A380 Program Entering Operational Support, Aftermarket Phase

LYON, France—Early in 2019, Airbus’ salespeople had to accept a harsh reality—that the market for new A380s was too slow for production to be sustained beyond 2021. 

Now it seems they have admitted the second-hand market, too, is weaker than they thought.

The program is thus moving to a phase where the key words are going to be dispatch reliability and spare parts, rather than new operator.

Asked whether Airbus has a target number for placing preowned A380s, chief commercial officer Christian Scherer answered negatively. “We do not see a major role for us in remarketing,” Scherer told members of AJPAE, the French aerospace journalists association.

Yet, in March 2019, Sunny Guglani, who was at the time the head of A380 product marketing, had some ambition about the second-hand market. “We are convinced it will be an opportunity for more carriers to afford A380s and we are going to support and promote this market,” he told French daily Les Echos. Lufthansa had just announced it would return six of its 14 A380s to Airbus in 2022 and 2023.

The new priority is rather to support current operators. Airbus is focusing on the continuity of operations, Scherer said. At least, Airbus’ executives may want to keep the aircraft’s reputation at a decent level.

Air France has begun the retirement process of its fleet of A380s. Air France-KLM group CEO Ben Smith was one of the company officials who publicly criticized the aircraft’s performance. “This is the poorest operating aircraft in the fleet, we have enormous amounts of delays on this aircraft and this fleet has the highest rate of cancellations,” Smith said in November. “Getting these aircraft out sooner rather than later is going to help the operations at Air France.”

Even though the fleet comprises only 10 aircraft, they “drive a lot of decisions,” Smith said.

Scherer emphasizes the ongoing investments some airlines are making in their A380s. Lufthansa and Qantas have planned significant cabin upgrades, simultaneously with D-checks, he said.

Airbus is keeping a close eye on the schedule of the first such 90-day overhauls. They will begin soon, as they happen every 12 years. The airframer wants an A380 D-check—a major event in an aircraft’s life—to be as smooth as possible.

Maybe the most worrying evidence about the A380’s second-hand market has been the difficulty for Dr. Peters, a Germany-based lessor, to place ex-Singapore Airlines aircraft. Since November 2017, the carrier has returned four. “We have talked to numerous airlines about both a follow-on lease and a sale ... the best economic solution turned out to be the part-out route,” said Christian Mailly, Dr. Peters’ head of aviation.

In the remarketing process for the other two A380s, currently in storage, “we continue to seek a viable solution for our investors, which includes leasing out the engines in the interim,” he added.

Another lessor, Doric, in 2018 placed an ex-Singapore Airlines A380 with Hi Fly, a wet-lease specialist based in Portugal.

The outlook for the A380 leasing market is gloomy, according to Mailly. “The A380 market has been challenging for some time and has been aggravated by Airbus announcing the production stop earlier [in 2019]; further A380s will be withdrawn from flight operations in the coming years and this will not make it any easier,” Mailly said. Scope Analysis, a Germany-based consultancy, said investors cannot expect the high single-digit percentage returns originally projected but will have to make do with the lower single-digit range.

Not everybody is looking into the crystal ball the same way. Consultancy Kea Partners associate director Sebastien Maire is relatively optimistic about the market for second-hand A380s. As returned aircraft have now paid for themselves, their cost of ownership has decreased. Combined with the emerging availability of cheaper spare parts, this will make the A380’s economic performance competitive with that of newer aircraft, he said.

The dismantling of two of Dr. Peters’ A380s is supplying the cheaper components. In Tarbes, southwest France, Tarmac Aerosave has started the final phase of the disassembly. In November 2019, it cut down the fuselage of the first one and sorted metals. The second one will follow in January 2020.

This spectacular phase—Tarmac uses a diamond wire cutting gantry and sorts nuances of aluminum—came after the one the market was most avidly looking at. Demand for spare parts was so strong that the number of components Tarmac removed stood close to 6,000 per A380, up from 700-1,000 for an A330.

“We even removed engine pylons for reuse, which is generally not the case,” said Gregory Beyneix, Tarmac’s VP for programs and operations. Parts as large as the rudder and flaps were removed, too. Money savings thanks to second-hand parts can be considerable, as a new A380 main landing gear is priced at around $25 million, according to Scope Analysis.

As of Nov. 30, 2019, Airbus had delivered 240 A380s to 15 operators. The backlog still contains 10, mainly earmarked for Emirates. One will be handed over to ANA.