Airbus superjumbo steals show
LE BOURGET, France (Reuters) -- Lingering doubts about the much-hyped A380 superjumbo jet are being laid to rest at this week's Paris Air Show as airlines line up to order the 555-seat giant being developed by European plane maker Airbus.
Korean Air signed a memorandum of understanding with Airbus on Wednesday to acquire up to eight A380s. This week, Emirates airline announced a $12.5 billion order for 41 Airbus planes, including 21 of the double-decker jets.
Qatar Airways is scheduled to announce a deal on Thursday also expected to include Airbus planes such as the A330-200 model which it already operates.
With 22 A380s already on order from Airbus and two set to be leased from top lessor ILFC, Qatar rival Emirates' fleet is expected to include 45 of the massive planes, which carry a sticker price of $275 million each and are due to enter fleets in 2006.
Airbus Commercial Director John Leahy said that if more airlines want the A380, they would have to wait until the second half of 2008, as delivery slots for 2006 and 2007 had been filled.
"I think you have to call the programme a success now," said Nick Cunningham, an aerospace analyst at Citigroup Smith Barney. "The only issue remaining is execution -- whether they can deliver on timing and performance -- and their track record on that is very good."
When Airbus launched the $12 billion project in December 2000 with about 50 airline commitments, there were questions about its ability to pull off the programme and the size of the discounts Airbus had offered launch customers.
There were also doubts about the future of such a big plane if, as rival Boeing Co predicted, air traffic shifted towards routes between smaller airports rather than big hubs.
Logistics presented a further obstacle. How would Airbus get the huge ready-built sections of the A380 to its headquarters in Toulouse, France from factories in Britain and Germany?
MANY QUESTIONS ANSWERED
Many, if not all, of these questions have now been answered, analysts say.
As Airbus keeps the details of its plane contracts a closely guarded secret, some remain concerned about the A380's profit margins.
But the jet maker, which is 80-percent owned by French-German aerospace firm EADS, said this week it was on track to meet its target for an internal rate of return of 20 percent, and believed it could break even on the project if it sells 250 superjumbos over the next 20 years.
Its current firm order book for the plane stands at 116 and that total would rise to 129 once the Korean order comes through and pending contracts are signed with Malaysia Airline System and Qatar Airways.
Airbus has settled on a dual sea-to-road delivery method for the A380's wings and fuselage. It now has 6,000 full-time engineers working on the project, while 60 percent of the 40,000 detailed drawings needed for the final blueprint are complete.
"The A380 is a reality," Airbus Chief Executive Noel Forgeard told reporters this week. "The events of September 11th and the recent problems in the airline industry have not diminished the appetite for this plane."
Customers that have placed firm orders for the A380 now include Air France, Emirates, Fedex, ILFC, Lufthansa, Qantas, Singapore Airlines and Virgin Atlantic.
MORE CUSTOMERS SEEN
Airbus said this week it expected a major U.S. airline and top Japanese carriers to order the plane before 2006. Chinese operators are expected to take on A380s via orders or leases before the Olympic Games take place in the country in 2008.
Whether airlines opt for the lavish interiors that Airbus has trumpeted in its advertisements for the planes remains unclear.
Leahy said on Wednesday that customers were interested in putting bars, lounges, duty-free shops and perhaps casinos and gyms on board. But Emirates made clear earlier this week that its planes would be full of seats instead.
"There won't be gymnasiums and bars," Emirates spokesman David Wilson said. "These will be planes to carry passengers, not casinos."