LE BOURGET, France, 19 June 2003 — 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 yesterday to acquire up to eight A380s.
The catalog price for each long-haul aircraft is $275 million (234 million euros), making the price tag for Korean Air’s five firm orders a total of $1.375 billion, and $2.2 billion if the options are exercised. Airbus Commercial Director John Leahy said a definitive signature on the deal with Korean Air could come in the next two months, with deliveries scheduled to begin in 2007.
“Our decision to purchase the A380 aircraft meets our strategy to reinforce Incheon International Airport as the strongest hub in Northeast Asia,” Yang Ho-cho, chairman and chief executive of Korean Air, said in a statement issued by Airbus. “As one of the leading airlines in Asia, our long-term fleet plan plays a significant role in this strategy,” he said. Korean Air became Airbus’ first customer outside Europe in 1974.
Another “significant” airplane order will be announced, Airbus chief executive Noel Forgeard told French radio BFM, from a company located “to the east of Europe.” He added that the size of the upcoming contract would be between the five A380s ordered by Korean Air and the 41 planes ordered by Emirates. Qatar Airways may just be the buyer-in-waiting, according to speculation in the trade media. The airline has already ordered two A380 superjumbos.
The Emir of Qatar, Sheikh Hamad ibn Khalifa Al-Thani, is scheduled to meet President Jacques Chirac this morning at the Elysee Palace. Earlier in the week, Emirates airline announced a $12.5 billion order for 41 Airbus planes, including 21 of the double-decker jets. With 22 A380s already on order from Airbus and two set to be leased from top lessor ILFC, Emirates’ fleet is expected to include 45 of the massive planes, which carry a sticker price of $275 million each and are due to begin flying with airlines in 2006.
Airbus Commercial Director John Leahy said that if new 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 program 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, questions abounded over its ability to pull off the program 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 toward routes between smaller airports rather than big hubs.
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.
