27 June 2010

About that A380 Order

It was a mega surprise of a mega order. But scratch beneath the surface and you start to see that the EK order is rational.

No doubt EK got a sweetheart of a deal. But have a look at the numbers. EK’s current fleet sits at 141 aircraft. It has almost the same number (168) on order through the end of 2017. By my calculation that is 84 months. Effectively 2 aircraft a month without a surge in capacity would seem to be a prudent process. Some of those aircraft will undoubtedly replace earlier models. The A350s will add growth as well as replace the A340s, the A330s and some smaller 777s. The 777-300ERs will be churning out replacing the earlier models as well as growth. The A380s can be used to replace smaller double dip flights but that strategy doesn’t necessarily play well. Frequency always trumps size for the passenger.

So what of the other possibilities – The GCC market is not necessarily built on the best economics. EK does seem to make money – its fellows in the region don’t fare as well. For Airbus they can now point to a full order book for the biggest pax plane and that can actually help them cover more sales. It’s a big blow to Boeing who thought that they could persuade the Dubai based carrier to load up on the 787-I. Bang there goes that market. It also means that Boeing will be trying to get a substantial sale to a GCC carrier. Saudi Arabian must be on the cards as their trump airline given their size and previous propensity for the aircraft and the fact that they don’t have the A380 on their order books.

Still – the EK order was definitely an eye opener. I wonder if anyone on Atlanta, Singapore, London, or Frankfurt or indeed any other major home city for the world’s airlines are thinking along the same lines. They should be. And did I say anything about Cargo? I think we can bet that a portion of those planes will be Cargo specific thus reviving the A380F that was cancelled by Fedex and UPS earlier.


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