visit and were said to be tapping China as a potential buyer of A380s. The Toulouse-based manufacturer was offering China a production role on the A380 if Chinese airlines order the jet, the Financial Times reported.

On Monday, Airbus’ outgoing chief operating officer, Fabrice Brégier, said “there are clearly other potential customers beyond Emirates”.

Dubai’s flag carrier is still “key for the long-term future of [the A380] programme” and talks with the airline are ongoing, Mr Brégier said.

Airbus sold 1,109 planes last year, 52 per cent higher than 2016, outstripping rival Boeing thanks to a raft of end-of-year deals, including a US$50 billion order for 430 A320neos from US private equity firm Indigo Partners.

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Airbus has held an order lead over Boeing since 2012, helped by Mr Leahy, who is set to retire in the coming weeks and be replaced by Eric Schulz, the former head of aerospace at engine maker Rolls-Royce Holdings.

In its sales update on Monday, Airbus said total deliveries reached 718 aircraft in 2017 – four percent higher than the previous record of 688 in 2016.

“A new Airbus delivery record coupled with our fifth best order intake wraps up a remarkable year for us…and makes the company fitter, stronger and ready for the opportunities ahead,” Mr Brégier said.

Deliveries were dominated by the single-aisle A320, with a total of 558 in 2017 as Airbus moves toward production of 60 planes a month across its assembly lines.

The company also handed over 78 of its newest wide-body A350, while production of the A380 fell to just 15 planes.

Airbus sees “great potential” for the Middle East aviation market in 2018, Mr Leahy told reporters.

“It’s a strong market and it’s recovering. It’s no secret that oil prices are moving back up again – Brent is very close to $70 a barrel and looks to be inching up from there, and the economies tend to be on the mend.

“[Regional] airlines are doing better as they are around the world and we see great potential for the region,” he said.