Airbus A380

If Airbus makes the A380neo it could be kiss of death for Boeing 747-8

Airbus A380

Boeing’s 747s may be the more iconic planes, but Airbus will likely be the last aerospace company to make four-engine aircraft.

Aerospace analyst Scott Hamilton predicted Tuesday that Boeing (NYSE: BA) will deliver its last 747-8s in 2018, and those will be the two new versions of Air Force One.

The A380neo will be bigger than the 747-8, and also more fuel-efficient. That combination is exactly what the mega cities around the world are looking for to help transport an increasingly mobile and growing population through space-constrained airports.

ombine that with the increasing possibility Airbus will upgrade its double-decker A380 with new fuel-efficient engines, and it is becoming more likely only the Airbus A380neo will survive.

“We now zero out the 747-8 program in 2018,” Hamilton wrote on his Leeham website.

Analyst Addison Schonland, who publishes AirInsight, agrees:

“The 747, now that they have the order for Air Force One, most likely that’s going to be the last passenger version of the airplane,” he said.

In an emailed response, Boeing spokesman Paul Bergman argued that the Boeing 747-8 is still competitive and relevant.

“The 747-8 is a very competitive airplane with a significant market segment for both the passenger and freight markets,” he wrote. “We continue to believe in the long-term strength of the freighter market and the 747-8 is uniquely positioned to capture that demand.”

The reason why the re-engined A380 re-stacks the deck is that new engines for the 10-year-old jet will burn 11 percent less fuel, Schonland estimates.

This matters because the lower engines will put the four-engine A380 in a new league of fuel efficiency in terms of cost-per-seat-mile, an industry measurement that points at how much it costs to fly each person.

Hamilton predicts the 550-seat A380neo will be 22 percent more efficient per seat mile than the 450-seat 747-8 passenger model. Schonland predicts 21 percent.

Another analyst, G2 Solutions LLC partner Michel Merluzeau, agrees about the importance of the A380neo’s expected economics.

“The 380neo, in Asia and the Middle East with better operating economics, higher passenger load, this could be a very strong niche market for Airbus that they could potentially dominate for the next 20 years,” he said.

To be sure, Boeing’s planned 777X jetliner, which will carry about 150 people fewer than the A380neo but will be equally fuel efficient, will probably be an even-stronger seller for Boeing than the A380neo will be for Airbus.

Still, the possibility of an aerospace industry without the 747 is hard for people to get their heads around, especially since Boeing has been making the four-engine model at the Everett factory since 1969. For most of that time it’s been the largest passenger plane in the skies.

But this week Boeing had unfilled orders for only 35 of the 450-seat model, only 23 of those for the passenger model.

Boeing did announce an order for three 747-8 freighters from Silk Way West this week, but that order had already been pre-announced, and wasn’t exactly news.

Even Teal Group analyst Richard Aboulafia, who has been an outlier in this discussion by contending that Airbus won’t decide it’s worthwhile to re-engine the A380, said in a recent interview that he doesn’t think the 747 line can survive on freighters alone.

“You’re only talking about a few more years,” he said of the 747 production line.

Airbus’ A380, which has hardly been a hot seller itself in recent years either, has several things in its favor.

For starters there’s a continued commitment from Emirates Airlines CEO Tim Clark, already the biggest customer for the model, who in January said he’d order 100 more, for $43 billion at list price, if only Airbus would add new engines.

And then there’s the growth of mega cities– those with more than 10 million people – which according to the United Nations will house nearly 9 percent of the world’s population by 2030, nearly twice the percentage in 2010.

Why does this matter?

Boeing has said for years that the trend will be toward what is called “long, thin, routes,” which means smaller aircraft carrying passengers directly between cities at greater frequencies, instead of between large airport hubs.

While Airbus hasn’t contradicted that, it’s also been arguing that there’s a parallel demand for very large aircraft to fly between very large cities.

Schonland points to the completely full London Heathrow Airport, where 99 percent of the gate slots taken, as an example of just the sort of market where a more-efficient A380neo will become dominant.

“You can’t make the airport bigger,” he said. “What do you do? You have the two runways you have, you have to use the slot much more efficiently, and that means bigger airplanes.”


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