Globonomics!

Consulting|Technology|International business

The economics of the Airbus A380

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http://en.wikipedia.org/wiki/Airbus_A380 

The Airbus A380 is the largest aircraft to take to the skies for passenger traffic. It can carry almost 550+ passengers and has a maximum range of 15000 kms crusing at a speed of Mach 0.85.

It is the world’s first double decker aircraft and is powered by four Rolls Royce Trent engines.

Given all this, let us take a sneak peek into the economics of running this mammoth piece of machinery in the skies and yet keep the parent company i.e. Airbus profitable.

The available seat mile http://en.wikipedia.org/wiki/CASM_(travel) of the Airbus A380 is one of the lowest in its category on high density routes helping it save 15-20% of seat mile cost when compared to the conventional airliner.

The fuel efficiency is good in the sense that it uses up about 3 liters of fuel per passenger over 100 kms making it as efficient as an economical road car!

For Airbus to breakeven on this new product, they would be required to sell at least 250 (As per their estimates) but some suggest that they might need to sell close to 500 given their recent cost overruns and production delays due to the “500-odd km long wiring per aircraft”.

Other difficulties posing this airliner include the capacity of the runways to accomodate an aircraft this large – the taxiways and the runways would need to be widened. Turnaround time needs to be minimized. The aircraft would also be useful on long haul flights such as those connecting Canada to China etc.

Singapore airlines is Airbus’ first customer for the A 380’s – Airbus has sold close to 150 of the A 380’s so far. It is said that only London Heathrow’s newer airport is able to handle the A 380. India’s Indira Gandhi International airport hosted the maiden flight of the A 380 on Indian soil yesterday – http://ia.rediff.com/money/2007/may/06jumbo.htm

It is left to be seen as to how this would compete against arch rival Boeing’s Dreamliner Boeing 787 to be launched shortly. The Dreamliner has a smaller capacity than the Airbus.

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Written by Naveen Athresh

May 7, 2007 at 10:25 pm

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