Airbus handed A380 lifeline with $16 billion Emirates order
Emirates has signed an outline deal for 20 Airbus A380s with an option to buy 16 more, worth a potential $16 billion at list prices
London: Airbus SE pulled its flagship A380 superjumbo back from the brink with a follow-up order from Emirates, giving the giant jet a new lease of life days after the planemaker floated the possibility of killing it off amid slack demand.
The Dubai-based carrier, already the biggest Airbus A380 customer, signed an outline agreement for 20 of the double-deckers with an option to buy 16 more, worth a potential $16 billion at list prices, it said Thursday, handing Airbus the first orders for the model in more than two years.
The purchase will extend A380 production until 2029 if Emirates takes all of the planes, according to Airbus, which as recently as Monday had acknowledged that the programme could be terminated without a new sale soon. The carrier had scuttled a deal for the same number of aircraft toward the end of last year amid doubts about the manufacturer’s dedication to improving the plane.
“This new order underscores Airbus’s commitment to produce the A380 at least for another 10 years,” John Leahy, the Toulouse, France-based company’s outgoing sales chief, said in a statement. “I’m personally convinced more orders will follow Emirates’s example.”
The new aircraft will be delivered from 2020, with engine options still under evaluation. Rolls-Royce Holdings Plc is supplying turbines as part of Emirates’s most recent order for 50 A380s, while the Engine Alliance of General Electric Co. and Pratt & Whitney powered the previous 90.
If Emirates signs off on the full deal it will have committed to a total of 178 A380s, or more than half of all orders for the plane worldwide. The carrier currently has 101 superjumbos in its fleet, and many older aircraft will have been phased out before the new batch arrives.
Airbus’s failure to land the order in November at the Dubai Air Show left the manufacturer red faced, with Emirates pulling out just minutes before an announcement was due as dignitaries were gathering for the event. Salvaging the deal will be especially important to Leahy, allowing him to deliver a final coup before standing down as sales supremo next week.
The planemaker and airline have developed an almost symbiotic relationship around the A380. Emirates has given the superjumbo a public profile it would otherwise have struggled to attain, while the 550-seat jet has enabled the carrier divert a significant proportion of global traffic via what’s a natural global crossroads but which was for so long an aviation backwater.
For Airbus, the Emirates-A380 deal will avoid an early shutdown of its most prominent programme, the oldest examples from which are barely 10 years old. The company is also keen to keep the A380 going in anticipation of the global travel market favouring bigger planes in years to come as the number of people flying climbs and runways become more and more crowded.
Emirates Chairman Sheikh Ahmed bin Saeed Al Maktoum, who signed the deal with Leahy in Dubai, said is company will now work with Airbus “to further enhance the aircraft and onboard product”.
The option component of the order may give Emirates leverage to press for enhancements possibly up to a re-engined version of the plane, Jefferies International Ltd. analyst Sandy Morris said in a note. The Gulf carrier previously dangled the possibility of as many as 200 orders if Airbus agreed to develop the new engine option or Neo, only for the manufacturer and Rolls-Royce to push back against the proposal.
A spokesman for London-based Rolls-Royce said it welcomes the opportunity to “be selected again by Emirates,” while declining to comment further.
As of the end of last year, Airbus had a total of 95 unfilled A380 orders, though only 48 of those, the vast bulk from Emirates, can be regarded as credible, according to Morris. Orders from carriers including Virgin Atlantic Airways Ltd. and sat on the books undelivered for years. Bloomberg
Editor's Picks »
- Hawaii street swallowed by ‘lava tide’ as many more homes burn
- Oil prices slump 3% as Opec and Russia consider output boost
- Uttarakhand Class 12, Class 10 results 2018 declared, check results at uaresults.nic.in
- Disney slashes forecast for ‘Solo’ as early ticket sales sag
- Delhi weather: Clear skies, maximum temperature likely to touch 45C
- Motherson Sumi continues to face margin pressure in foreign markets
- What the Warren Buffett indicator tells us about market valuations today
- Jet Airways lands with a thud in Q4 as fuel costs increase
- IBC amendments: Some dilutions, and a lot more speed
- Patanjali’s gambit is paying off in toothpaste wars