Dubai’s Emirates wants guarantee on A380 output before placing new order

Dubai wants a guarantee that Airbus will keep production of the A380 superjumbo open for at least 10 years before state-owned Emirates places a new order for the world’s largest jetliner, the airline’s president said on Monday.

Speaking to Reuters at the Dubai Airshow, Tim Clark also said the largest Middle East carrier would probably stick with the Boeing 787 for its mid-sized fleet needs after ordering 40 of the jets on Sunday, and could order more in future.

Airbus’s hopes of a new order from top customer Emirates for the slow-selling A380 were thwarted on Sunday when the airline unveiled a surprise order for 40 Boeing 787-10 jets worth $15.1bn at list prices, but no European contract.

Read: Dubai’s Emirates announces $15.1bn order for Boeing 787s

Delegates said Airbus may be willing to meet Dubai’s conditions to steady A380 output, but hopes of an announcement during the rest of the November 12-16 air show all but evaporated on Monday as Airbus CEO Tom Enders left empty-handed.

“We continue to have a dialogue with them,” Clark said.

“If that comes to some kind of fruition during the course of the week, or the next few months, is very much down to them.”

Delegates said an air show order was not impossible but now looked unlikely.

Airbus has been scaling back production plans for the A380, which was launched as the solution to ever-rising air travel between major international hubs but has been outflanked by improvements in the efficiency of smaller jets.

With 100 A380s already in Emirates’ fleet, Clark made plain the concerns about Airbus’ commitment to the project were being felt as high as the Dubai government, which owns the airline.

“I think the ownership here are concerned about continuation [of the A380]. They need some copper-bottom guarantees that if we do buy some more, then the line will be continued for a minimum period of years and that they are fully aware of the consequences of cancellation and leaving us high and dry.”

“Those assurances I am sure will come. Quite when, I don’t quite know.”

Asked what would be a reasonable commitment to unblock a deal, he said: “A minimum 10 years. These are vast capital investments for us and we can’t afford to have anything less than 10 years; hopefully it would be 15. But it is their call”.

Airbus declined to comment.

GUARANTEES

Emirates is by far the biggest customer for the A380, which entered service in 2007 during the financial crisis and never generated as many sales from other carriers as Airbus had hoped.

Emirates has ordered 142 of the jets, worth $436 million each at list prices, and last week took delivery of its 100th.

Scrapping production would raise concerns about future support and the value of jets in Emirates’ portfolio.

Dubai’s demand for industrial guarantees raises the stakes in negotiations and would be a matter for the Airbus board.

“There has to be a fleshing out of the undertakings. My own view is that Airbus are ready to make those, but whether it is today or tomorrow or next week or in the next few months, I don’t know,” Clark said.

Airbus has been driving down A380 costs in an effort to ensure the line can stay open and break even, even if Emirates remains the only significant buyer of new jets, something that would help it to give the carrier assurances over its future.

Emirates’ tough negotiating position also reflects growing concerns about management uncertainty at Airbus, whose veteran sales chief John Leahy is about to retire.

“We know management is likely to be structured slightly differently. On the basis of that we wish to know that irrespective of what the management does, that once that commitment is made and signed for … that they will honour it and nobody will change it,” Clark said.

Clark, who is also seen as approaching retirement, squashed suggestions that Emirates may still buy A350s as well as 787s.

Asked whether Emirates’ plans still left room for the A350, Clark said: “No. I would say that once we have gone for the 787 we will stay with the 787, but I can never say never.”

He also played down reports that Emirates, which had previously said it was seeking 50-70 twin-engined jets, had taken a more conservative tack by ordering only 40 787-10s.

“Will it stop at 40? My own view? No, it will grow,” he said, adding that Emirates may take some smaller 787-9s.