Amedeo confident it can convince Delta on A380 economics
Amedeo chief executive Mark Lapidus is confident that he can convince Delta Air Lines chief executive Richard Anderson on the economics of the Airbus A380, despite comments from the latter that the aircraft is “uneconomic” with four engines.
“Richard Anderson at Delta is an extremely smart guy,” says Lapidus at an A380 investor event in New York on 12 June. “Once we get into discussions with them they’ll see it’s [economics are] irrefutable to argue.”
By Amedeo’s analysis, the A380 has the lowest per seat costs of any aircraft available, especially when configured in a high-density configuration with upwards of 700 seats, and can capture additional premium revenue – generating additional profit – on certain high demand routes.
The lessor has firm orders for 20 A380s with deliveries beginning in the third quarter of 2016 and running through the second quarter of 2020.
Asked why airlines like Delta have not ordered the aircraft yet, Lapidus says simply: “It takes time.”
Anderson spoke out firmly against the economics of the A380 during an event in October 2013.
“I think the A380 is, by definition, an uneconomic airplane,” he says. “Four engines? We’re not a four-engine airline anymore. We’re a two-engine airline. We had four-engines when jet engine technology was not advanced. Now jet engines are amazing, amazing machines, and you only need two of them.”
Anderson adds that for key trunk routes, such as London Heathrow to New York JFK, the market demands frequency not high capacity.
“As a consumer do you want eight flights a day in every time channel?” he says. “Or do you want two a day in two time channels where you take all four flights and pack them on an A380? It’s not what people want.”
Anderson continues: “It’s like the Shuttle, you want every half hour, every hour and you want total choice, you want an app that lets you pick when you go.”
Paul Kent, chief commercial officer of Amedeo, responds to the question of frequency over capacity. Using the American Airlines and British Airways joint venture’s 11 daily flights as an example, he says they only really need about seven daily flights on an aircraft the size of the A380 to meet demand.
“Flights within 20 minutes of each other is capacity, not frequency,” he says.
Delta is not alone in shying away from the superjumbo A380. Neither American Airlines nor United Airlines have shown any interest in the aircraft.
American chose the 310-seat Boeing 777-300ER as its largest aircraft, with deliveries of 20 beginning in late 2012.
United has selected the roughly 350-seat Airbus A350-1000 as the replacement for its fleet of 23 Boeing 747-400s. Delivery of the first of 35 A350s begins in 2018.
Lapidus is undeterred about future demand for the A380.
“We will expand and broaden the base for this aircraft and it will happen this year,” he says.