{"id":8550,"date":"2019-03-03T10:38:19","date_gmt":"2019-03-03T18:38:19","guid":{"rendered":"http:\/\/calleam.com\/WTPF\/?p=8550"},"modified":"2026-01-15T16:10:17","modified_gmt":"2026-01-16T00:10:17","slug":"a380-take-two","status":"publish","type":"post","link":"https:\/\/calleam.com\/WTPF\/?p=8550","title":{"rendered":"A380 – Take two"},"content":{"rendered":"

The following entry is a record in the \u201cCatalogue of Catastrophe<\/a>\u201d \u2013\u00a0a list of failed or troubled projects from around the world.<\/p>\n

\n

Airbus SAS\u00a0<\/strong>\u2013 France
\nProject name :\u00a0<\/strong>A380
\nProject type :\u00a0<\/strong>Commercial aircraft development
\nDate :<\/strong>\u00a0Feb 2019
\nCost :<\/strong>\u00a0Undeclared, but certainly in the billions of dollars in lost opportunity and other costs.<\/p>\n

Synopsis :<\/strong><\/p>\n

An old Danish proverb (sometimes incorrectly attributed to Yogi Berra) quips that “It is difficult to make predictions, especially about the future\u201d. Unfortunately, organizations making large, long-term bets on a project are in the\u00a0difficult position of having to do just that. Normally those predictions are embedded into the project\u2019s business case and that business case becomes the platform upon which the project\u2019s ultimate go \/ no-go decision is based. If the analysis in the business case turns out to be incorrect or incomplete the organization may have invested significant amounts of money which they will never recoup.<\/p>\n

\"\"<\/a>
A380 on approach – Creative Commons Attribution-Share Alike 2.5 Generic \u2013 Source: Keta<\/figcaption><\/figure>\n

The Airbus A380 project has recently provided a good example of the perils involved. Sadly, in Feb 2019 Airbus has announced that the A380 production program is to be wound up with just 253 aircraft built, far short of the 700 plus predicted by Airbus when the aircraft was first launched. Airbus is not declaring the net loss for the project as a whole, but given that development costs are said to have been in the order of $20 to $25 billion and only about 35% of the anticipated aircraft were built, the write offs are likely to be considerable. Not only are the development costs being spread across fewer aircraft, but the lower build\u00a0total will likely have meant higher unit costs due to the failure to scale the production line up to the full capacity originally planned (failure to achieve economies of scale).<\/p>\n

Although the full Airbus business case documentation isn\u2019t public it is pretty clear from Airbus\u2019 public statements that the project has not lived up to expectations. \u00a0Asa result it is fair to assume that the predictions in the business case have turned out to be overly optimistic. \u00a0That of course begs the question of what went wrong. \u00a0Were the sales targets wrong or is there something at a deeper level that held the program back from its full potential?<\/p>\n

A number of industry overseers have been predicting the failure of the program since day one. In fact, the cancellation of the production program concludes\u00a0a long-held debate in the aviation industry. From the earliest stages of the project (back in 2002) there was a debate as to whether large aircraft (like the A380) would be the key to linking congested airports in the world\u2019s major cities or if airlines would prefer to use smaller aircraft that operate at higher frequencies (i.e. more daily flights). With one\u00a0notable exception (Emirates that operates over 100 A380s) airlines certainly have voted with their chequebooks. Sales of the twin engine mid-size\u00a0Boeing 787 and competing Airbus A350 aircraft have far exceeded those\u00a0for larger four engine A380. To some that will be vindication of their argument that the failure of the project was simply a matter of the airline\u2019s preference for smaller aircraft.<\/p>\n

There certainly is no doubt that smaller aircraft are inherently less risky from an operational standpoint. It\u2019s easier to sell out a small aircraft than it is a big one and if there were another major recession, carriers operating the large A380 may well find themselves operating aircraft that they can\u2019t fill. So it is certainly plausible that in part the failure of the larger aircraft is due to airlines being risk adverse. However perhaps that is not the only issue. Instead, what seems to be an equal concern is the failure of a\u00a0second-hand market for used\u00a0A380s to develop. Top tier airlines typically only operate their aircraft for 10 to 12 years. To maintain their top tier status these\u00a0airlines sell the aircraft on (or return the aircraft to the lessor) while the aircraft still have plenty of life left in them. \u00a0The problem is that to sell the aircraft on, there needs to be a market for second-hand aircraft. If that market doesn\u2019t exist then the airlines are left amortizing to zero their full investment over just 10 years rather than recouping a big chunk of that investment when they sell second-hand.<\/p>\n

Given that the first A380 entered operational service in 2007, it’s pretty clear now that the second-hand marked just isn’t there. \u00a0The operators who might have taken the second-hand aircraft have not budged. \u00a0Perhaps fearing the operational risks of having\u00a0such a large aircraft to fill or recognizing that the aircraft requires special tooling to service (e.g. new larger hangers, new equipment to handle the massive engines, specialized flight simulators for training, etc), the second-tier operators have steered clear. \u00a0Of the early aircraft coming off their original leases only 1 has found a permanent home. \u00a0Several others are already being stripped for parts. \u00a0The cost for those holding the aircraft leases or the airlines who purchased outright the write off of a 10 year old aircraft is a bitter pill to swallow. \u00a0Having seen early adopters\u00a0face that pain, it’s pretty clear that no other operators are going to want to purchase the aircraft new and likely that is part of the reason to shutter the production line early.<\/p>\n

As a lesson learned it appears that the problem was that\u00a0the business case focused on initial sales and did not anticipate that the second-hand market simply would not be there. Perhaps if Airbus had put more thought into how they could stimulate a strong second-hand market right from day one, the A380 story may have had a different ending?<\/p>\n

Contributing factors as reported in the press:
\n<\/strong>Issues with the scope of the business case (not enough attention to the second-hand market). \u00a0Bad assumptions.<\/p>\n

Related stories:<\/strong><\/p>\n

    \n
  1. Boeing 787 Dreamliner<\/a>\u00a0(which had its own issues when first launched)<\/li>\n
  2. A380<\/a> – Prior story about problems with the original launch of the aircraft<\/li>\n<\/ol>\n

    Reference links:<\/strong><\/p>\n

      \n
    1. Airbus scraps A380 superjumbo jet as sales slump<\/a><\/li>\n
    2. How the Airbus A380 superjumbo went from an airline status symbol to being sold for spare parts in just 10 years<\/a><\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

      The following entry is a record in the \u201cCatalogue of Catastrophe\u201d \u2013\u00a0a list of failed or troubled projects from around the world. Airbus SAS\u00a0\u2013 France Project name :\u00a0A380 Project type :\u00a0Commercial aircraft development Date :\u00a0Feb 2019 Cost :\u00a0Undeclared, but certainly in the billions of dollars in lost opportunity and other costs. Synopsis : An old […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,3,77],"tags":[64,152,138,134,100,132,129,93,147],"class_list":["post-8550","post","type-post","status-publish","format-standard","hentry","category-private-sector","category-failed-project","category-why-projects-fail","tag-advanced-project-management-training","tag-business-case","tag-causes-of-failure","tag-decision-making","tag-examples-of-failed-projects","tag-private-sector","tag-failed-project","tag-why-do-projects-fail","tag-why-projects-fail"],"_links":{"self":[{"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=\/wp\/v2\/posts\/8550","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8550"}],"version-history":[{"count":30,"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=\/wp\/v2\/posts\/8550\/revisions"}],"predecessor-version":[{"id":9949,"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=\/wp\/v2\/posts\/8550\/revisions\/9949"}],"wp:attachment":[{"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8550"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8550"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/calleam.com\/WTPF\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8550"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}