Singapore Airlines made headlines worldwide when it said last week it would not renew the lease on its first Airbus A380 aircraft which turns 10 next year.
I've reported on aviation long enough to know that when SIA moves, the world watches. In this case, though, I do feel the whole thing was blown out of proportion.
To the layman, it would appear almost as if SIA's decision to return the first plane spelt doom for the double-decker superjumbo. To put the matter in perspective, the airline has 19 A380s, the first five on leases that expire between October next year and mid-2018. SIA has not said so but it is not expected to renew the remaining four leases either; no big surprise for an airline that prides itself on operating a young fleet. Keeping older planes also means hefty maintenance bills when they have to go in for major checks, usually after 10 to 12 years in the air.
Even as SIA is likely to retire the first few A380s when their leases expire, it does have another five on order. They start arriving in the second half of next year. Centre for Aviation analyst Brendan Sobie noted that it was always the airline's intention for the new planes to replace the earlier ones, and not to grow the fleet. "This has always been and remains a sensible strategy and I'm amazed why this has led to such a hubbub," he said.
The fact is, SIA does not need a big fleet of A380s, which can each carry about 470 passengers. With cut-throat competition in the long-haul premium market, especially from Middle Eastern carriers, it is no secret that SIA has been losing market share and yields in this sector. For the group, the focus in the last few years has been on growth in the low-cost and Asian markets. That explains the aggressive expansion at regional arm SilkAir and budget unit Scoot-Tigerair.
SIA has also put significant resources into Vistara, a New Delhi-based airline which it owns jointly with India's Tata conglomerate. That is a sound strategy, given the fast-growing Indian air travel market.
Given its current growth strategy, SIA has good reasons not to grow its A380 fleet. That does not in itself mean the plane is inferior. It does, however, add to Airbus' grief over an aircraft programme which has not delivered as expected.
A decade after the world's biggest passenger jet made its debut with pomp and pageantry in SIA's colours, the stark reality is that the A380 has not proven as popular as its maker had hoped. Conceding waning interest, Airbus said in July that it would slash deliveries to just 12 A380s in 2018, or one plane a month. Last year, it achieved, for the first time, a break-even rate of 27 deliveries.
In 10 years, Airbus, which had once forecast a 1,200-strong market for giant planes over two decades, has secured just 319 A380 orders, of which 194 have been delivered. Emirates alone has ordered more than 140. Other than the Dubai-based carrier, only Australia's Qantas and SIA have purchased at least 20 of the planes.
By comparison, the smaller and more efficient A350, which started flying commercially only in January last year, has 810 orders from 43 carriers, including SIA. The Singapore carrier, which received its first A350 earlier this year, ordered 67 of the planes, including seven of an ultra-long-range model that will be delivered in 2018 for use on non-stop services between Singapore and the United States.
With the A380, one could argue that Airbus got it wrong from the start. With passenger traffic doubling every 15 years, the European firm was and remains convinced that the A380 is the only efficient solution to meet demand on the world's most heavily travelled routes, especially at capacity-constrained airports.
This is in stark contrast to the view held by its American rival, Boeing, which believes that the future lies less in growing traffic between major hubs and more in operating non-stop point-to-point flights to popular destinations. The whole idea is to bypass congested airport hubs.
According to Boeing, industry data shows that the bulk of growth in air travel in recent years has been on the back of an increase in the number of new non-stop markets and airlines operating more frequent flights. Looking at the number of A350 orders and strong demand for the Boeing 787 Dreamliner, it does seem Boeing was right.
Endau Analytics founder Shukor Yusof goes as far as to say that the A380 should not even have been built. He is convinced that "it is no longer a question of if, but when, Airbus will shut the programme".
However, despite the dismal outlook for the A380, Airbus, which spent more than US$15 billion to design and build the aircraft - an investment it is unlikely to ever recover - refuses to give up.
The plan is to continue to improve the efficiency of its industrial system so that it can break even at 20 aircraft next year, and to further lower that figure by cutting costs.
"The A380 is here to stay!" Airbus' president and chief executive Fabrice Bregier declared a couple of months back.
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