Airbus A380: The Death Watch Begins!

All told, we can only identify 18 truly firm non-Emirates A380 orders on backlog. Clearly, Emirates will need to do the heavy lifting in terms of line program sustainment.

Emirates took its first A380 in 2008, with 72 delivered through the end of 2015. That’s an average of nine per year. But as demand elsewhere has vanished, Emirates has been forced to ramp up its intake. In 2015, Emirates took 14 of the 27 A380s delivered.
How long can this keep up? Emirates has just reported its first annual sales decline in a decade. Its load factor dropped 3.1 points to 76.5%. Its yield fell 10%. Ramping up capacity hardly seems like the right move now.
Meanwhile, Emirates has ordered 150 Boeing 777-9Xs, with deliveries starting in 2020. This jet has the same range as the A380, more belly cargo, just 25% fewer seats (the discounted ones, of course) and has two fewer engines. They’re more modern engines, too.
Thus, the question becomes, how long is Airbus willing to lose money, particularly when there’s no doubt about the ultimate outcome? Assuming that next year’s rate of 20 isn’t too ruinous, and assuming that Emirates can keep taking 14 per year (despite declining traffic growth rates and falling load factors), that means Airbus can sustain about three more years of production (14 Emirates planes per year, plus six for other customers). But then again, since Airbus is losing money on all of these planes, Tim Clark is correct to worry that Airbus could simply end the program at any time.

Teal Group has always provided the most pessimistic A380 forecast. But it turns out we may have been much more optimistic than reality.

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