2/20/2019 How Airbus’s A380 Went From Wonder to Blunder - WSJ

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https://www.wsj.com/articles/how­airbuss­a380­went­from­wonder­to­blunder­11550599532

BUSINESS

How Airbus’s A380 Went From Wonder to
Blunder
World’s largest passenger plane was hurt by misjudged market trends, internal dysfunction and
production problems

Airbus has sunk at least $17 billion into the A380 project yet sold fewer than half of the 750 superjumbo jetliners it promised to
deliver by the end of this year. An Airbus A380 of Lufthansa airline. PHOTO: MICHAEL PROBST ASSOCIATED PRESS

By Robert Wall and Daniel Michaels

Feb. 19, 2019 1 05 p.m. ET

When Airbus SE EADSY 0.61% ▲ launched the A380 superjumbo in 2000, it touted the two-deck
plane as “the Eighth Wonder of the World.” Instead, the world’s largest passenger plane
exposed dysfunction inside the European aerospace company and now offers a textbook case of
a company misjudging its market and losing big.

Airbus has sunk at least $17 billion into the project yet sold fewer than half of the 750
superjumbo jetliners it promised to deliver by the end of this year. On Thursday Airbus said it
would cease producing the 555-seat plane at the end of 2021.

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By then, Airbus expects to have sold 251 A380s—one more than its original break-even target,
set before production delays added billions of dollars in costs. At its peak, A380 deliveries never
reached 5% of annual Airbus deliveries—less than half its target.

How did some of the world’s best engineers get their numbers so wrong? Airbus misjudged
market trends and underestimated emerging technologies. It compounded the error by
justifying its decision with emotion and European pride, some former Airbus officials have said.
Then its production system, organized for politics more than efficiency, failed.

Steven Udvar-Házy, a pioneer of aircraft-leasing who was early both to order the A380 and
terminate his planned purchase, said the plane was inspired largely by political ambition to
outdo Boeing Co.’s 747 jumbo jet as the world’s largest airliner.

“The technological achievement was formidable,” he said, but the A380’s “commercial viability
was always dubious.”

All jetliners are expensive bets on technology, engineering and market trends. When Boeing’s
747 first flew in 1969, it was triple the size of any other plane in the air and for several years its
success was uncertain. Europeans in the 1960s wagered on the government-funded supersonic
Concorde, an aviation marvel that flopped because of high operating cost and house-rattling
noise.

Airliners typically fly for a generation, but the first A380s are already parked after only
about a decade and being sold for scrap. Boeing’s jumbo jet could still be in production—
though barely—when Airbus mothballs its A380 factories.

“We were probably at least 10 years too late,” Airbus Chief Executive Tom Enders said in
announcing the A380 cancellation.

With the A380, Airbus planners bet prevailing market conditions would persist. They assumed
airlines would keep using big, increasingly congested hub airports to transfer passengers
between connecting flights, and need to fly large, four-engine jetliners on very long routes. Both
changed around the time A380s started flying.

Not long after Airbus began developing the A380, Boeing in 2003 embarked on its smaller,
hyper-efficient twin-engine 787 Dreamliner. It quickly became a best seller. Only in 2006 did
Airbus respond with a big two-engine model, the A350. Together, the twins rewrote the
economics of long-haul flying, hurting the A380.

The technology change coincided with shifts in airline boardrooms. Whipsawed by traffic-
crushing crises and soaring fuel prices, airline executives in the 2000s focused increasingly on
costs and investor returns. Profit took precedence over market share. Big planes that could be
tough to fill profitably fell from favor. No U.S. carrier bought the A380. The biggest European
buyer, Germany’s Deutsche Lufthansa AG , took only 14.

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2/20/2019 How Airbus’s A380 Went From Wonder to Blunder - WSJ

‘We were probably at least 10 years too late,’ Airbus Chief Executive Tom Enders said in announcing the A380 cancellation.
PHOTO: JASPER JUINEN BLOOMBERG NEWS

Airbus officials offered many reasons for the order dearth, including production problems and
the financial crisis. Yet they insisted airport congestion would snarl growth that only the A380
could revive. In 2015, after another order drought, Fabrice Brégier, then-Airbus Commercial
Plane president, said the A380 was simply ahead of its time.

The A380 might have built more momentum if not for production debacles. Around the time of
the first test flight in 2005, Airbus realized it had underestimated the complexity of wiring the
superjumbo. Managers discovered that French and German designers had used incompatible
software.

The snafu exposed deep cultural rifts inside the plane maker, which was led by French and
German co-CEOs—a structure designed to appease government shareholders. In 2006, during
the depth of the A380 crisis, Airbus ousted senior French and German executives. The next year
it abandoned the co-CEO structure altogether.

More setbacks followed. The engine of an A380 blew up during a passenger flight in 2010.
Nobody was hurt, but it drew negative attention to the plane. Wing cracks discovered on
many A380s led to costly repairs.

Customers, including Richard Branson’s Virgin Atlantic Airways Ltd., Air France-KLM SA and
Qantas Airways Ltd. , canceled orders.

Airbus stumbled into its production fiasco because of overconfidence in its own abilities,
company veterans said later. That hubris was fueled by giddiness from politicians and
executives at the turn of the century about the plane maker itself and the European Union.

Airbus was created in 1969 as a loose consortium of European aerospace companies. After a
slow start, by the late 1990s it had squeezed McDonnell-Douglas out of the market and was
nipping at Boeing’s heels.

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The corporate champions fit with

READ MORE ON THE A380 the growing stature of the EU,
created in 1993, and its single
Airbus to Retire the A380, the Superjumbo That Never Quite Took Off
currency, the euro, which made its
Airports Worried the A380 Was Too Big. Turns Out, That Wasn’t the Problem.
debut in 1999. When the Airbus
partners announced their merger
in October 1999, it was unveiled by French Prime Minister Lionel Jospin and German Chancellor
Gerhard Schroeder.

“Europe has succeeded with the great feat of the euro,” said French Finance Minister
Dominique Strauss-Kahn at the ceremony. Integrating Airbus “is a euro of industry.”

Fusing Airbus was deemed a prerequisite for undertaking a project so ambitious as a

superjumbo, which in turn would bond the partners, said Jean-Luc Lagardère, who was co-
chairman of Airbus’s holding company.

“This aircraft will be the cement of the company for years to come,” Mr. Lagardère said when
Airbus launched the A380 in June 2000.

An Emirates Airlines Airbus A380 800 plane outside the assembly-line site at Airbus headquarters in Blagnac, near Toulouse,
France, last week. PHOTO: REGIS DUVIGNAU REUTERS

Write to Robert Wall at robert.wall@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

Copyright © 2019 Dow Jones & Company, Inc. All Rights Reserved

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