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July 14, 2016

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Airbus moves to cut A380 output amid gloomy economic horizon

THE aircraft sector hit turbulence yesterday as European giant Airbus slashed output of its A380 superjumbo because of weak demand, putting a lid on plane orders generally at Farnborough.

European planemaker Airbus revealed late on Tuesday at Farnborough — one of the world’s largest civilian and defense air shows — that it would halve production of its enormous A380 to one a month from 2018.

Chief Executive Tom Enders said yesterday that he hoped the cutbacks would last for “just a year or two,” adding that he remained optimistic over the jet’s prospects.

“We are all pretty optimistic about the longer-term prospects of the A380 and I hope this is just a year or two and then we can raise production rates again,” Enders said at the air show. “We decided back in 2000 to launch the A380 (and) little did we know what the world would look like in 2010, 2015 or 2016.”

He added: “We believe in this aircraft, the company knows what to do. We are proactive and I am quite confident that we will be able to (again) raise production rates.”

Enders said Airbus needed “to work harder to convince airlines that this aircraft really pays off if you can fill it.”

“It’s a real moneymaking machine,” he insisted.

In what has been a relatively quiet show for new orders of planes generally, Airbus’ US rival Boeing yesterday inked previously announced jet deals worth a total of US$3.79 billion with Air Europa of Spain and Ruili Airlines of China.

Airbus on Tuesday revealed firm orders for 129 aircraft worth a combined US$15.6 billion before the usual discounts are applied.

The orders included a vast US$12.5 billion deal for 100 single-aisle A321neo jets from Malaysia’s AirAsia.

However, the shock A380 announcement has stolen the show and reminded participants about the gloomy economic backdrop.

The A380 is the world’s largest civilian airplane, carrying up to 544 passengers in a four-class configuration or 853 in just a single class.

The jet has a list price of US$432.6 million but it has not registered any sales yet at the weeklong Farnborough event.

Dubai’s Emirates airline is the biggest client for the A380, operating 81 with another 142 on order.

“Airbus still continues to face the challenge of securing new orders for the A380,” independent aviation analyst John Strickland said.

“Its best customer, Emirates, would order many more but only if Airbus upgrades its ... capability. This is something that Airbus is reluctant to do when it is not making money on the aircraft.”

Strickland added that airlines have a wide choice of large-capacity aircraft built by Boeing and Airbus that are cheaper than the A380 because they require only two engines, not four.

The superjumbo was launched in 2007 and has since received 319 orders from 18 global airlines, of which it still has yet to deliver 126.

Jefferies analyst Sandy Morris said the superjumbo also faced competition from Boeing’s 777-300ER long-range aircraft.

Morris added that Airbus’ target markets of the Indian sub-continent and the wider Asia region has a limited appetite for the superjumbo.


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