x

Abu Dhabi, UAEMonday 10 December 2018

A380 superjumbos face humiliation of the breaker's yard

Second-hand operators for the oldest jets are proving hard to find

An Airbus A380 at the Paris Air Show this year. Older models of the superjumbo may be broken up for parts if operators cannot be found soon. AP
An Airbus A380 at the Paris Air Show this year. Older models of the superjumbo may be broken up for parts if operators cannot be found soon. AP

The mighty Airbus A380 superjumbo, the world's biggest passenger plane, may suffer the ignominy of being broken up for spare parts if second-hand operators for the oldest jets cannot be found in coming months.

The double-deckers could be “parted out” to recover engines and other spares worth at least US$100 million per plane, according to the German fund manager Dr Peters, which owns four A380s due to be returned between October and June by Singapore Airlines following the expiry of 10-year lease deals.

At the same time, talks are continuing with six potential operators of the jets, including an Asian low-cost airline that would fly them in a 700-seat single-class layout, said the Dr Peters chief executive Anselm Gehling said. Prospective users also include carriers in the United States, which has so far eschewed the model, and Europe, where the British Airways owner IAG is continuing to evaluate deploying used A380s at airlines within the group, he said.

“Our main goal is to find new lessees,” Mr Gehling said. “We’re also willing to sell the aircraft as some airlines told us they’d prefer that. Still, there are hardly any spare parts around when it comes to engines for A380s, so it may make sense to do a part-out for the first one or two aircraft returning.”

Airbus struck an order blank on selling new A380s last year and has offered to revamp the model with fuel-saving winglets and 80 extra seats on top of the standard 550 to improve its appeal. Boeing last month dropped the very large aircraft category from its 20-year forecast, saying it sees no long-term future for either the Airbus plane or its own 747.

Parting out can be a lucrative option even for relatively young planes, with components - especially turbine elements - carefully managed in the aftermarket. Original lease terms on the A380s require that they be returned with engines, landing gear and auxiliary power units effectively as new.

With the Singapore planes the first to be sent back there is also no established second-hand market for the A380. Malaysia Airlines has sought to find buyers for six younger examples deemed surplus to its requirements and after failing to do so aims to use them to form a fleet dedicated to transporting Muslim travellers on the annual Hajj pilgrimage to Mecca. Amedeo, a widebody aircraft acquisition and leasing platform based in Dublin, has also yet to find operators for 20 superjumbos it has agreed to buy.

An Airbus spokesman said the France-based manufacturer remains confident in the market for second-hand A380s. It added that used planes will present a growth opportunity for new entrants and operators with different business models, as well as for major carriers that already have the plane in their fleet, or are considering adding it.

While the remarketing of the A380s due off lease is being done in conjunction with Airbus and Doric, which owns another Singapore Air plane, Dr Peters has also engaged Sparfell & Partner to seek potential VIP customers for its four aircraft, with the Swiss reseller advertising them as Air Force One-style “head of state” transports on its website.

Some parties are also discussing short leases of two to four years in order to assess the utility of operating an A380, to be followed by five-year terms should the planes prove profitable, Mr Gehling said. Doric said a year ago that the aircraft were being offered at a 40 per cent discount to the $2m-plus monthly rental rate for a new version.

For investors, parting out A380s - which had an original list price of about $250m when they were bought, before discounts - should offer a decent return, Mr Gehling said. After 10 years, they would have typically had back 65 to 70 per cent of their outlay, and would need $55m to $60m more now to break even, whereas an A380 could yield up to $120m in components.

Singapore Airlines has orders for five more superjumbos, which will maintain its fleet as its first planes come off lease.

* Bloomberg