Airbus to end A380 production

Airbus SE reported strong Full-Year 2018 consolidated financial results and delivered on its guidance for all key performance indicators. But the headlines were about cancelling production of the twin-deck, four-engine, 800+ passenger A380 jetliner.

The production halt is due to Emirates reducing its A380 orderbook by 39 aircraft, with 14 A380s remaining in the backlog yet to be delivered to the Dubai-based airline. Because of this decision and lack of order backlog with other airlines, deliveries of the A380 will cease in 2021, according to the company announcement.

Departing Airbus CEO Tom Enders told CNBC, “If you have a product which, despite all the efforts you put into that, you can’t sell anymore or can sell only below production costs, then you have to stop that product and this is the decision, the painful decision, we had to take.”

He added that it is the end of production, but not the program. Airbus will continue to support the more than 220 A380s still operating.

Up to 3,500 jobs are at risk, but it’s possible some can be transferred to other, more profitable lines.

“Though 2018 had plenty of challenges for us, we delivered on our commitments with record profitability thanks to a strong operational performance, particularly in Q4,” Enders said. “With an order backlog of around 7,600 aircraft, we intend to ramp-up aircraft production even further.

“Airbus stands on a solid growth trajectory and our helicopter, defense, and space businesses are also in good shape as the new management team under my successor Guillaume Faury gets ready to take over.”

Net commercial aircraft orders for 2018 totaled 747 (compared to 1,109 aircraft in 2017), including 40 A350 XWBs, 27 A330s, and 135 A220s. The order backlog reached an industry record 7,577 commercial aircraft at year-end.

Consolidated order intake in 2018 totaled 55.5 billion euros ($62.6B) with the consolidated order book valued at 460 billion euros ($518.9B) on Dec. 31, 2018 under IFRS 15.

The A320 program is on track to reach the monthly targeted production rate of 60 aircraft by mid-2019 with rate 63 targeted in 2021. In 2019, A330neo deliveries are due to ramp-up. The A350 program reached a production rate of 10 per month in Q4 2018. The backlog supports this rate going forward, according to Airbus officials.

Airbus delivered 12 A380s in 2018 as part of 800 total deliveries for the year.

For 2018, the A380 program had a net negative impact of 463 euros million ($522.1M) but also a positive adjustment of 177 million euros ($199.6M).

Although Emirates is reducing its A380 orderbook from 162 to 123 aircraft, the airline will take delivery of 14 further A380s during the next two years. Emirates is replacing the cancelled A380s with 40 A330-900 and 30 A350-900 aircraft.

Based on the Airbus 2018 average list price of $445.6M for an A380, the cancelled Emirates order is valued at $17.4B. However, the combined A330-900 and A350-900 order has a value of $21.4B, based on each individual jet’s worth of $296.4M and $317.4M respectively.

As the basis for its 2019 guidance, Airbus expects the world economy and air traffic to grow in line with prevailing independent forecasts, which assume no major disruptions.

Airbus targets 880 to 890 commercial aircraft deliveries in 2019.