A380, B787 delays not all bad news for European airlines

Overall, Airbus will deliver 12 A380s this year (instead of 13), 21 in 2009 (instead of 25) and 30-40 (yet to be finalised) in 2010 (instead of 45). Airlines scheduled to receive A380s in 2009 include Emirates, Qantas, Air France and Lufthansa.

Air France, which was originally scheduled to receive the first of ten (later increased to 12) A380s in late 2006, is expecting its first delivery in Apr-09 and intends to deploy the aircraft on the Tokyo route. Lufthansa stated it has not received any new delivery dates from Airbus. Its first A380 is scheduled for delivery in mid-2009. Both carriers are yet to confirm if initial deliveries will be delayed further.

Qantas confirmed it remains confident of receiving three A380s this year (one in Aug-08 and two more by Dec-08), although a fourth aircraft (due in early 2009) and the subsequent 16, several of which were earmarked for the Kangaroo route, are likely to experience some delays.

The only current A380 operator, Singapore Airlines (SIA), stated it expects a delay with its sixth A380 due in 2009 and is awaiting further advice from Airbus about the delivery schedule. SIA's fifth A380 is scheduled for delivery in early Jul-08.

Neither of the A380 or B787 delays will have a massive impact on planned new capacity in the broader scheme of Europe's skies over the next two years. Nonetheless, there is probably some comfort for airline planners, as the usual cycle of "order in good times-deliver in downturns" appears to be repeating itself as global economies come off the boil.

Only a relative handful of the two new aircraft types was due for delivery to European carriers this year and next, but their absence from the marketplace will help soften any immediate downside in demand. So, for many airlines, late deliveries will fall more into the category of annoying interruptions to fleet development plans than to a major concern from the finance department.

A380 customers by region

* ILFC has 74 aircraft on order, which could be placed outside North America
Source: Centre for Asia Pacific Aviation & Airbus

B787 customers by region

* ILFC has 74 aircraft on order, which could be placed outside North America
Source: Centre for Asia Pacific Aviation & Boeing

In the medium term, the effect will be to increase average fleet age - and therefore fuel efficiency - but the economic impact is around the margins, rather than a core problem. Core issues in the meantime look likely to focus on the high cost of fuel and, more importantly at this time of revolution in aviation strategy and regulation, on industry structural change.

These changes include a rush to consolidate in one form or another, notably on each side of the North Atlantic. But there is another structural change occurring which tends to exercise the minds of European airline managements: the rise and rise of the Gulf carriers, and notably Emirates Airline.

By contrast with Lufthansa, Air France and British Airways, the A380 was a fundamental strategic vehicle for launching Emirates into the next generation of global airlines. As such, the Gulf airline put a lot of eggs in the one basket. If Airbus had delivered, Emirates would be well on the way to entrenching an almost unassailable growth trajectory, as European and other governments open up their markets to new carriers.

Emirates has 58 A380 orders, far more than any other airline. And, if the original delivery schedule had been followed, it would have been operating 22 of them (its original order) by Spring 2009, when the first of 23 additional orders placed in Oct-03 were to have commenced delivery. (The airline has since increased its order to 58).

Moreover, as a predominantly sixth freedom airline at a time of slowing demand, Emirates' now extensive route network (uniquely covering every continent on the globe non-stop, following its launch to Sao Paolo late last year) would place it well to capitalise and entrench its global position for the good times.

Emirates President, Tim Clark, last week stated further delays would do "serious damage" to the airline's expansion plans. Emirates is now slated to take delivery of its first A380 in Aug-08 and five before 31-Mar-09 (which will be largely unaffected) and another 12 in the year to 31-Mar-10 (which is likely to be reduced). The Dubai-based carrier's roll-out of its initial A380 destinations New York (from 01-Oct-08), London Heathrow (01-Dec-08) and Sydney/Auckland (01-Feb-09) should remain intact, but phase two expansion - likely to include more destinations in Europe - could be affected.

Centre for Aviation's Chairman, Peter Harbison observed:

"So, for Emirates, the A380 delay is truly a financial and strategic setback. Even though the European airline route planners may be a little frustrated at not getting access to the new super-jumbo, there is a good chance that any concerns shown by their senior management contain a good dose of crocodile tears. For them, anything that is bad for Emirates is a positive."