The news that Singapore Airlines will not extend the lease for its first Airbus A380 was not a shock to the finance community.

Nor is it necessarily sounding the death knell for the programme. However, a challenge lies in convincing airlines that this aircraft is suited for other business models, like cargo or charter operations.

Singapore Airlines has five A380s still on order. The carrier does not need to expand capacity so it makes sense to decline the lease renewal on the basis that another five of the aircraft are coming between now and the end of next year.

What's more, the airline was the A380 launch customer, which means that this aircraft – the first off the line – had several technical issues and is heavier than its successors. Frankly, it's no surprise that Singapore would opt for more efficient equipment.

But, after only three orders were placed in 2015, the question arises: where does the A380 programme go from here?

"It's a niche airplane with a relatively small pool of operators," said Rob Morris, head of Flight Ascend Consultancy, at a business briefing in New York on 15 September. "I think it's a very challenging future for that aircraft."

For comparison purposes, Morris points out that of the nearly 500 747-400s sold by Boeing, only 50 found homes in the secondary market and only 25 of those went to new customers.

In 2017 and 2018, several A380s will be up for lease renewal, which could mean multiple aircraft hitting the market at once.

"We're at an inflection point for the A380," says one banker. "These aircraft are not financeable on anything but credit."


Airbus has failed to market a compelling secondary use for this aircraft type since the start of the programme.

The manufacturer has recorded 48 cancellations for the aircraft, which made its first commercial flight less than a decade ago, losing 15% of its orderbook – mostly from customers that had seemed unlikely to ever take delivery in the first place.

Of the 48 cancellations, a total of 20 came from FedEx and UPS when it became clear that a cargo version of the aircraft could not be efficiently operated as a freighter.

Ill-fated airlines like Kingfisher Airlines and Transaero increased the number of cancellations.

In April, Reunion's Air Austral cancelled an order for two A380s placed in 2009. The airline had planned to operate the aircraft with only economy class.

Japanese low-cost carrier Skymark Airlines cancelled its order as well.

Additionally, the only VIP order has been lost.

Of course, all manufacturers lose orders when airlines cease operations. This is not news and is factored into sales strategy.

Orders are placed four or five years in advance, and it is impossible to ensure that an airline will still be operating. This is why it is unlikely that these 13 terminations from Kingfisher, Skymark and Transaero are consequential for Airbus.

Still, the number could rise: there is wide speculation that Virgin Atlantic and Accord Air (the holding company created to protect security deposits during Transaero's bankruptcy) will never take delivery of a combine nine A380s.

Only two lessors – ILFC and Amedeo – gambled on the niche aircraft. ILFC cancelled its orders in 2011 because it was not confident about the secondary market.


Malaysia Airlines, it is rumoured, was in the market to wet-lease or sub-lease its A380 but found no takers. But there are suggestions that Chinese carriers might be interested.

During a briefing in June, Doric said the company could make a secondary A380 profitable as an ACMI operation. One source told FlightGlobal that Doric has already purchased seats from Lufthansa for the reconfiguration of the cabin as it prepares to remarket the aircraft.

There is also the theoretical possibility of a freighter conversion.

However, one conversion specialist says such a programme is not realistic given the engineering requirements.

The height of the A380's floors was optimised for passenger travel not cargo, hence the FedEx and UPS cancellations.

Moreover, the 777, which is better suited for a freighter conversion, has no takers. Why would airlines choose the A380 over the 777?

The specialist adds that, were a conversion programme pursued, development would take at least five years and cost up to $50 million per aircraft, as a basic estimate.

"At that conversion cost, we reckon the passenger aircraft feedstock would have to be extremely cheap – almost free – for the converted freighter to make economic sense for operators, and even then it would have limited appeal," says George Dimitroff, head of valuations at Flight Ascend Consultancy.

To convert the aircraft from the current mainline configurations to a charter aircraft with a single-class or two-class configuration is also a possibility. Again, cost is a key factor, and the conversion specialist doubts that an owner would opt to reconfigure the whole aircraft given the expense.

One remarketing agent estimates that the cost of converting the aircraft from three-class to charter configuration (mostly economy and some premium economy) would carry a cost of between $15 million and $20 million.


Without a secondary market, it is hard to see the A380 programme more than limping along for the next few years. Airbus has already disclosed this summer that it is slowing production, an appropriate move given the three A380 orders the company received last year.

The result is that this is a buyer's market for the airlines. Asset managers will be seeking homes for these aircraft and airlines will have leverage when it comes to lease negotiations or sale prices.

Airbus might have sold over 300 A380s, net, but has it managed the aftermarket effectively?

The reality is that if there is a secondary market, the evidence is not easy to find. Several sources tell FlightGlobal that Airbus is working behind the scenes to craft a secondary deal.

Airbus confirms that it is confident in the secondary market for the aircraft type. "They can be leased or acquired otherwise at very attractive rates, offering a great opportunity for new entrants with new business models to begin A380 operations," says the manufacturer.

Source: Cirium Dashboard