Farnborough reels as Airbus slashes superjumbo output

An Airbus A380 aircraft is seen beside the runway during the Farnborough Airshow. (AFP)
Updated 13 July 2016
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Farnborough reels as Airbus slashes superjumbo output

FARNBOROUGH: The aircraft sector hit turbulence as European giant Airbus slashed output of its A380 superjumbo because of weak demand, putting a lid on plane orders generally at Farnborough.
European planemaker Airbus revealed late Tuesday at Farnborough — one of the world’s largest civilian and defense airshows — that it would halve production of its enormous A380 to one a month from 2018.
CEO Tom Enders said Wednesday he hoped the cutbacks would last for “just a year or two,” adding he remained optimistic over the jet’s prospects.
“We are all pretty up optimistic about the longer term prospects of the A380 and I hope this is just a year or two and then we can raise production rates again,” Enders said at the airshow, south of London.
“We decided back in 2000 to launch the A380 (and) little did we know what the world would look like in 2010, 2015 or 2016.”
He added: “We believe in this aircraft, the company knows what to do. We are proactive and I am quite confident that we will be able to (again) raise production rates.”
Enders said Airbus needed “to work harder to convince airlines that this aircraft really pays off if you can fill it.”
“It’s a real money making machine,” he insisted.
In what has been a relatively quiet show for new orders of planes generally, Airbus’ US rival Boeing on Wednesday inked previously-announced jet deals worth a total of $3.79 billion (3.42 billion euros) with Air Europa of Spain and Ruili Airlines of China.
Airbus on Tuesday revealed firm orders for 129 aircraft worth a combined $15.6 billion before the usual discounts are applied.
The orders included a vast $12.5-billion deal for 100 single-aisle A321neo jets from Malaysia’s AirAsia.
However the shock A380 announcement has stolen the show and reminded participants about the gloomy economic backdrop.
The A380 is the world’s largest civilian airplane, carrying up to 544 passengers in a four-class configuration or 853 in just a single class.
The jet has a list price of $432.6 million but it has not registered any sales yet at the week-long Farnborough event.
Dubai’s Emirates airline is the biggest client for the A380, operating 81 with another 142 on order.
“Airbus still continues to face the challenge of securing new orders for the A380,” independent aviation analyst John Strickland said.
“Its best customer, Emirates, would order many more but only if Airbus upgrades its... capability. This is something that Airbus is reluctant to do when it is not making money on the aircraft.”
Strickland added that airlines have a wide choice of large-capacity aircraft built by Boeing and Airbus that are cheaper than the A380 because they require only two engines, not four.
The superjumbo was launched in 2007 and has since received 319 orders from 18 global airlines, of which it still has yet to deliver 126.
Jefferies analyst Sandy Morris said the A380 also faced competition from Boeing’s 777-300ER long-range aircraft.
“The A380 simply ran into a very good all-round competitor in the B777-300ER,” Morris told AFP, adding that Airbus’ target markets of the Indian sub-continent and the wider Asia region has a limited appetite for the superjumbo.
“Those markets have to grow to the point where such a large aircraft is needed,” he said.


Lufthansa announces overhaul of budget carrier Eurowings

Updated 24 June 2019
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Lufthansa announces overhaul of budget carrier Eurowings

  • Lufthansa cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16
  • Eurowings’ long-haul business would be managed by Lufthansa in the future

BERLIN: Lufthansa on Monday announced a turnaround plan for Eurowings in which the budget carrier will focus on short-haul flights and seek a 15 percent cut in costs by 2022 in the hope of returning to profit.
The German airline cited falling revenues at Eurowings as a major reason for its warning on full-year profits on June 16. Eurowings’ revenue was also forecast to fall sharply in the second quarter.
Lufthansa said its Eurowings fleet would be standardized on the Airbus A320 family and it would seek to boost productivity at Eurowings by limiting itself in Germany to one air operator’s certificate.
Brussels Airlines — the Belgian national flag carrier which Lufthansa took control of in 2016 — would not be integrated into Eurowings, Lufthansa said. A turnaround plan for Brussels Airlines will be announced in the third quarter.
Lufthansa also said it would start pegging its dividend payout ratio to net profit in the future to give the group more flexibility. It would pay out a regular dividend of 20 percent-40 percent of net profit, adjusted for one-off gains and losses.
Lufthansa said Eurowings’ long-haul business would be managed by Lufthansa in the future.
Carsten Spohr, Chief Executive Officer of Lufthansa, said Monday’s announcements sent “a clear signal that this company cares about its shareholders and tries to create value for them.”
Lufthansa said its Network Airlines — made up of Lufthansa, Swiss and Austrian Airlines — would aim to use innovations in sales and distribution to make a contribution to increasing unit revenues by 3 percent by 2022.
Network Airlines will aim to reduce unit costs continuously by 1 to 2 percent annually, the airline said.