Thursday, December 11, 2014

Emirates raps Airbus for A380 comment, dangles huge order

The head of Dubai-based airline Emirates has reacted angrily to a suggestion by Airbus that it might stop making its A380 superjumbo airliner, telling Reuters it could double its investment if the plane-maker agreed to upgrade the A380 instead.

Tim Clark, president of Emirates, said he had protested to Airbus after its finance director aired the possibility of ending production of the flagship jet due to poor sales.

"I am not particularly happy as you can imagine," Clark said in a telephone interview.

"We are on the hook for this plane. I get pretty miffed when we have put so much at stake."

Harald Wilhelm told analysts on Wednesday Airbus would break even on the A380 through 2018, "if we would do something on the product, or even if we would discontinue the product".

The unusually frank remark reflected an internal debate over the future of the world's largest airliner but is the first time Airbus has publicly contemplated winding down the project - one of several scenarios in a review first reported by Reuters.

Others include slowing production or investing together with Rolls-Royce in an improved engine, which Clark said would improve fuel consumption by 12 to 15 percent from 2020.

Clark said that if the two companies went ahead with the upgrade Emirates would eventually replace all the 140 superjumbos it has ordered with the newly upgraded version.
But he suggested Emirates would hold Airbus to delivering the A380s it has sold if it decides to halt the programme.

Airbus would in that case probably ask Emirates to forego some of its future deliveries, he said, adding, "That is not a conversation I would like to have".

Clark said he was worried about the effect Airbus's sombre message would have on future A380 purchases by other airlines, as well as the supply chain and the European aerospace industry which has been a darling of politicians by creating jobs.

He also said the stance would not help the future second-hand value of A380 aircraft.

Clark called on Airbus to step up its A380 marketing efforts, saying it was flying "full to the gunwales" and making good profits if configured correctly. The aircraft was designed to help airlines cope with airport congestion.

"This is where Airbus needs to be going, to persuade airlines in the long haul business that this definitely has a place," he said.

Airbus immediately sought to defuse the row.

"The entire Airbus top management continues to believe strongly in the market prospects of the A380, but any investment by Airbus requires a sound business case, which we will continue to study," head of corporate communications Rainer Ohler said.

However, Clark raised broader questions about Airbus's strategy for wide-body jets, citing poor sales of the smallest type of A350 and its replacement by an upgraded version of the older A330. Airbus says this has extended a successful product.

"What is happening over there? I would like a first-hand understanding on where they are going," Clark said, suggesting that Airbus risked being over-dependent on its smaller A320.

The sweeping criticism from one of the airline industry's most influential figures will ring further alarm bells in Toulouse, after Emirates recently cancelled an order for A350s.

However Clark ruled out a broader decline in the relationship and said Emirates would soon consider making an order for 50-70 mid-sized Airbus or Boeing wide-body jets.

He said Emirates wanted to look at in-service performance data on the A350 before deciding whether to place a new order.

(Tim Hepher - Reuters)

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