Airbus to Cut Production of Super Jumbo A380
Airbus will slash the production of its aircraft A380 after the company struggled to find more new customers. On Wednesday, the company announced that it would build just 20 of its A380 twin-decks in 2017 and just 12 annually starting in 2018. That number is down from its delivery of 27 during 2015.
Airbus has struggled in its pitch to new buyers about the super jumbo. There are just 193 A380s being used across the globe, with 126 more that have been ordered from different airlines that are lined up to be assembled.
That is far below 1,200 orders that Airbus said it was expected when it first introduced the aircraft during 2005.
However, Airbus was clear in saying it did not plan to ditch its aircraft entirely. Airbus CEO and president Fabrice Bregier said that the company would maintain, innovate and invest in its A380.
Prior to January, when ANA Holdings from Japan announced it would purchase three Airbus A380s, the aircraft makers had been three years without a single new contract for its super jumbo.
Iran agreed as well to purchase 12 of the A380s as it renews its overall fleet following the sanctions being lifted this past January.
However, other airlines recently cancelled their orders for A380s. Air France-KLM canceled its two orders last March and Air Austral based in France cancelled two during April.
Last year was Airbus’ first in which it recovered the cost of manufacturing each of the A380, but it still is out of pocket for costs associated with the development of the aircraft.
Existing A380 orders mean this aircraft should break even, including the costs for development, this year as well as next, before its production drops sharply during 2018.
The A380, which Airbus originally designed to challenge its arch rival Boeing in the market of super jumbo aircraft, took more than 15 years in developing at a total cost of more than $25 million.
Airlines today are now moving towards planes that are more fuel efficient, rather than the super big aircraft in order to cut down their costs. Fuel is an airlines second largest expense behind just the cost of paying staff.
With fuel prices edging upward with the price of crude stabilizing, airlines continue to find ways of keeping their costs down, as they do not want to raise the prices of airfare and risk losing passengers.
Get Analysts' Upgrades and Downgrades Daily - Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.