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Airline Industry

Emirates order is a major boost for Airbus A380

W.J. Hennigan  Jun 14, 2010

The Airbus A380, the world's largest passenger jet, got a major boost when Emirates airline ordered 32 of the double-decked aircraft, raising prospects for a plane that some critics had derided as a white elephant.

The multibillion-dollar order last week from Dubai-based Emirates — the largest ever placed for the A380 — ensures that production lines will be humming through the end of 2017 and could represent a boon to more than 80 suppliers in California. Airbus spends about $1 billion annually buying parts from those suppliers.

"This is a huge deal," said Simon Menzies, general manager McStarlite Co. in Harbor City, which makes doughnut-shape "lipskins" for the A380's four massive jet engines. "It guarantees that we'll have work for years to come. We hope there are more big sales like this one."

But some analysts said the order will not help eliminate lingering concerns about the A380's long-term prospects. Not one U.S. carrier has ordered the plane, and in the last three years, Airbus, a subsidiary of European Aeronautic Defense & Space Co., has landed only one new customer. Also, nearly 40% of the orders have been placed by a single airline, Emirates.

"The order raises more questions than it answers about the program," said Richard Aboulafia, an analyst with aerospace research firm Teal Group Corp. "Can it continue with just one major customer? And why is Emirates buying so many A380s in the first place?"

Airbus and Emirates declined to say how much was paid for each plane, which has a price of more than $300 million. Few airlines pay the so-called list price and often get steep discounts for large orders.

With the order, Emirates will have 90 A380s in its fleet by the end of 2017. The airline with the next largest order is Qantas Airways Ltd. with 20.

Emirates, owned by the government of Dubai and the largest carrier in the Middle East, said it sees the A380 as the future of travel and a key driver of its growth. With two decks, the plane can hold more than 500 passengers.

Despite worldwide passenger traffic declining more than 2% last year, the airline reported a 21% increase in passengers.

"The A380 is selling in expanding markets," said Michel Merluzeau, managing partner of aerospace consultant G2 Solutions in Kirkland, Wash. "The fact that Emirates is buying more shows that all the technical kinks have been worked out. It's a major endorsement for the plane."

In all Airbus has orders for 234 A380s from 17 customers, including Singapore Airlines Ltd., Lufthansa and British Airways. It has delivered 29.

Airbus' reliance on Emirates harkens back to when Boeing Co.'s 747 jumbo jet first took to the skies in the early 1970s. With the exception of Pan American World Airways, there wasn't much initial interest in the jet — then the world's largest. Subsequently, the 747 became one of the most successful commercial jetliners.

A380 supporters are hoping for a similar outcome after years of setbacks including production problems that delayed delivery of the aircraft to airlines by several years. The delays cost Airbus billions of dollars.

There were also initial worries that airports could not handle the A380's size. Los Angeles International Airport spent $88 million to build a taxiway that can handle large aircraft. Qantas, an Australian airliner, is currently the only carrier flying the A380 at the airport, with about 10 flights a week.

Korean Air Lines Co., which has ordered 10 of the jets, expects to fly its first A380 out of LAX next year. But the Asian airline said it has no plans to order more.

Airbus hopes Emirates order will help nudge others to make additional orders. Hurt by the recession, U.S. passenger traffic fell more than 5% last year. With early signs pointing to a turnaround, the company is hoping that will drive up orders.

"The orders for the A380 have been steady, but once traffic starts to inch up again, I think your going to see more customers lining up," Airbus spokeswoman Mary Anne Greczyn said. "The Emirates order is just the beginning."

Emirates order is a major boost for Airbus A380
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