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.
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.