Sir Tim Clark, the President of Emirates, argues that other carriers like Air France blew their chance with the Airbus A380. He’s not wrong, but the reality is a bit more complicated.
Sitting down with AirlineRatings, Clark was asked to contrast Emirates’ approach to the A380 versus that of Air France. Air France recently announced it would retire the A380 ahead of schedule. Here is his answer:
The A380 was a misfit for Air France. They never scaled, they only have ten aircraft. Yes, we faced the same teething problems, but we dealt with them because we were scaled enough to deal with it. If you’ve got a sub fleet of 10 it’s a bloody nightmare and the costs go through the roof, she is absolutely right. But if you got a hundred of them it’s a bit different. Your unit costs in operating with that number are a lot lower than having just ten.
Secondly, look at their interior. What did they actually do to shock and awe their market community with that A380 when it came to market? Why was it that it was Emirates, who took it after Singapore Airlines, that it lit up the planet in terms of showers and bars and big TV screens? We did it for a very well calculated reason. Not to blow our trumpet. But simply we had taken a huge risk and huge investment.
To belittle that investment by putting in a Business Class seat of 1990s-think and a First Class of 1980s-think and Economy Class seating and IFE of 1990s-think was not something we would have done, like Air France. The whole approach to the A380 at Air France and Lufthansa was ‘just more of the same.’ They lost the opportunity to really define it. They never ordered any more. British Airways didn’t order any more. BA should have had the same number of A380s as we have, hundred of those. They got 62 million people in the UK and a congested Heathrow hub, that should have worked easily.
Frequency + Capacity Controls
Clark makes several points, including:
- Per unit costs skyrocket when you only have 10 aircraft
- Outdated interiors made Air France A380 uncompetitive from day one
- Short-sided thinking when it comes to utilizing slot-controlled hubs
And he’s right on all three points.
Maybe if Air France had its latest first and business class product on the A380, they would be sticking around a bit longer. After all, Air France CEO Ben Smith specifically cited its outdated seats as a reason for pushing up the retirement date of the A380.
There’s no doubt unit costs are higher when the number of aircraft in your fleet are limited.
But I think Clark fails to appreciate the difference between capacity growth and profit growth, which are not necessarily directly related. It is true that an airline cannot cut it way to profitability. But through disciplined growth and slot-sitting, supply can effectively be controlled. That pushes up per-seat yield and keeps out competition. Emirates never faced this concern at its home base.
Second, frequency is king for business travelers. The very point of the A380 was to consolidate traffic into a larger aircraft. That makes a lot of sense in theory, but in practice is not feasible to run several A380s between New York and Paris each day if prices are not to drop dramatically.
It simply made sense for Air France to retire the A380 and the problem went beyond the outdated onboard product.
Clark notes that had the A380 been produced in 2004 instead of during the Great Recession, we would not be talking about its retirement today. I think he’s right. Clark is an astute man and his observations are always worth considering. Here, while I think his logic is sound considering why the A380 did not work for other carriers, he fails to account for two key reasons that transcend the A380. Controlling capacity and increasing frequency just did not fit into the A380 model.
What do you think of Clark’s A380 analysis?
(H/T: One Mile at a Time) // image: Bill Larkins / Wikimedia Commons