Yesterday, Airbus delivered Emirates’ first Airbus A380. The new aircraft will fly from Dubai direct to New York City. It will be the United State’s first regular A380 service as well as the Middle East’s first A380 service. This aircraft is the first of the 58 A380s that Emirates has ordered.
Another carrier flying the skies with the A380, Singapore Airlines, has announced that their load factors have decreased despite the greater available seat miles offered to passengers. The airline cites that fuel has contributed to this dilemma. This makes me wonder if he A380 came a little too late in the market for airlines.
As fuel prices have nearly doubled in the year, more than half of most airlines pay out over 50% of their expenses to fuel bills. Ryanair, a low-cost european carrier modeled similarly to Southwest Airlines, stated that they went from paying appx. 30% of their expenses on fuel (last year) to paying appx. 50%+ of their expenses of fuel. The carrier has announced that they will cut staffing at airports, also citing that their bases at Dublin and London Luton are their most expensive cities. Luckily, the carrier has focused on fuel efficiency and operates a fleet of 737-800s. Other carriers, such as Singapore Airlines and Emirates, are forced to pay high fuel bills with the growing A380 fleet, yet the passengers just aren’t there.
With the rising of ticket prices, the days of visiting family 500nm+ away is no longer a possibility for some families. Rising fuel costs will inevitably force 5 vacation round-trip flight families back to 1 vacation a year, depending on their wealth. Low-cost carriers won’t save these passengers, since legacy carriers attempt to maintain low-cost carrier fares (they just have more fees).
You should be getting the picture that more capacity vs. high fuel prices does not help airlines. Instead, it just adds unused seats to the market and forces airlines to pay a higher fuel bill. A few years ago, when these orders were places, the market was able to sustain the A380. It’s no doubt that New York to Dubai will be a crowded route, but with the 57 A380s that have yet to arrive, many of those will have unused capacity. The great thing about these two airlines is that they have large international traffic at their hubs, and not a great deal of competition out of these hubs (based in their cities). How many passengers want to wait an hour to board the A380 anyways? (Also, on a side note, knowing what Airbus knew in the late 90′s / early 2000′s, they should not have built the A380. The expected revenue (back in that time period) did not exceed R&D costs. It was a huge loss for Airbus, but helped with R&D with the A350.)
There are two sides to every issue. In this case, is the A380 going to help or hinder these airlines? Will it be a fuel-saving tool, compared to the 747? Or will it add too much capacity. I’m sure these airlines will place the A380 on large-demand routes, no doubt about it.
Image: airplanemart.com
