FLYING from Changi Airport to Sydney, in the blue and gold livery of
Singapore Airlines, the Airbus A380 will at long last enter commercial
service on October 25th. On board the giant double-decker plane will be
about 470 passengers, many of whom will have bought their seats in an eBay
auction, raising $1.9m for charities. For both the airline and the
manufacturer, the day will be one of celebration, when delays, spiralling
development costs and financial controversy can be put to one side. But it
will also mark the next stage of a commercial saga in which fortunes are
wagered on the way the world will fly.
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Few industries are more given to self-dramatisation than the aviation
business. The decision to build an important new plane invariably means
“betting the company”, while the aircraft itself is usually referred to by
its messianic (or blinkered) maker as a “game-changer”. Both were true of
the first Boeing 747, which the A380 has been designed to replace. The
original jumbo jet entered service nearly 38 years ago and the financial
strain of developing it almost brought mighty Boeing to its knees. But the
huge leap in capacity offered by the 375-seat 747-100 compared with the next
biggest plane then available, the 250-seat McDonnell Douglas DC-8,
transformed both the experience and the economics of long-haul flying.
Boeing's 747 gamble eventually reaped rich rewards. Without a direct
competitor and with nearly 1,400 sold over its long life, the 747 has been a
matchless earner. Apart from that beautiful flop, the Concorde, no other
aircraft is as recognisable or as loved. With the A380, Airbus has now
risked everything; not only to kill off its rival's greatest cash cow, but
also to create a similarly enduring icon to capture the imagination of the
world's travellers.
Its success will depend not only on the quality of the aircraft, but on
whether there is demand for a plane that can fly more than 500 passengers in
a conventional three-class configuration or more than 800 in a single-class
layout. Airbus is in no doubt that there is; Boeing, explaining its decision
to offer only a mildly updated jumbo—the 747-8—in competition to the A380,
says that the market has changed and Airbus has got its sums wrong.
A long time coming
The design of any new airliner begins years before its first flight.
Appropriately for a super-jumbo, the A380 has had a long gestation. Airbus
began looking at the possibility of building a 600-800 seat aircraft in
1990. But two years later Daimler-Benz and British Aerospace, two of the
partners in the Airbus consortium as it then was, pushed for co-operation
with Boeing on what prosaically came to be known as a new Very Large
Commercial Transport (VLCT). Both companies knew the risk of competing
head-on over such a big new aircraft. An earlier battle between the
McDonnell Douglas DC-10 and Lockheed's L-1011 had weakened both firms and
pushed Lockheed out of the commercial-aviation business entirely.
Jürgen Thomas, a veteran German engineer appointed to lead the project and
who became known as the father of the A380, remains convinced that Boeing
was serious about the partnership. Others were less sure. The view that came
to prevail within Airbus, particularly with its French chief executive at
the time, Jean Pierson, was that the Americans wanted to string the talks
out for as long as possible.
For one thing, Boeing was insistent on producing a plane substantially
bigger than the 747, which would complement rather than replace it. For
another, as long as there was no agreement on how to build the VLCT, Boeing
could continue to milk its 747 monopoly. It is said to have used its
estimated $30m profit per 747 to cut the price of its other jets, like the
737, which face direct competition from Airbus.
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The Europeans eventually plucked up the courage to go it alone in 1995. A
year later they created a self-contained Large Aircraft Division, under Mr
Thomas. After a series of meetings with prospective customers, Airbus became
convinced that there was indeed a large market for a modern plane capable of
carrying between 550 and 650 passengers up to 9,000 miles (15,000km). Airbus
forecast that if air travel continued to grow by about 5% a year (see
chart), there would be a need for 1,235 such aircraft by 2020. In April
2000, seven weeks before its official launch, one of those potential
customers, the fast-growing Dubai-based airline Emirates, showed its faith
in the project by declaring that it would buy ten A380s. By the end of the
year Airbus had five more customers: ILFC, an influential aircraft-leasing
operator, Air France, Singapore Airlines, Qantas and Virgin Atlantic.
As well as offering the range the airlines said they were looking for it
also had the room: by placing one cabin on top of another, the A380 has 50%
more floor area than a 747-400. Airbus also promised operating costs would
be at least 15% per passenger less than those of its Boeing rival. It
committed itself to much lower noise levels for passengers and people living
near airports and to lower emissions.
But amid the excitement stoked by Airbus and its customers—there was talk of
bars, shops, casinos (from Virgin's Sir Richard Branson) and showers in
first class—it intensified a furious debate between Boeing and Airbus over
the future of aviation. That debate rages on even as the A380 enters service.
Boeing argues that the market for very large, long-haul planes has been
fragmented by the increasing popularity and capability of so-called “heavy
twins”—big, twin-aisle planes with only two engines—and that aircraft like
its own 747 and the A380 are now no more than “niche products”. Boeing began
the trend with the 777. Known as the “Triple Seven”, it can carry more than
350 passengers in three classes and its longest-range version can fly more
than 10,000 miles. When the Triple Seven entered service in 1995, airlines
were worried that passengers would not relish the idea of flying across
oceans on only two engines (even though such aircraft can manage on just one
in an emergency). But such is the reliability and power of modern
high-bypass turbofan engines that it has ceased to be a worry.
Airbus competes in the heavy-twin market with the slightly smaller A330 and,
after several false starts, is developing the A350 XWB (extra-wide body) for
entry into service in 2013. But it is Boeing that has set the pace with its
787 Dreamliner, a plane with a revolutionary all-composite fuselage made out
of several single-barrel sections rather than a conventional frame with
panels. The 787 should have flown by now, but is running late because of a
shortage of aluminium fasteners and problems with its flight-control
software. On October 10th Boeing said first deliveries of the
210-330-passenger plane will be delayed by six months to late November or
December 2008. It is a blow, but with more than 800 firm orders and
commitments Boeing will still have the most successful launch in the history
of commercial aviation.
Bypassing hubs
Boeing believes that a combination of airline deregulation and the
popularity of heavy-twin aircraft have changed long-haul flying for good.
Instead of the hub-and-spoke system, in which passengers flew in 747s to big
hub airports and then took short-haul flights to their final destination,
Boeing says that passengers now want the convenience of flying
point-to-point and that smaller long-haul planes make it both possible and
economical for them to do so. As evidence, Boeing points to the drying-up of
orders for passenger versions of the 747.
Airbus has some equally persuasive counter-arguments. John Leahy, an
American who is the top salesman at Airbus, dismisses the Boeing claims as
not just wrong but irresponsible. “It's ridiculous,” he says. “Boeing's
answer means burning more fuel per passenger, putting more strain on
overloaded air-traffic control systems and creating more congestion at
airports that are already finding it difficult to cope.”
Given the expected tripling of air-passenger traffic over the next 20 years,
Airbus predicts that very large aircraft will reach some 3,400 flights a day
out of 200 airports around the world. About 70% of those flights, however,
will emanate from just 25 airports, many in Asia (see map). Today, 80% of
747 flights connect 37 airports. Airbus also points out that half the
world's 100 fastest-growing long-haul routes connect two big hubs, such as
Hong Kong-London and New York-Tokyo. The point is that many hub airports are
also the origin and destination for more and more passengers.
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Many of these big city airports are under enormous capacity and
environmental strain. Significant expansion at London's Heathrow, for
example, will be impossible without the construction of a third runway—and
few believe it will ever be built because of restrictive planning rules and
local political opposition. A recent order by British Airways (BA), the
world's biggest 747-400 operator, for 12 A380s with options on a further
seven has bolstered the Airbus case.
Willie Walsh, BA's chief executive, said that the A380's superior capacity
would allow it to grow from its creaking Heathrow base, while its
quietness—it spreads noise over only half the area that a 747-400 does on
take-off and less than a third on landing—was also important. As one Airbus
executive put it: “Willie would have had trouble explaining to the
neighbours why he'd bought a noisier, dirtier aircraft [the 747-8] even if
was a bit cheaper.” Likely destinations for BA's A380s include Johannesburg,
Hong Kong and points in India and America's west coast, but not, for now,
New York. And as Boeing quickly pointed out, at the same time as BA
announced the A380 order, it also said it would buy 24 787s. Honours even.
Perhaps more worrying for Airbus, the BA order was the A380's first from a
new, as opposed to existing, customer for the best part of two years. Airbus
says that it is usual for orders to slow in the year or so before an
aircraft enters service, as more cautious airlines wait to see how it
performs. It also says that the 46 orders it has taken in the past year,
bringing the total to 185, compares well with other aircraft at similar
stages in their lives.
Delays on the line
The question that nobody can answer is how deeply the production problems
that have assailed the A380 have affected confidence in the aircraft and its
maker. The first delay was announced in June 2005, when Airbus confessed
that delivery would be six months later than promised. Almost exactly a year
on, another delay of up to seven months was announced.
News of the second delay knocked 26% off the value of shares in EADS, the
parent company of Airbus, and led to the resignations of Noël Forgeard, its
joint chief executive, Gustav Humbert, chief executive of Airbus, and
Charles Champion, then in charge of the A380. The company's failure to
provide more timely information about the scale of its problems also
triggered investigations into the share dealings of executives and EADS
board members. A report by the French stockmarket regulator has been sent to
prosecutors.
The mood at Airbus's base in Toulouse is one of frustration rather than
fear. But those senior managers who have so far survived both the
resignations and a big overhaul of the once dysfunctional relationship
between Airbus and EADS face an unwelcome distraction at the very least.
Part of the explanation for the catastrophe was the sheer complexity of the
A380. The cabin wiring—more than 330 miles of it and over 40,000 connectors
in each aircraft—caused problems because two incompatible versions of
computer-aided design software were used. The Germans in Hamburg had one
system, the French in Toulouse another. When the electrical harnesses came
to be fitted in the forward and aft fuselage sections, many didn't connect
with each other. Despite efforts to resolve this, it was decided in October
last year that only by updating the computer-design tools would Airbus get
on top of the problem. That meant a third delay.
John Leahy recalls that when airlines were told that not only would
Singapore's first aircraft be delivered late, but that everyone else's
orders would slip again, “they were stunned, speechless.” The reason was the
need to deal with the work on two tracks. Although a new system for
installing the harnesses was being developed, the first 26 aircraft would
all need difficult and time-consuming rectification work. It will be another
three to four years before production reaches its intended rate of four
planes a month. Another consequence was that a freighter version would be
delayed until at least 2014, which lost Airbus orders from both Fedex and
UPS and raised its expected earnings shortfall up to 2010 to €4.8 billion
($6.8 billion).
Despite the setbacks, all due to the poor execution of industrial processes
rather than design, it has not all been bad news for the A380. Despite
rumours that it was overweight and struggling to meet performance targets,
the indications are that Airbus has delivered a remarkable plane that, as
long as they can fill it, will provide airlines with the step-change in
operating economics they were hoping for. With reduced fuel burn from its
Rolls-Royce Trent 900 or Engine Alliance 7200 turbofans, lower maintenance
costs from its 25% composite airframe and its advanced avionics, Airbus
claims the A380's cost per seat has come out at 20% below that of the
747-400.
Back at the gate
Another achievement is that despite the aircraft's size and weight, the A380
can take off and land on the same runways as the big Boeing, thanks to the
efficiency of its wings. There is no need to build longer runways, although
airports have had to spend heavily to make space for the plane's wingspan at
departure and arrival gates—which must also be modified to allow upper-deck
passengers on and off.
Above all, passengers stand to gain most. Stephen Forshaw, of Singapore
Airlines, says that while meeting or exceeding noise and emissions targets
was extremely important, the catalyst for ordering 19 A380s was the
opportunity to provide its customers with more comfort and a better
environment. “Keep it in mind that this is an aircraft—it has physical
limitations and must meet economic considerations,” he says. “But we have
been able to bring about a revolution in business class with four-abreast
seating and much more personal space and privacy. Even in economy, there are
two inches more legroom, extra seat width and larger TV screens. There will
be 12 suites on the main deck which, with its straight walls, has a unique
feeling of space. The plane is also remarkably quiet inside.”
Singapore believes that life for 747 operators, such as All Nippon Airways
and Japan Airlines, faced with direct competition from airlines flying the
A380 will be hard. Mr Forshaw adds: “A lot of customers are sitting back,
but they'll have to move at some point. We're very confident this aircraft
really is a game-changer and everybody will have to play by the new rules.”
If that is right, the prospects for the A380 may be rather brighter than
either Boeing or Airbus's critics would like to think. Boeing's emotional
investment in the 747 and the difficulty it has in coming to terms with the
end of its long reign as the flagship of long-haul travel is understandable.
But so far, Boeing has only received 20 orders for the passenger variant of
its 747-8—all from Germany's Lufthansa, which is also buying 15 A380s and
has options on more. Between an aircraft that is at the end of a 40-year
evolution and one at the beginning of what is likely to be a similarly long
career, there is no contest. The debate about hubs versus point-to-point
flying is also a largely sterile one: one doesn't exclude the other and it
will be horses for courses.
But it is harder to say whether the A380 will ever match the 747's
commercial prowess. Its firm order tally of 185 aircraft to date from 15
airlines is respectable. But there are only seven more established 747
operators to sell to and existing A380 customers may take a long time to
come back for more. Airbus now reckons the market for very large aircraft to
be 1,665 by 2025, with 55% of the demand coming from the Asia Pacific
region, some of it from new carriers. Cautiously, it predicts taking only
50% of the market, but it is reluctant these days to say how many aircraft
it needs to sell to break even. Recently, Louis Gallois, EADS chief
executive, admitted that the number is higher than a previous figure of 420
because of the slower build-up in production and the effect of a weak dollar.
However, even if the market turns out to be smaller than Airbus is hoping
for, the A380 looks likely to dominate, if not monopolise, long high-density
routes for years to come. And with time on its side, it might even produce a
return on the money it has cost to put into service—nudging €20 billion
according to some estimates. For airlines and passengers, the A380 should be
nothing but good news. But for Airbus it will have been a long, bumpy and,
at times, perilous ride.
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