Flying Airbus

Instead of ordering planes for a clear business formula or add the customary component of policy, the sale of the Airbus 380 becomes a merger. All Nippon Airways received Airbus orders for the sale of the Airbus Airbus 380, but only in return for supporting ANA's relationship with the insolvent Skymark client. An unsuccessful offer to Emirates to resell the Airbus A350 was subject to a requirement to keep the Airbus line open.

According to media coverage, Airbus is now planning to divest the Airbus 380 to China in return for China's increased industry interest in the Airbus 380. Already China has an Airbus 20 terminal line and A330 (and soon 737) execution centers, so it is not clear what further lessons China will gain unless the Airbus 380 stake is on its way to China, where it becomes another Japan (building an astonishing fifth of a 777) or the US/France (building Breitbodies).

However, this policy is crucial: China's airline companies alone would not order any A380. This is a multi-faceted situation which is all the more compounded by the changes in Airbus seniority. The A380 will be used by international carriers to travel to China (if permitted by applicable regulatory authorities), but its presence is limited to only five aircraft operating China Southern.

A380 from China Southern averages 6. Two years old - about the mean of his globel Fleettype. Chinese-South ern has almost fought hard to find a route that is appropriate for the model, both in capacity and revenue respects. The China Southern five A380 aircraft are marginally sub-scaled; all other commercially operating airlines are planning a minimum of six aircraft, with the sole exception of All Nippon Airways, which operates only three Airbus 380s (exclusively to Hawaii) under a comprehensive agreement supporting ANA's alliance with its insolvent Skymark Airlines, a locally based rival.

Both the A380 and 747-8 belong to the Very Large Aircraft (VLA) family. Air China's only other passengers VIPA in China are the 747-8. There are seven Air China owned aircrafts, including those used for state VVIP operations ("Xi Force One"). Without the government's need to use the 747-8 as a transport, Air China probably would not have ordered the 747-8.

A 747-400 Air China was a 747-400 passengers carrier (China Eastern and China Southern not), but its long-haul is the 777-300, and Air China has 26 of these types. A simple story about the A380 and China is that the A380, with its very large production capability, is the ideal choice for all the growing markets and bottlenecks.

Traffic jams are a serious infrastructural issue, which is correct; but any A380 order from China would be in a very large size and would not result in a significant number of flights. The A380 is therefore not the supreme discipline for solving the infrastructural problems from the airline's point of view.

Worldwide, carriers have found it difficult to fill an A380 with sufficient passenger capacity at a reasonable rate of return. China's airline companies have worked tirelessly to achieve reasonable returns on overseas flights. While it is correct that there are many domestic carriers that can become better under their supervision - products, as well as sales, ecommerce and related activities - the basic characteristics of the domestic airline industry are high volumes and low returns.

Of course, airplanes are long-term investment. It will be a bright time when the scale of the China markets and increasing complexity create a large premier class as well. By then, however, the A380, or even an Airbus80neo, will be old; the A380 shape is approaching the 20 year old stage. Life-long innovation leads to new narrow-gauge vehicles that deliver seating units similar to those of large-capacity vehicles.

Indeed, the PRC has tried to meet the infrastructural challenges by urging carriers to use widebody on national long-haul flights. There are cases where inland air services have only been assigned to carriers that plan to use broadband systems.

While the A330 is designed for wide-body flights, many of the A330's are configured for home flights. Issues about the futures of China's internal flights are not the focus of interest for the A380, which few anticipate will be used for internal traffic. It is then a matter of whether the chances of selling the Airbus A430neo or Boeing's possible new 797 plane are good.

In theory, the use of the A380 or other wide-body jets on high-frequency inland services would either help to strengthen current slot holdings or reduce the use of new ones. However, using the A380 in its planned long range operations would only make a marginal impact on resolving the challenge of space-time. The A380 may have an arguing potential for further traffic jam problems: if a flight is late, many people are affected.

Worldwide, many non-A380 carriers certainly have A380 viable itineraries. It is not possible for most carriers to deploy an A380 squad, even a small one. Perhaps it is not just about the plane or the networks; in some cases the decisive issue may be management's appetite for risks.

China's airline companies are probably no different. For Boeing, there is an advantage: the big three state-owned carriers must normally attribute a similar value to each producer, so an A380 order means that Boeing could look forward to an order - and perhaps Boeing would get an order for an airplane with a higher margins than Airbus would for the A380.

It seems the fundamental issue is what China wants from A380 manufacturing locally. The Chinese fleet already includes a terminal line for assembling the Airbus A320s, an A330 completions center and, shortly, Boeing's 737s. Each of these planes belongs to a class with a much better prospective than a very large one.

On the other hand, the A380's finite prospects may lead Airbus to be willing to share know-how. So whatever the value of doing A380 work locally, is that enough to make sure airline companies buy the one? One thing is certain: China wants a great many things, regardless of the assessment made.

There is no aftermarket in China where undesirable goods can be sold. Previously operated by China Southern, the Airbus A320 Family is now flying for United Airlines, not vice versa. Both the A380 and the Chinese industry's possible involvement are small pieces in comparison to the big issue of what the Boeing 797 could be: Boeing's first completely new plane in almost 20 years, an airplane that will mean industry's involvement in many nations, but the new country of China is already competing for a significant proportion, as old Japan has already done.

Meanwhile, Japan represents about one-fifth of a classical 777 and will keep this proportion on the 777X (which means more work as a bigger aircraft). Concerning China, the emerging Chinese markets are demanding more and more the latest and most effective solutions. However, as carriers are a small milestone in the value creation process, the further value of a large A380 in China is questionable.