Emirates is seeking to cancel five of its last eight A380 deliveries, with manufacturer Airbus pushing back because the planes are already in assembly, according to people familiar with the situation.
Dubai-based Emirates plans to take three more of the double-deckers before the end of its fiscal year next March, but doesn’t want the remaining five, according to the people, who asked not to be named as the talks are private. Airbus is proposing a deferral of deliveries or payments, the people said.
Emirates said it remains “in regular dialog with Airbus” regarding fleet requirements and doesn’t comment on commercial discussions. Airbus declined to comment, saying talks with customers are confidential.
The coronavirus outbreak has plunged airlines worldwide into crisis, with Emirates especially exposed to any long-term slump after building its business model around the world’s biggest passenger plane. The carrier has a fleet of 115 A380s and had planned to operate them through the end of the decade.
Walking away from A380 contracts without an agreement would come at a cost for Emirates, triggering penalties of up to US$70 million per plane, according to the company’s annual report.
Three of the final A380s are already built, according to planespotter websites, while wings and fuselage sections for the remaining planes are at the final assembly plant in Toulouse after being shipped in February. The jets, together with one for Japan’s All Nippon Airways, are the final ones in a program that’s due to be wound by the end of next year.
As previously reported, Emirates is already looking at accelerating the retirement of a chunk of its existing A380 fleet. That could see it stand down as many as 65 aircraft earlier than scheduled, according to one of the people.
Reporting by Bloomberg News
PREVIOUS [18 May, 2020] | Emirates is considering accelerating the retirement of its fleet of A380s and slashing about 30,000 jobs as it reduces costs and realigns its operation to cope with a travel downturn expected to last for years, according to people familiar with the matter.
The A380 was the linchpin of a strategy that made Dubai the leading hub for flights around the globe. Emirates is the biggest operator of the A380, with 115 of the double-decker jets in its fleet, and eight more due for delivery before Airbus ends production of the superjumbo in 2021.
None of the A380s are currently flying, and airline president Sir Tim Clark this month said he expects demand for airline travel to be “tempered” for at least the next couple of years, adding that "we know the A380 is over."
It's been suggested that as many of 46 of the older A380s could be stood down, with Emirates planning to mostly rely on its Boeing 777 jets during the recuperation period, said one of the people. The airline has 155 of the smaller planes in its fleet.
Emirates also holds around 200 orders for the Airbus A350, Boeing 787-9 and Boeing 777X.
However, facing a slow recovery ahead, Clark said the new jets "may not be ordered soon, they may have orders deferred and pushed back, but eventually they will come back, and they will be a better fit probably for global demand in the years post the pandemic."
The airline could shrink a payroll that stood at 105,000 in March by as much as 30%, the deepest cuts yet in a global airline industry that’s been forced into near-hibernation by the coronavirus pandemic.
Emirates said it is reviewing “costs and resourcing” levels against projections as it prepares to resume service after an almost two-month grounding.
“No announcement has been made regarding mass redundancies at the airline,” it said in an emailed statement. “Conserving cash, safeguarding our business, and preserving as much of our skilled workforce as possible remain our top priorities.”
Emirates halted most of its passenger flights on March 25, but with some countries starting to ease travel restrictions, the airline plans to resume limited operations on May 21.
The pandemic has also forced Emirates to push back the launch of its long-awaited premium economy offering and rule out retrofitting the new seats to its older jets.
Clark has called the pandemic a black swan event for the industry, referring to a rare occurrence with extreme impact.
"If you go back to any of the major interventions, disruptions that the world has faced since the Second World War; if you took the aggregate of all of those, they wouldn’t be the equivalent to what has happened here. It’s hugely serious and it’s devastating for the business. I don’t see any way forward at the moment."
Additional content by Bloomberg