Over 100 A380s will remain grounded forever according to the man who was key in the development of the superjumbo and then buying the A380.
Nico Buchholz, an aerospace engineer by training worked in Airbus product marketing for many years before becoming head of fleet procurement at Lufthansa.
In this function, which he held for over a decade until 2015, Buchholz was instrumental in the German carrier’s A380 orders. And Buchholz himself sat down with Boeing’s legendary “father of the 747”, Joe Sutter, to conceive the 747-8 according to Lufthansa’s specifications, for which the Germans became the biggest customer.
In an exclusive interview with Airlineratings.com, Buchholz talks about the end of four-engine wide-bodies.
Q: Were you surprised by the sudden end of many of the giants in the current situation?
Buchholz: I am not surprised. And it is a pity from a passenger’s viewpoint, as both the A380 and the 747 are beautiful aircraft. But from an economical viewpoint, it was foreseeable ten years ago that eventually big, effective twins would achieve the same unit costs or even better ones than these giants. In addition, the Boeing 787 and A350 can be operated more flexibly in times of crisis.
Q: But you yourself ordered more A380s less than a decade ago, was that a wise move?
Buchholz: Vast orders for big wide-bodies radically diminished ten years ago. Between 2011 until spring 2013, Lufthansa ordered four additional A380s and beyond that Lufthansa had unfulfilled orders for both A380s and 747-8s. In the fall of 2013, however, Lufthansa cut back on its commitments to take A380s by three aircraft, lowering overall orders from 17 to the 14 that were operating before the corona crisis. We saw the 747-8 in the same league in unit costs as the A380, but with about a hundred fewer seats, meaning a lower risk in trip costs, which made this aircraft pretty attractive. But there was already the writing on the wall that no further A380 orders would be possible. We reduced our 747-8 order by one to just 19 aircraft, as we already realized there probably would be more efficient aircraft in the future. When Lufthansa ordered their first A380s in 2001 it wasn’t foreseeable that the 787, A350 and 777X would come so quickly. Even the 747-8 couldn’t be anticipated then, as the engine technology wasn’t available. The unit costs of an A380 were nearly 14 percent better than that of a 747-400.
Q: So there were times when the A380 at Lufthansa had a positive effect?
Buchholz: Yes, for Lufthansa it made sense on numerous long haul routes to the Far East. Lufthansa and many others always focused on mega-city airports like Tokyo Narita. But all of a sudden Haneda airport close to the city also opened up for international traffic, and it was possible to offer more frequencies and offer customers better flexibility. Many airlines used smaller aircraft again. Also in Beijing and Shanghai new or enlarged airports offered more possibilities. Both airports in Beijing together now have about the same capacity as all German airports combined, and also there are many more Chinese airports now that can be served directly from Europe. Additionally, former slot restrictions in many areas have been lifted. That means there is almost exclusively London-Heathrow left where the A380 still makes sense. Slot restrictions haven’t been a reason for long to buy the A380 anymore.
Q: The A380 had been conceived for totally different conditions…
Buchholz: Indeed, the whole development phase and the crucial orders all happened before the year 2000 or shortly after. During the development of the A380, technology wasn’t as advanced, especially in terms of reliability and thrust of the engines. So the A380 was the right decision at the time to carry so many people economically, comfortably and sustainably over vast distances. Until it finally was first delivered in 2007 with a delay, the development of the big new twins had already begun. So we could sense that there would likely be competitors, but at the time nobody really took them seriously. But engine technology on the 787 and the A350 was more advanced already than on the A380, which should have been the best on the market.
Q: So that was the beginning of the end for the giants?
Buchholz: The new engine technology of the 787 and A350, besides their improved aerodynamics, were probably decisive factors for the current demise of the A380 and 747-8. Airbus and Boeing pushed big numbers of 787s and A350s on the market, and passenger growth was channeled away from the big hubs straight to secondary airports by the smaller aircraft. That means passengers were taken away from A380s and 747-8s. The A380 also features a huge wing, which had been built for a planned stretch and therefore is pretty heavy. Unfortunately – or shall I say luckily – this further development never happened in the end.
Q: But still Lufthansa wanted to order many more A380s even a few years ago only, aiming at up to 25 in total.
Buchholz: Bigger is better was always the motto. This was woven into the profitability goals of the yield management systems. But it became more or less obsolete with the new efficient twins, not only by the 787/A350 but for narrow-bodies also by the A220. But to replace that objective in the computer booking systems and calculate correctly was a learning curve. For that, we needed new algorithms, and they weren’t available.
Q: What will the fate of giants be now, especially at Lufthansa?
Buchholz: It’s hard for me to say as former Lufthanseat. Six A380s are bought back by Airbus, eight remain in the fleet, and are supposed to be deployed from Munich. Recently Lufthansa has played up other options. But in my opinion, a total fleet of just seven to eight A380s doesn’t make sense, that number is too small. It is a terrific, but also very complex aircraft. And as much as the current market has collapsed, these aircraft have a very low residual value. Unfortunately, especially from a passenger’s viewpoint, I feel it’s obvious that the A380 won’t have a very long future at Lufthansa anymore.
Q: What will happen to a total of 242 A380s that have been delivered in the medium-term future?
Buchholz: There is almost no second-hand market for the A380, only Hi Fly operates one aircraft. The market for possible freighter conversions is difficult as it is an operational challenge to load freight to and from the upper deck. A few business models that could use the A380 would come to mind, but not for 200, maybe 50 aircraft. As there are about 200 A380s currently grounded, I assume more than a hundred will remain there permanently. But even cannibalizing them for spare parts is a limited opportunity, as they can only be used on other A380s, and demand is very limited. I predict that four-engine wide-bodies will fly longest at Lufthansa with the 747-8 and Emirates with the A380. In 2030 you most likely have to take a pick between these two airlines if you want to fly with four engines.