Travel News - Boeing making a mistake not challenging the A380

Boeing is right when it says that point to point traffic is on the increase and hub to hub traffic is declining. However this is too US centric and too much based on the effects of 9/11 which are not a permanent feature. 9/11 has affected international hub-to-hub traffic much more than domestic air traffic: hub-to-hub traffic has got thinner and airlines have had to switch in smaller planes on hubs to avoid empty seats.

In most of Europe and Asia however, space is just not available to build more runways to handle more planes. If air traffic does expand as it is predicted to do, then the only way to increase it in most hub airports will be to use the A380 in ever increasing numbers and density configurations. It is of course possible to build new out of town airports, but these increase trip times if travel times into the cities is included, and are not popular with passengers or operators. Also getting planning permission for new airports is becoming increasingly difficult. The A380 is a blessing for airport operators and airlines operating from major hubs.

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This has been debated at length in other threads which you can find via the Search function. Bottom line is that it depends on what happens in the future - not just in terms of air traffic, but in terms of economic factors that determine whether an airport will be able to afford modifications such as gates with two jetways to permit loading/unloading pax in a reasonable amount of time and so on. Nobody has a perfect crystal ball on all the relevant factors. Your opinion is reasonable, but so are others that lead to the opposite conclusion.

Even given demand for an A380 class aircraft, it's a stretch to conclude that Boeing made a mistake by not building one. No company can do everything. Boeing chose to put its resources into other projects, such as the 787, which will also presumably be profitable. Could they have made more money by betting on another horse? That's even more conjectural than the first set of predictions.

Time will tell.

When the 747-X and the A3XX were in design stages, airlines decided that, as an all-new design with a full-length upper deck, the A3XX was the better choice if they desired/needed a plane that could carry more then 500 people in a three class configuration.

While (one of) the original design(s) for the 747 was a double-deck plane, Boeing went with the smaller hump, which was expanded in the 747-300 and 747-400. The airframe would have had to been completely re-built to handle a full-length deck, and stretching the main deck and upper hump were, at best, going to get Boeing within 50 seats of the A3XX with probably worse economics.

So the airlines that wanted a big plane choose Airbus, and the A3XX became the A380. If airlines had wanted a 747-X, Boeing would have built it. But they didn't, so Boeing first launched the Sonic Cruiser (which was the perfect plane for the high-fare late 90's when speed mattered and people were willing to pay for it) and, when 9/11 and the Tech Boom wiped out that market, the 7E7/787, which allows airlines to fly more efficiently longer distances.

Then 9/11 happened, followed by SARS, and world air-travel numbers imploded. A lot of airlines (like LH) that chose the A380 over a stretch 747 suddenly wanted a stretch 747 because they could not fill an A380 and as the A380 grew heavier, the economics worsened (from about 20% better then a 744 to about 15-16%). Also, the A380 has to have double-deck loading and unloading (unless you want to spend two hours boarding and disembarking) and a lot of airports, in a financial crunch due to lower airport fees, did not complete the conversions as fast as expected.

The A380 is indeed the perfect plane for airlines that fly long routes or have extremely high density and frequency on selected routes. It is also good for airports like LHR and ORD that are at 110% of capacity and can't really expand anymore.

But some of those hubs are so full because the demand for direct flights to bypass them is not high enough to justify the flight. With a plane like the 787/A350, the economics are such that a case can be made. If you fly 300 seats between SEA-NRT, and 150 of those people go on to HKG, you can swap out that 300-seat 777 for two 200-seat 787s, one doing SEA-NRT and one SEA-HKG. You also have enough seats on both planes so that those SEA-based passengers that travel to SFO or LAX to connect to available seats on a NRT or HKG-bound plane can now stay in SEA and fly direct.

Asia especially should be a solid market for the 787 because right now it almost has to be an A340, 777, or 744 to service those flights due to the ranges. So you need to funnel your passengers into hubs to make sure each plane flies as close to capacity as possible. Using a smaller 787/A350 will allow more direct service, as cargo and passenger demand can be better tailored and the stress on the hubs reduced.

I mean if Airbus really thought the world would just buy A380s, they would never have built the A350. They see the 787 as a threat, both to their dominant A330 as well as their hopefully dominant A380.

I truly believe the 380 will put a serious dent in Airbus. The cost of development will NEVER be returned.

I truly believe the 380 will put a serious dent in Airbus. The cost of development will NEVER be returned.

I think they'll make back the $15 billion or so, but I do not believe it will ever be the "cash cow" the 747 is for Boeing. So that means about 250-300 A380s vs. probably around 1500 747s (as of November, Boeing has delivered 1351 with an additional 34 on order according to: http://active.boeing.com/commercial/orders/displaystandardreport.cfm?cboCurrentModel=&optReportType=AllModels&cboAllModel=747&ViewReportF=View+Report).

We have indeed had a range of informed discussion on FT about this very matter. Here's a quick summary of one view:

US airlines and rest-of-the-world airlines are different markets, a fact more appreciated by Airbus than by Boeing. The A380 will not sell to US airlines but it will sell to the rest, some of whom will use it to New York, Los Angeles, etc, where it will become the 21st Century aircraft of choice on selected routes. But it will be more dominant in places like London or Tokyo.

By the time the A380 gets going there will be a lot of 747-400s up for replacement, having been very hard used for 20 years or so. The A380 will probably sell about 36-48 a year for 20 years or more, maybe about 1,000 overall.

Both Airbus and Boeing have enjoyed support from their governments in their own ways, as one would expect for such significant industries. In the US subsidies have been traditionally dressed up as "military contracts", in the same way as when aviation was developing US airline subsidies were dressed up as "mail contracts" through the post office. And we all saw how the "support" was returned in kind to relevant government employees.

Boeing may never take an order for another passenger 747. The only remaining orders will be for freighters (what happens to many aircraft programs at the end when all the tooling is depreciated and you can sell the plane cheap). They will give up when production gets under 2 aircraft a month sustained (it's been bumping down there for a while).

Boeing used to be a competent world player (indeed, THE competent world player) until they moved HQ away from Seattle and replaced wise industry execs like CEO Phil Condit with the likes of "Unspeakable Harry", who may go down in history as the man who put TWO major commercial aircraft manufacturers (McDonnell Douglas and then Boeing) out of the business.

The above posts summarize things well.

Boeing either has to spend the money to build a A380-like 797 or cede the market to Airbus. If a 500-600 passenger 797 is built, it is likely to make little or no profit for many years. Of course, an A380 replacement could be designed by Boeing in 2045.

There may not be a huge demand for an A380 but there is certainly a number of markets that need it. On the other hand, all those markets add up so that the A380 will sell quite a few planes.

When will Boeing develop an A320 replacement? Let's see if Airbus has the resources to develop an A380, A350, and A360 (A320 replacement)?

When will Boeing develop an A320 replacement? Let's see if Airbus has the resources to develop an A380, A350, and A360 (A320 replacement)?

Supposedly, they're working on one right now, but Boeing just needs to sell the 737NG at a loss, as Airbus apparently is doing with the A319-A320, and they should start to win plenty of orders. :D

As for ceding the big 400+ passenger plane market to Airbus, Boeing doesn't feel that the market of the past thirty years (when high-capacity planes were in demand) will not be the market of the next thirty years, and that lower-capacity planes that allow airlines to fly direct will be the future.

To an extent, Airbus does, as well, which is why they are releasing the A350. They do not expect to sell an A380 for every 747, but they do expect to sell hundreds and hundreds of them. Even a one A380 for every three 747 ratio is over 500 planes, which is about double what Airbus needs to sell to break even.

>>To an extent, Airbus does, as well, which is why they are releasing the A350. They do not expect to sell an A380 for every 747, but they do expect to sell hundreds and hundreds of them. Even a one A380 for every three 747 ratio is over 500 planes, which is about double what Airbus needs to sell to break even.<<

The A350 is a response to the 7E7 (787) and the 777. The A340 is at a disadvantage compared with the 777 in many routes because it is a 4 engine plane and therefore slightly less efficient. Also the efficiency improvements in the 7E7 require a response from Airbus. The A350 isn't aimed directly at the 7E7, but in true Airbus fashion, in between the 7E7 and 777. It may not quite as efficient as the 7E7 in the 7E7's niche, but it will have a lower seat cost than the 7E7 for airlines that can fill a slightly larger plane then the 7E7, and it will be more efficient than the 777 and will take some of the market for smaller 777 variants.

Airbus has already sold 129 A380 planes before most airports have been modified to accommodate it. It has pretty well already killed off 747 passenger version sales, and conversions of surplus 747s to freight will probably kill off new 747 freighter version sales, forcing Boeing to end production some time in the near future. Once the bulk of hub airports are converted for the A380, I think the A380 will sell as fast as the 747 did - provided Boeing doesn't come up with a challenger for as long as the 747 flew before being challenged.

I admit that I am not an expert as some of you who have already posted here, and I cannot speak on behalf of anyone except for myself.

My questions:

1. Is there a greater financial risk for the airlines to fly the A380 in the event of economic slowdown or unforseen events such as SARS or 9/11?

2. Clearly, the aviation market is moving towards open sky treaties based on the recent treaties signed between various countries. Wouldn't this development call for more point-to-point flights than going through hubs such as NRT, FRA or LHR, thus creating less congestion? Is A380 economical for point-to-point quick turn-around type of service?

3. Is 747-Advanced considered as a A380 competitor?

4. I still don't see the order for A380 come close to 1,000. I have seen airlines such as SQ and ANA ordering 777-300ER to replace their 744. If the A380 is considered as a 744 replacement, I would assume SQ to order close to at least 35 to 40 A380.... that's a lot of capacity!!

5. Will the Japanese ever order the A380? Anyone know if HKG and NRT airport authorities approved the modification plan to meet the A380 requirement?

Is there a greater financial risk for the airlines to fly the A380 in the event of economic slowdown or unforseen events such as SARS or 9/11?

Yes. It is why, after 9/11 and SARS, LH suddenly showed extreme interest in a 480-500 passenger 747-X vs. the 535 passenger A380s they had ordered, instead. "Empty seats generate no revenue." :) Also, when LH ordered the A380, they flew five fully-loaded 747s a day between Germany and JFK. Three A380s would have carried the same load, offering LH very significant cost reductions. I do not know how their schedule is, today.


Clearly, the aviation market is moving towards open sky treaties based on the recent treaties signed between various countries. Wouldn't this development call for more point-to-point flights than going through hubs such as NRT, FRA or LHR, thus creating less congestion? Is A380 economical for point-to-point quick turn-around type of service?

To answer your first question, this is what Boeing is counting on with the 787. Hubs have their advantages, even today, in that it allows more service to "spokes" that cannot justify their existance seperately. But many "spokes" at both ends can generate enough "direct" traffic to justify the route, if the right plane can be assigned to it. So while, say, SEA-HKG cannot justify a 300 seat 777 or a 400 seat 744, it might justify a 200 seat 787. So an airline could fly that route direct, instead of funnelling SEA passengers to NRT or SFO, first.

To answer your second, her sheer capacity makes an A380 an unlikely "quick turnaround" plane. And while the A380 could carry up to, I believe, 800 passengers in a single-class config (making it a natural for the domestic Japanese market and charter operators), I do not believe she can evacuate that many in the FAA-required timeframe. So I believe 535 is her top configuration and any passenger capacity increases will require a stretch with four additional doors (two on each side per level) to handle the load.


Is 747-Advanced considered as a A380 competitor?

Yes and no. The 747-Advanced carries less passengers then an A380 and I believe is less efficient (though the A380's weight increase has knocked a few percentage points off that). Also, the A380 has the advantage of being an all-new design, where the 747-A would be much like the A350 - a streched airframe with new engines and new wing.


I still don't see the order for A380 come close to 1,000. I have seen airlines such as SQ and ANA ordering 777-300ER to replace their 744. If the A380 is considered as a 744 replacement, I would assume SQ to order close to at least 35 to 40 A380.... that's a lot of capacity!!

I also don't think they'll sell more then 500 or so, but considering this plane will be in service into the mid-2000s, anything is possible. China alone could suck up a thousand of them, if her population rises as a whole to the point they can afford air travel. Same with India.

The A380 is the perfect plane if you do one, or both, of the following:

Fly a very long distance (SYD-LHR, for example) a few times a day
Fly a shorter distance (FRA-JFK) many times a day

Otherwise, the 777, 787, A340, A330, or A350 are the better choice and that is why sales for them all are still solid.


Will the Japanese ever order the A380? Anyone know if HKG and NRT airport authorities approved the modification plan to meet the A380 requirement?

I do not believe they will. Boeing has a lock on that market, a lock re-inforced by NH and JL choosing the 787 over the A350 and the 777 over the A340.

While an 800-seat A380 would be a perfect fit for their domestic high-density routes currently handled by 500+ seat 747s, I do not know if it can meet the Japanese aviation authority's evacuation standards for such a configuration.

The airlines don't necessarily seem to agree with Boeing's point to point strategy - not even in the US. Also the point to point strategy will probably benefit the A320/737 class of aircraft more than the 7E7/757/767 class of aircraft because the range of the former is enough to cover most internal flights, and most international flights will have to be concentrated in a small number of hubs in any case because of the need to form alliances with other international carriers.

Here is a recent article:

http://archives.californiaaviation.org/airport/msg32688.html

The problem with hubs is that they push the advantages to the airline that controls the hub. UA at NRT/SFO. BA at LHR. AA/UA at ORD. AA at DFW.

Especially when some of these airports are literally (LHR/NRT) or effectively (ORD) slot-controlled and cannot handle any more expansion (or very little).

If AA wants to increase service to Japan, they can't do it through NRT. But they can do it via KIX or NGO, for example. But can those cities justify a 777? If not... But a 787 doing DFW-NGO or JFK-KIX...

UA could launch ORD-GWR or BOS-MAN with a 787. Or, for that matter, BA could launch LHR-DEN or LH MUC-SEA.

Right now, you need a 300+-seat plane (777 or A340) to handle most international (5000+ miles) routes. Being able to fly 5,000+ miles with a 200 seat plane - that is efficient enough to make money doing it - could open a lot of new markets that cannot be economically run with a 300+ seat plane.

If AA wants to increase service to Japan, they can't do it through NRT. But they can do it via KIX or NGO, for example. But can those cities justify a 777? If not... But a 787 doing DFW-NGO or JFK-KIX...


Or if there is a rationalisation of the international routes to reduce cost the same as has happened on domestic routes, AA could simply drop the route and concentrate on the routes to hubs that they can operate with the highest capacity and therefore the lowest seat mile cost.

AA can also form an alliance with a foreign airline and get slots in a high density hub in return for the foreign airline getting slots in AA's hub in the US. Both will be happy with this arrangement because although each is giving up hub slots, each will generate spoke traffic from the other's hub traffic. If this happens each will want to cram in the biggest number of passengers into the slots they are alloted - that means A380s.

The thing about the secondary airports in Europe and most of Asia (Japan may be different) is that the secondary airports tend to be small regional airports which can't justify anything larger than a 737 or A320, or secondary hub airports which are unpopular because of limited connecting flights and because transferring to and from them and the primary hub requires a coach trip. These tend to be used therefore mainly by budget airlines for holiday and regional trips. These secondary hubs tend to be very unpopular with international airlines, probably because they are not the destinations where international travellers want to go, due to longer distances from the cities they serve, fewer connecting flights and poorer road and rail connecting transport.