ANALYSIS: the Airbus A380 aircraft report

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The Airbus A380 is now well established in the marketplace with 100 units delivered as of this year.

Backed with 50 firm orders and 42 options from six customers (Air France, Emirates Airlines, Qantas, Singapore Airlines, Virgin Atlantic Airways and operating lessor ILFC), Airbus launched the A380-800 variant in December 2000.

The launch resulted in years of studies around the high-capacity A3XX family project, addressing the top range of the commercial aircraft market and designed to challenge the Boeing 747 family.

At the time, the basic A3XX-100 was designed to carry 555 passengers in an intercontinental three-class layout, some 30% more than a typical 747 at 7,650 nautical miles (nm).

Airbus offered a long-range version, the A3XX-100R, to fly over 8,750 nm with the same number of passengers.

The higher density A3XX-200 version was designed to accommodate 656 passengers over 7,650 nm.

Airbus said it would also offer a low density version, the A3XX-50R, with 480 seats.

Airbus offered a freighter A3XX-100F version designed to fly 5,725 nm with 36/LD3 cargo containers, but cumulative delays led FedEx in 2006, and UPS in 2007, to cancel their orders.

Airbus suspended work on the freighter version in order to focus on delivering the basic passenger version. The development programme was marred by design issues relating to the complexity of wiring, programme, design and control as well as overweight issues.

After a two-year delay entry into service, the first delivery occurred in 2007 to Singapore Airlines.

A few years after entry into service, the type encountered an uncontained Rolls-Royce Trent 900 engine failure. During the subsequent repair process, wing-cracking problems were discovered, requiring a wing refit programme with each aircraft needing eight weeks of downtime repair to resolve. A permanent fix will be introduced from aircraft MSN 137, according to ICF SH&E.


Early studies by Airbus showed a market for 864 aircraft with 600-1,000 seats during a 20-year period, according to the then vice president forecasting and strategic planning, Adam Brown.

At the time, Brown saw up to eight carriers needing the aircraft, primarily those in the Asia-Pacific area. British Airways made no secret of its desire to operate a 600-800-seat passenger version and Singapore Airlines also declared an interest. The others included United Airlines and Northwest Airlines for their north Pacific routes, and Japan Airlines, All Nippon Airways and Cathay Pacific for parts of their regional and long-haul networks. The common denominators in this list were: high-density routes and congested airports.

Total orders for the A380 stand at 262 as of April 2013. The biggest customer is Emirates Airline, which in June 2010 increased its order by 32 aircraft to 90 in total.


Rolls Royce has now delivered more A380s to customers (58 aircraft) than it has on backlog (52 aircraft). General Electric/Pratt & Whitney Engine Alliance has recorded 89 orders with currently 46 aircraft in service. Another 19 aircraft orders have yet to firm their engine selection.


Airbus achieved its target of 30 A380 deliveries in 2012, including 13 in the final quarter alone.

Delivery of the final aircraft for 2012 brought the global fleet to 97 of the double-deck type, but also takes the backlog down to 160 - the lowest figure at any point since A380 deliveries began in October 2007.

Flightglobal's Ascend expects deliveries to slow to 25 units this year in order to deal with the wing-support bracket cracking issue. "Existing aircraft are being modified, but will require eight weeks (or 30,000 man hours) downtime if repairs are implemented in a single instalment - as Emirates has opted for. Airbus does expect more operators, however, to adopt the phased approach spread out over three two-year heavy checks so as to reduce operational disruptions," according to Ascend.

A380s featuring the recently-introduced revised wing design, which incorporates more twist and a lighter structure, will need to be modified earlier as the wing-crack issue has a "slightly greater effect" on these wing, says Ascend. A total of 120 aircraft will be affected before new deliveries with the revised wing in 2014.

"It is likely that most operators receiving new A380s in 2013 will choose to have their wings repaired during final assembly, which could result in a four- to six-week delay in delivery."

Photograph: Colin Miller 

Malaysian Airlines and Thai Airways International became new A380 operators last year and British Airways is set to become a new recipient of the type in July this year. In 2014, Air Austral, Etihad Airways, Hong Kong Airlines, Qatar Airways and Skymark Airlines will become new operators.

Ascend estimates that 10% of the A380 backlog is uncertain. Air Austral has ordered 800-seat configured A380s but says it might defer deliveries by two years. In December 2012, Hong Kong Airlines noted that it might cancel its 10 A380 orders or swap them for a smaller widebody type to focus on short-haul routes. The current backlog also includes five units by Kingfisher (not operating) and six aircraft by Virgin Atlantic Airways (delivery deferred).

In the meantime, Lufthansa is expected to order two additional aircraft while Cathay Pacific Airways is expected to take a decision by mid-2013 between the A380 and the 747-8 models.

The A380 is setting the new benchmark in large aircraft and, as the operator base builds, should attract more customers - albeit it is a niche aircraft for large operators. China Eastern, Turkish Airlines and TransAsia Airways are reported to be evaluating the type. The US market is also being targeted with United and Delta in need of 747-400 replacements.

The size of the aircraft restricts its operator base to the world's largest airlines and hence limits the secondary market. However, its selection by Air Austral, Skymark Airlines and Transaero Airlines indicates that there is also demand among smaller airlines in growth markets or with different business models, says Ascend.


When the A380 entered service in 2007, there were a lot of question marks about how the aircraft would be financed.

Financing was predicted to be difficult because of the large amount of capital required to purchase the aircraft compared with other units in the market. Also, financiers expressed concern about future transition costs between two operators.

However the quality of airline credits in the A380 orderbook ensured a soft introduction of the model among financiers. The most obvious form of financing was export credit agency (ECA) support, but during the years, various non-ECA backed structures have developed.

Prevented from using ECA products, Air France and Lufthansa tapped the commercial debt and German operating lease markets for their deliveries, but the most prolific market has been the Konmmanditgesellschaft (KG) market.

Flightglobal estimates that of the 101 commercial deliveries to date, the KG market financed almost a quarter, ECA-guaranteed deals absorbed a third and pure commercial bank debt covered a dozen A380s.

Two new financing structures have recently emerged. In the second half of last year, Doric, which has a total of 18 A380s under management, brought the first capital markets transactions to market, covering four Emirates A380s.

The asset management company says the A380 is "revolutionising" aircraft financing.

It was the first company to finance the A380 - a unit on lease to Singapore Airlines. The financier has since funded a total of five A380s with the carrier and says all leases are performing "according to forecast".

"Widebody aircraft values are inherently stable and not prone to significant, cyclical fluctuation. Doric sees widebody aircraft as long lived assets featuring long-term value sustainability. A new 747-400 delivered in 1989 retained about 50% of its value in 12 years' time, which we believe would be the trend for the A380 as well," says Doric.

While there has been no second-hand activity for the A380 yet, Doric says it has discussions with a number of potential operators for the aircraft.

Doric also holds various Doric Nimrod Air (DNA) financings listings on the London stock exchange.

"The DNA aircraft investment companies, investing in eight A380s, are significantly outperforming the market and are trading at a premium of 25% to their original issue price making them the best performing lessor companies in the marketplace," says Doric.

In February this year, Emirates refinanced an A380 for the first time in the capital markets. US Bank JP Morgan arranged the ECA bond guaranteed by Compagnie Française d'Assurance pour le Commerce Extérieur (Coface).

Emirates has diversified its financings over the years. To date 10 A380s have been financed in the KG market with UK operating leases, says the carrier. Another four were collateral aircraft in Doric Alpha's Enhanced Equipment Trust Certificates transaction in the capital markets last year. The Middle East carrier also used the ECA market for a total of 12 deliveries while another five have been financed under commercial finance leases.

Values and lease rates

Flightglobal asked five appraiser companies to give opinions on a 2012 Trent 970-84-powered A380 with a 560,000 kg (1,234,588 lb) maximum take-off weight.

A monthly lease rate for the aircraft is $1.76 million, according to IBA, whereas Ascend places the rental at $1.65 million and Collateral Verifications says $1.67 million. MBA estimates a one-year-old aircraft is in the $1.6-1.7 million range, while ICF SH&E has a wider range with $1.55-1.75 million.

For a 2010-vintage aircraft, lease rates are $1.67 million for IBA, $1.54 million for Ascend and $1.42 million for Collateral Verifications. MBA estimates lease rates for a one-year-old aircraft are in the $1.4-1.5 million range. ICF SH&E has a rental range of $1.4-1.6 million.

A four-year-old aircraft has a lease rate of $1.17 million for Collateral Verifications. Ascend estimates the lease rate at $1.45 million while IBA says $1.55 million. MBA estimates a one-year-old aircraft is in the $1.23-1.33 million range, while ICF SH&E has a range of $1.25-1.45 million.

Ascend and IBA agree on a lease rate of $1.4 million a month for a 2006-vintage aircraft. Collateral Verifications says the lease rate is $925,000 a month, while MBA estimates a one-year old aircraft is in the $1.16-1.26 million range.

"Airbus A380 aircraft hitherto have interiors tailored very much to individual operators' styles, particularly in the premium category cabins. In any re-marketing scenario, reconfiguration could prove very expensive. Despite this, IBA believes the A380 still has adequate liquidity. This is reflected in the value profile. IBA believes that lease rates should hold strong on the secondary market," says IBA senior analyst Alice Gondry.

She values a 2006-vintage aircraft at $127 million, while MBA has a $122.9 million current market value. Ascend says the current market value is $139 million with a lease rate of $1.4 million a month, or a lease rate factor or almost 1%. Collateral verifications values the seven-year-old delivery at $128.8 million.

A five-year-old A380 has a current market value of $140 million for IBA, $140.4 million for ICF SH&E, $148 million for Ascend, $148.9 million for Collateral Verifications, while MBA estimates the 2008-vintage at $133.8 million.

Collateral Verifications remains the highest of the five appraisers on a 2010-built delivery with a $177.8 million estimated current market value, followed by ICF SH&E with a value of $163.2 million, IBA has a $162 million appraisal and Ascend believes the value is $161 million. MBA is the lowest appraiser with a $157.8 million current market value.

A 2012 delivery is valued at $188.1 million by ICF SH&E, $193 million by IBA, $193.3 million by MBA. Ascend is the lowest of the appraisers with a $180.5 million current market value, while Collateral verifications values the vintage at $205 million.

Gueric Dechavanne of Collateral Verifications says demand for the A380 has remained stable during the last 12 months due to the "outstanding performance" of the aircraft.

"As there have not been any used aircraft to hit the market place, it is difficult to ascertain how the current market environment may affect values. We do not expect any used aircraft to become available for quite some time as many of these have been placed on long-term leases and all current operators seem to be quite satisfied with the performance of the aircraft," he says.

Dechavanne sees values and lease rates remaining stable during the next 12 months and beyond. "The secondary market will most likely not develop until the latter half of this decade if not later. Should the market continue to improve during this time, I expect many of the initial operators to retain their still relatively young fleet of aircraft. As there will most likely not be a replacement for this aircraft for quite some time, we expect this trend to continue for the foreseeable future."

ICF SH&E Angus Mackay says confidence by current operators has led to a re-order pattern, which is expected to improve, along with new customer orders, as pent up demand is released with improving global economic conditions. Despite the limited number of flag carriers that can utilize and finance the aircraft, current market values, lease rates, and residual values are expected to remain reasonably healthy over the next 10 years. "In addition, future A380 orders may be captured as older 747-400 aircraft are replaced by operators requiring additional range/payload and revenue capability over that provided by the 777-300ER and A350 XWB large twins," he says.

But he points out that in times of soft passenger traffic demand, large aircraft are at a disadvantage given the need to operate them with sizeable passenger counts in order to maintain profitability. "As a four-engine, twin-aisle aircraft with very high passenger capacity, A380-800 demand, values and lease rates may be impaired disproportionately versus smaller widebodies should global economic conditions soften and passenger traffic growth diminish. In addition, it is unclear which the secondary operators of the A380 will be; hardly surprising given that the oldest units are just over six years old and that an aftermarket has not yet developed. Given this situation and that there is no current passenger for freighter modification in development; caution is warranted with respect to residual values," Mackay comments.

MBA believes as the A380 matures, a leasing market will develop, but not to the same extent seen in other type aircraft. The A380 has a niche place and will have a difficult time expanding beyond where it is today, it adds.