Realist, not conformist analysis of the latest financial, business and political news

Dr. Madsen Pirie: Airbus A380 – Not A Happy Birthday

The first prototype of the Airbus A380 was revealed to the world at Toulouse 16 years ago on January 18th, 2005. It was a giant, much larger than Boeing’s 747 whose market it was designed to take. It was a gamble, and it failed. Airbus thought that larger capacity, typically 525 seats (with more possible), would lower costs per seat on a hub-and-spoke operation. They estimated a demand for over 1,500 such aircraft over a 20-year period.

Boeing, facing falling demand for its 747s, estimated future demand for very large passenger aircraft might be in the 250-300 range, thinking that people would prefer fast and frequent point-to-point travel without having to change planes. They bet on the smaller, lighter, cheaper 787 Dreamliner, using lighter composites and twin engine configuration to achieve lower running costs, rather than going for big capacity.

The rest is history because Airbus lost, selling about 300 of its A380s and losing money. The initial budget of €9bn doubled to €18bn, with Airbus ultimately losing money on each A380 made. Finally they pulled the plug. Tts chief executive Tom Enders put it succinctly, “If you have a product that nobody wants anymore, or you can sell only below production cost, you have to stop it.”

I watched one take off when it appeared at the Farnborough Air Show. It was an impressive giant of a plane, but a scientific and engineering success does not by itself mean market success. I flew on a BA one to Miami and disliked it. It took ages for everyone to board, and took even longer to get through security, immigration and customs on arrival, amid many hundreds of others.

It’s a story of markets at work. Innovators take a gamble that people will want the product they plan, and they are up against competing producers. They succeed if customers buy it and fail if they don’t. Its trial and error methodology parallels that of scientific discovery. Rival theories go head to head, and the ones that win are those that pass the test of experiment and predict more accurately what we shall observe. In the case of markets the test is whether consumers will buy it.

It’s been tried where governments, rather than consumers, decide what shall be produced, and eliminate what they call “wasteful” competition. It’s been tried and it doesn’t work. In a head to head contest, markets have won and governments have lost. The failure of the A380 is a victory for the market and for customers. Airbus took a gamble on it, and when customers preferred the competition instead, they lost.

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Quentin Vole
Quentin Vole
3 months ago

The wings (look to me like they) are designed to take a longer body. I think Airbus had plans for a ‘stretched’ A380-900, but there was clearly no demand for it.

MrVeryAngry
MrVeryAngry
3 months ago

As Airbus is a heavily subsidised Franco EU racket was not it rather that the EU taxpayer lost? (Not that Boeing is not also subsidised..)

jgh
jgh
3 months ago

People who manufacture “containers” never seem to take account that the bigger the container the more time you have to spend filling and emptying it. At the extreme I’ve been on some bus jouneys where it took longer to board and alight the bus than the journey.

Spike
Spike
3 months ago
Reply to  jgh

Author’s experience in Miami (as the Transportation Security Administration labors to make all hijackings physically impossible) is not unique to, or the fault of, the A380. But it would affect marketability of the A380.

Wikipedia says you can load/unload passengers in “only” 34 minutes – if you have three jetways.

John Galt
3 months ago

I actually liked the Singapore Airlines A380 for my twice yearly trips from London to Asia, the seats were larger and more comfy and there was more room to move and breath. Is there that much difference between the latest Boeing though? Not really and certainly not enough to justify spending more money on production than they are worth.

I’m guessing they will still be used for high volume hub-to-hub transport like the London to Singapore / Kuala Lumpur leg of getting to Australia, but even that’s not exactly a core market.

Obligato
Obligato
3 months ago

I’ve flown on them several times to Aus via Dubai and via Singapore. I have to say in my 60 year history of airline travel they are far and away the best for passenger comfort on that long haul. Even in economy class. The sense of space, the size gives huge stability especially in the economy cabin right over the centre of moment . The engines so far away that they’re quiet. I’ll really miss them if they disappear.

Quentin Vole
Quentin Vole
3 months ago
Reply to  Obligato

Like the 747, they’re not going anywhere soon (albeit many are currently grounded while air travel is so depressed). They’ll still be flying for a few decades, but they can’t easily be converted for the longer-lived freight role, unlike a 747.

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