50 A380s? We could have bought 10 more, says Emirates

Reuters
Airbus A380, the world's largest passenger jet, flies during the Dubai Airshow
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An Airbus A380, the world's largest passenger jet, flies during the Dubai Airshow November 18, 2013. …

By Tim Hepher and Praveen Menon

DUBAI (Reuters) - Emirates' whopping order for 50 of the world's biggest jets should end doubts about the project that had even crept into manufacturer Airbus, the airline's chief told Reuters, adding it was so sure of filling the planes it might have bought 10 more.

By announcing a $23 billion A380 order at the Dubai Airshow, Emirates turned round the fortunes of a recently slow-selling jet that is synonymous not only with Europe's industrial ambitions but also the rapid growth of its largest customer.

"For us the A380 is the future. And we don't like anyone talking about it not being around," Emirates airline president Tim Clark said in an interview on Tuesday.

"I want to make this absolutely clear to Airbus and the EADS board, that we are here for the long-term. We will take more if we can, we have demonstrated that."

Emirates dominates the A380 backlog with a total of 90 ordered out of 259 since it was launched in 2000. But several airlines have cancelled or deferred as they worry about whether they can fill its 525 seats in difficult economic times.

"I've been very vocal with the Airbus management, saying don't bottle out of this ... it's a really good aircraft," Clark said.

The deal galvanized an already dramatic start to the Dubai Airshow on Sunday, coming on top of $100 billion in orders for a new Boeing jet led by Emirates and other Gulf carriers.

It ended a dearth of orders for Europe's iconic double-decker jet, which had sapped confidence and triggered a debate within Airbus over whether to cut production and alter strategy, as reported by Reuters last month.

"We were aware of it (Airbus's A380 discussions). But that was not the reason why we did this deal," Clark added.

CHANGING THE OUTLOOK OVERNIGHT

The agreement was sealed in less than a week of negotiations as the board of Airbus parent EADS met to discuss quarterly results amid doubts over the superjumbo's future.

"They knew nothing about it until Monday last week. We gave them a call and said we want these airplanes and this is how we want to do it," Clark said.

"At the time, they were having issues with regard to what to actually do, slow production rate maybe."

Clark said he had always considered Emirates would need at least another 25 or 30 A380s for its fleet.

"So what we then did was to re-examine the real estate at the Dubai International Airport and see how we could use every trick in the book" to fit in more planes.

"When we did that study, the magic number came up. So we said, let's have them in," he said, adding, "we could have done another 10 if we found another bit of space somewhere in the field."

Airbus officials said there had been preparatory discussions for about two months, but confirmed that last week had seen a step-up in the pace of negotiations.

"It was like a switch," one source familiar with the process said, adding it had changed the outlook for the A380 overnight.

The sale does not immediately resolve a problem of what to do with an estimated 5 A380 aircraft remaining to be sold in 2015, for which the first parts must soon be ordered.

Emirates is unlikely to take delivery of those since they do not fit its schedule for introducing a complex new in-flight entertainment system, which must be planned well ahead.

Airbus has said it needs to deliver 30 aircraft in 2015 to meet its target of breaking even on the jet that year, but that any shortfall would not have a significant impact on profits. However, it could have a stronger impact on EADS' cashflow.

Analysts said the order leaves Airbus increasingly dependent on Emirates, raising questions about whether risk had simply been deferred.

"We wouldn't place orders of this size if we were concerned about it," Clark said.

Emirates and Airbus expect traffic to grow fast enough in coming years to prove the jet's value, but rival Boeing says the industry wants slightly smaller planes like its new 777X.

"We believe business will come," Clark said, adding Emirates was already detecting signs of recovery in Europe.

"You have to fill it. Time will demonstrate that you can fill the 500-seater. I can name 10 airlines today that I'm convinced can fill the airplanes, who are not operators of the 380."

To help win support from smaller customers, Airbus has struck a marketing deal with Doric Lease Corp which has pledged to order 20 aircraft and says it will finalize around year-end.

(Editing by Mark Potter)

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