What’s next for Very Large Aircraft?


Facing headwinds in terms of orders, Airbus and Boeing have to reconsider their jumbo jet production rate. From the airlines’ point of view, the trend is to focus on smaller twin engine aircraft, which are lighter and more flexible in terms of use.

This year Airbus didn’t record a single order for the A380 and has faced three cancellations. The main risk is to have unfilled slots in factories by 2015 and force the group to accumulate “white tailed” aircraft. Airbus has announced some variation in the production rate that should be carried out in order to adapt to market reality. The rate could decrease to 2.7 aircraft per month, against 2.8 now. The goal is set at 25 A380 firm orders by the end of this year.

But as of today, it is still officially… null! Even worse, Lufthansa has recently cancelled 3 orders of A380s and switched to smaller wide body aircraft which are fitting in better with their needs. In another potential blow to the Airbus A380 program, Air France has indicated it may not take all of the aircraft it has currently on order.

According to Air France-KLM CEO Alexandre de Juniac, the airline may swap part of its remaining order for other aircraft types. Air France has ordered 12 A380s and received nine so far. The airline expects to receive another one in 2014, but has already postponed delivery of two more until 2016; and now may not take them.

The commercial performance of Boeing 747-8, the modernized version of the 747-400, is also modest. The company recorded five firm orders from Korean Air but as many cancellations from other customers.

To date, the 747-8 settles for merely 5 purchase intentions to be confirmed. In addition, the passenger version sold poorly compared to the cargo variant (40 of the 107 aircraft ordered). With 262 orders for the A380 (which does not exist in freight version), Airbus controls nearly 90% market shares for new orders, on the VLA market. Boeing estimates that the decline in airfreight and weak demand in the passenger segment explain the softness of the jumbo jet market. In spite of the cargo market showing early signs of recovery, the company has decided to produce less 747-8. The rate will decrease from 1.75 to 1.5 aircraft per month in early 2014. Boeing has delivered 16 jumbos since the beginning of the year.

Airbus still assesses a potential market of 1711 large jumbo jets ($519bn), for the next two decades, whereas Boeing is forecasting only 760 units ($280bn) for the same market segment. In order to improve sales both companies are trying to enhance their marketing argument, most of all on fuel efficiency issues.

Boeing is almost ready to bring a series of avionics and engine upgrades to its flagship 747-8 aircraft, claiming a further reduction in fuel burn of 1.8%, resulting in savings of $1mn/year. Airbus A380 remains the most fuel-efficient in its class, with a consumption of 3 liters per passenger per 100 km.

But Airbus wants to go further. Three paths are being explored: a design modification of the wing, new engines that allow the four-engines to maintain the gap with new very ambitious twin-engined jet. Finally, the launch of an extended version that will allow the A380 to approach the symbolic threshold of 1 000 passengers.

Indeed, with the B787-10 and the A350-1000 Airbus and Boeing have both created the conditions for a fierce competition from within their own product ranges. The 747-8, with “only” 467 seats, appears at risk of being “cannibalized” by the 777X to be announced at the Dubai airshow this month. (The 777X, the modernized version of this long-haul aircraft offers 407 seats). However, this is a less critical issue for the A380, which is the only airplane to offer more than 500 seats. If traffic increases by 5% per year, the A380 may have a market, as landing slots are not extensible and companies have to look for more capacity on certain routes. However, according to Christophe Menard, aerospace analyst at Kepler-Cheuvreux, airlines no longer have to buy very large aircraft because their problem is to fill them. In a recent interview in Paris, Fitch Ratings was also very sceptical regarding the VLA market segment, in spite of growing aerial traffic.