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Why Aren't Giant Jets Selling?

In the late 1960s, the Boeing (NYSE: BA  ) 747 represented the latest in commercial aviation achievements. Becoming the largest passenger airliner at the time, the characteristic hump of the plane signified the power of aerospace engineering. Fifty years later, Airbus, a subsidiary of European Aeronautic Defense and Space Company (NASDAQOTH: EADSY  ) , has passed the 747 in size with its A380 superjumbo.

But despite the modern technologies incorporated into the Airbus A380 and the redesign that created the Boeing 747-800, neither of these colossal jets have become the sales sensations they were targeted to be.

Slow sales
While the 747-800 and the A380 both bring the latest in aerospace technology to the world's largest passenger jets, sales have not been quite so large. Boeing recently slowed the production rate on the 747-800 to 1.5 aircraft per month amid slow sales. In an attempt to help clear a glut of older 747 aircraft, Boeing has set up a trade-in program where airlines can trade in old 747 models to partially finance the purchase of a 747-800. In a world where fuel costs make disposing of old jumbo jets increasingly difficult, the trade-in program seems to be a logical move to sell new jumbo jets.

The Airbus A380 has been met with its own sales difficulties, with the latest being that Air France-KLM (NASDAQOTH: AFRAF  ) may be swapping A380 orders for other Airbus models. As a launch customer for the airplane, Air France-KLM already has some A380 aircraft but this latest decision seems to imply that the Franco-Dutch carrier has enough of the planes.

Saving the A380
Not every airline has given up on the A380, however. Emirates, an airline effectively owned by the government of Dubai, gave a boost to the A380 order book at the Dubai Air Show as the carrier ordered another 50 superjumbos. Since the launch of the A380, Emirates has been a major player in the program, becoming one of the launch customers and currently comprising nearly half of the total A380 order book.

While Emirates is showing its bullishness on the A380, the response from U.S.-based airlines has been far less supportive. None has placed an A380 order and Delta Air Lines (NYSE: DAL  ) may even cause Virgin Atlantic Airways to reduce or eliminate its A380 orders. Ever since Delta acquired a 49% stake in Virgin Atlantic, the airlines have been forming a transatlantic partnership linking Delta's New York JFK International operations with Virgin Atlantic's valuable London Heathrow presence.

Delta CEO Richard Anderson noted his reasoning behind declining to purchase the A380 by saying, "The A380 is, by definition, an uneconomic airplane unless you're a state-owned enterprise with subsidies." It's worth noting that other for-profit privately owned airlines do operate A380 aircraft, European carriers Air France-KLM and Deutsche Lufthansa (NASDAQOTH: DLAKY  ) among them.

Fortunately for Boeing and Airbus, orders for these aircraft are not just disappearing. Thanks to advances in other Boeing and Airbus aircraft, twin-engined models stand to pick up many of the orders not given to jumbo and superjumbo aircraft. Among the benefiting aircraft are the Boeing 777 and Airbus A350, twin-engined aircraft with large capacities and long ranges.

But there is hope for the 747-800 and A380. If airlines currently using the aircraft can modify routes in ways that the larger size of these aircraft becomes a major advantage, the examples could fuel future order demand. Until then, this size category of aircraft still leaves much to be desired in terms of order count.

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Read/Post Comments (10) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On November 29, 2013, at 6:39 PM, RobertPhoenix wrote:

    Since we know that A380 has the lowest fuel cost per passenger mile, and since fuel is the largest cost component, I find Delta's comment very strange

    "Delta CEO Richard Anderson noted his reasoning behind declining to purchase the A380 by saying, "The A380 is, by definition, an uneconomic airplane unless you're a state-owned enterprise with subsidies.""

    This only applies if you can't sell all the seats. With Emirates now having 5 A380 flights per day from Heathrow to Dubai, the can clearly sell the seats and give frequent service.

    Delta complains that it wants more slots at Heathrow - but neglects to use the largest airplanes it can on the slots it has.

  • Report this Comment On November 29, 2013, at 7:36 PM, twaishek wrote:

    Both these jets run on four engines that burn a lot of fuel. The trade off for a slightly smaller passenger capacity with a plane that needs only two engines like the popular Boeing 777 series seems to make more economic sense.

  • Report this Comment On November 29, 2013, at 11:25 PM, compal wrote:

    Flying your 2-engined aircraft twice to ferry the same number of passengers’ costs a good deal more per km considering the crew's time, airport costs, maintenance and much quicker wear and tear of aircrafts.

    What airlines are basically worried about is that

    they can't fill those monsters on their scheduled flights.

    State subsidising is an American nonsense used if they cannot compete.

  • Report this Comment On November 30, 2013, at 12:21 PM, MaDDMan wrote:

    "Why Aren't Giant Jets Selling?" ... Because neither the Giants or Jets are having a good season..

  • Report this Comment On November 30, 2013, at 1:26 PM, ArmyDaveNY wrote:

    In the case of the Airbus A380, it has a problem that other jumbos don't have. Most airports cannot handle the aircraft, and there are three main issues that have to be addressed at the airport. First, the runway and taxiways have to be reinforced to handle it, second, the gate needs to be modified to handle the aircraft (two levels), and third, the size of the aircraft requires special areas that can handle the aircraft and gates.

  • Report this Comment On November 30, 2013, at 3:09 PM, panamcunard wrote:

    I do not think A380 is out for the count, because it is still a tec airliner, also keep in mind that 747s classics sale were horable in the 70s, but then their sales took off in the 80s and 90s.

    Now it did not hurt, that due to the DC-10 grounding, the DC-10 strech project was cancel, leaving high capacity sales open for 747s, but the 777X is in good standing, but the A380 still have a chance.

    Now the 747 time may have come. This is sad, because the 747 is the last Pan Am Clipper that Juan Tripp design.

  • Report this Comment On November 30, 2013, at 3:44 PM, DNMay wrote:

    One driver of traffic to an airline flying between A and B is frequency of service. Two flights a day of a 250-seat airplane will generally carry more pax than one flight a day of a 500-seat airplane. Depending on all the factors involved, this can make the smaller airplane a better choice.

    Also, an airline flying between two countries will carry more pax if they can offer several non-stop routings rather than force feeder service to a hub . . . and this also can favor the smaller airplane because it can serve smaller cities economically.

    I think we need to respect Delta's judgment of the best-size airplane for its own routes. Just as we must respect Emirates' judgment for their routes.

    Some people are correctly making the point (above) that crew costs and some other economies of scale favor the bigger airplane. But we probably need to consider some offsetting factors in the design, too. For gate reasons, the A380 wing span is crimped below the optimum for a modern wing with higher aspect ratio, and so its lift-induced drag is rather high. Not a show-stopper, but you can't just point to a bigger airplane and claim inherently lower seat-mile costs when this is the case.

    As for 747-8 sales, remember that Boeing never expected enormous sales, but to divert some sales from the A380. To the extent that the very large airplane market does not materialie, both the A380 and the 747-8 will be affected.

  • Report this Comment On November 30, 2013, at 9:56 PM, vespajet wrote:

    The thing is that US airlines really don't have a need for the A380 and the same is nearly true with the 748i. Only United and Northwest ordered the 747-400 and American and Delta opted for the MD-11 (although they were short-lived in AA service), Continental ordered the A340 (along with the A330), but those orders got canceled. TWA ordered the A300, but canceled the order (Their A318 order was supposedly made to make good on the canceled A330 order.). Delta became a 747-400 operator via the merger with NW and when they do decide to replace the 747-400s, it will likely be for more twin jets from either Boeing or Airbus (or a mix) instead of a four engine a/c.

    The technology with engines has made such a major leap that long routes like LAX-SYD and ATL-JNB are commonly done with the 777-200LR. Even Virgin Atlantic backed away from their entire "4 Engines 4 Longhaul" mantra, as they have added the A330 to their fleet to replace the A340-300. I would not be surprised if Virgin Atlantic's A380 order is cancelled (maybe converted to additional A330s) and they order the 748i or more surprisingly, the 777-300ER.

  • Report this Comment On December 01, 2013, at 7:42 PM, overpaidyahoos wrote:

    I may have missed the comment but the A380, although a nice plane to ride in, lacks cargo space. All those seat generate baggage and baggage limits cargo. Ask any airline bigwig if he would rather have 10 free bags or that space for paying cargo he will say "cargo" every time.

    From a purely nice to look at view point the 747 is a great looking aircraft. The A380 no so much. And, have you ever noticed how much the profile of a B747 is similar to the B17? Another great looking aircraft.

  • Report this Comment On December 01, 2013, at 9:53 PM, DNMay wrote:

    If the B747 and the B17 have a similar profile, it's escaped me.

    But the lack of cargo space on the A380 is an excellent point to make. Two passenger decks and only one cargo deck - and that cargo deck occupied by lots of wheels - not a natural cargo carrier with pax onboard. Now an all-cargo A380 may hold potential . . . but has failed to sell and has been essentially abandoned.

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