Emirates Airline Orders 36 Airbus A380s in $16-Billion Deal

01/18/18 06:04 AM EST
   By Robert Wall 
 

LONDON--Emirates Airline on Thursday announced a $16 billion deal for up to 36 more Airbus SE (AIR.FR) A380 superjumbos, extending a lifeline to the European plane maker's struggling flagship program that was at risk of production ending had a deal not materialized.

Emirates Airline, the biggest customer for the double-decker A380, and Airbus had been in talks for months about the top-up purchase that brings the Dubai-based carrier's commitment to the world's largest jetliner to up to 178 planes. The two companies were close to signing an agreement in November at the Dubai Air Show, but Emirates walked away from the table wanting firmer commitments to the program from Airbus .

Airbus sales chief John Leahy on Monday warned that "if we can't work out a deal with Emirates, there is no choice but to shut down the program."

"This order will provide stability to the A380 production line," Emirates CEO Sheikh Ahmed bin Saeed Al Maktoum said in a statement. Some of the planes from this order will be used to replace A380s already in service, he said.

Emirates now accounts for more than half of all A380s ordered if it exercises all options, punctuating the Toulouse, France-based plane maker's dependence on the airline.​

Even with the deal, Airbus is reducing output of the A380 amid otherwise slack demand. Airbus produced 15 A380s last year and plans to hand over only 12 this year.

The bleak outlook for the A380 was punctuated late last year when the first of the jets, once operated by Singapore Airlines, was placed in long-term storage after the airline opted not to extend its initial lease period. The carrier is the second biggest A380 customer, having ordered 24.

Air France-KLM SA (AF.FR) and Deutsche Lufthansa AG (LHA.XE) are among other carriers to have cut orders for the plane. Virgin Atlantic Airways Ltd. has never introduced the model despite ordering six and Malaysia Airlines is phasing out its six though it is trying to rent them to others.

For Mr. Leahy, who is retiring from Airbus this year after a career spanning more than 30 years during which has sold more than 15,000 planes, the deal is a final coup. "This new order underscores Airbus's commitment to produce the A380 at least for another ten years, he said. Mr. Leahy said he was "convinced more orders will follow Emirates's example and that this great aircraft will be built well into the 2030s."

Airbus has long promised huge demand for the A380 that costs $445.6 million each at list price, though airlines typically get discounts. The airplane has been popular with passengers, but airlines have been cautious to embrace it, worried about filling the aircraft that can seat more than 600 passengers.

Airbus Chief Operating Officer Fabrice Bregier earlier this week said production could fall as low as 6 planes a year. The company once had ambitions to build around 60 a year.

Emirates said it was considering engine options. Rolls-Royce Holdings PLC (RR.LN) and the joint venture of General Electric Co. (GE) and Pratt & Whitney offer A380 engines.

 

Write to Robert Wall at robert.wall@wsj.com

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January 18, 2018 06:04 ET (11:04 GMT)

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