Five years after the A380’s first test flight, Airbus is 2 1/2 years behind on deliveries of the double-decker superjumbo, and an estimated 200 orders short of turning a profit on the design. Until the break-even point, supporting the program will be a drag on Airbus as a whole. Airbus delivered just 10 of the aircraft in 2009 and is hoping deliveries exceed 20, this year. The A380 has earned just one new airline customer since the aircraft’s commercial life began in 2007 and the aircraft is costing Airbus about 50 percent more to produce than it had originally projected. In the words of analyst Gerard Buhrer, the A380 “is a program in trouble” due to low sales, high purchase price, few available destinations and few customers positioned to make use of the aircraft’s design capability. According to Buhrer, the A380’s development costs can not be recovered, but government loans must be repaid and stopping the program may cost more than continuing it. So, says Buhrer, Airbus may find itself having to accept that the program will never generate profits and that the A380’s costs must be absorbed by other Airbus programs, “driving down overall profits.”
According to Buhrer, canceling the A380 would cost more in severance pay and benefits to support the workers who would be laid off than does the expense of keeping the program alive. Wrapped up in the complexities of A380 economics are the strength of the dollar (which pays for completed aircraft), the strength of the euro (which pays for labor to build the aircraft) and the state of the world economy. Buhrer says that the aircraft’s development costs have been lost, never to be recovered, and concludes that “the A380 was a mistake,” adding that it “will never sell well and cost Airbus lots of euros.” But canceling the program could cost Airbus even more — in cash, customers, and prestige. Says Buhrer, “Keep building and getting cost out is their only option right now.” According to Airbus CFO Hans Peter Ring, “We are still trying to reduce the amount of outstanding work on the A380, but we are making good progress.” “Certainly there is hope that at the end of the planning horizon we are approaching break-even.”
