Leahy: Pricing, design and quality issues killed the A380

by Andreas Spaeth
3002
November 24, 2020

Airbus super salesman John Leahy says that pricing, design, and quality issues were the final nails in the coffin of the A380.

In the second and final part of our exclusive story, Mr. Leahy for the first time reflects on what might have been for the aircraft that passengers love. (Read the first part here)

When did your belief in the A380 start to seriously crumble?

That wasn’t probably until after several years into service. The A380 should have been the stretched A380-900, to begin with, then things would have been a lot better. (The A380-900 would seat 650 passengers in standard configuration and for approximately 900 passengers in an economy-only configuration.) When we knew in 2006 that we couldn’t get the aircraft out on time, that we couldn’t build the freighter, we had too much on our plate and had to cancel it. Every airline knew we would be at least two years late, as we had to do this big redesign. Every customer at that point had a right to cancel, to rip up their contract, get their deposit back, and get penalties from us. We were in total breach of contract, we said we would do something and we blatantly and incompetently couldn’t do it. But everybody stayed with the program, despite the launch customers being really mad at us. At that point, I thought we had something that the airlines really wanted. When we finally did deliver the airplane from 2007, it became apparent that we had real quality issues. I can remember more than a few very unpleasant meetings with Tim Clark, President of Emirates, he would go through the roof. But even he stayed on and eventually bought many more airplanes. I think we could have made that airplane work.

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Emirates chief Tim Clark talks with the media on the airline’s inaugural A380 service from Dubai to New York in August 2008. Credit: Geoffrey Thomas

Which role did the pricing of the A380 play in its fate?

We did some harm to ourselves in 2009 to 2011, when we couldn’t get follow-on orders for the airplane, by not keeping our pricing aggressive, but by having a big step up in pricing and expecting everybody will just pay. But they didn’t pay. I walked away from a deal with Lufthansa that we should have won for another five or six airplanes, because we didn’t meet their pricing, which actually was higher than their launch customer pricing. Airbus’s finance department just overplayed their hand and thought: These airlines just have to pay. No, they don’t, they just have to find some other aircraft to fly.

Why did the A380 never tap some important markets?

We never broke into China. There was enormous political pressure blocking us from getting into China, which was a big shame. The Germans, Brits, and French should have gotten together and put their own political pressure back on China. The fact was that the US and Boeing were doing everything they could to make sure that A380s didn’t get into China. The five A380s for China Southern was our one little flag in there. They did whatever they could to put pressure on the Chinese government to not take any more aircraft, that was unfortunate, too. We could have easily picked up another 50 or a hundred airplanes out of China. That would have really built up the base for the A380. Also, Japan has always been extremely close to Boeing, becoming risk-sharing partners on the 787 and for other components.

READ: Qatar Airways soars ahead with 100 destinations.

Was there ever a realistic chance for an improved or stretched version of the A380?

We looked at that in 2010. We kept looking at new engines, Tim Clark was constantly pressing for it. But as we looked at it, it became very expensive and the engine manufacturers were not very keen to help for re-engining at this point. GE and Rolls Royce were happily selling engines to the 787 to compete with us, they were not anxious to further improve the A380 at the expense of themselves to compete with themselves. There was a lot of dragging of feet with the engine guys, but there was a window when re-engining could have worked. After 2010 and before 2016. There was a window of five or six years where we might have gotten it right on re-engining and kept the program going. But you still had the problem with the weight of the airplane.

Was the last idea of offering a slightly improved “A380 plus” ever a realistic option to save the program?

That wasn’t going to change the direction of the river. And the river was flowing downhill. That might have slowed things down a bit, but you really needed to get new engines to address the engine problem. Cleaning up the wing was a good idea, getting weight out was a good idea. But because you missed the design point, the only way you were really going to get to optimize that airplane would have been to come up with the A380-900. Because we couldn’t show appreciably better economics than the twins, the market was migrating towards the point-to-point. Of course, everybody wants to go point-to-point if there is no economic advantage of going hub-to-hub. If the A380 would have done what it was designed for, there wouldn’t have been as much fragmentation.

Qatar Airways chief Akbar Al Baker with John Leahy.

Was launching the A380 a mistake Airbus made in hindsight?

The mistake was not getting it right. The mistake wasn’t saying you missed the hub and spoke as everybody wants to go point-to-point. That is absolutely wrong. Hub and spoke can only work if it’s more efficient than going point-to-point. Mistake number one was getting the engines wrong and losing twelve percent of fuel burn. Mistake number two was having in the back of everyone’s mind that we would have the A380-900 coming out a few years after the A380-800. So we designed an airplane that was going to be too heavy in the -800, so that the -900 could be the optimum. Mistake number three was getting it so confused between the French and the Germans and the respective design teams that you were ending up with systems that weren’t compatible, not reliable, wiring harnesses that didn’t connect to each other properly so that the cost of production went up and reliability for the airlines went down. If you ask, knowing what we know now, should we have built the A380 the way we did? Of course not. If we would have avoided all the mistakes I mentioned, we would have absolutely had a winner of an aircraft. It would have been 15% better than an A350 and maybe 20 percent better than a 787. And you would have had much less point-to-point flying because people would have had an economic advantage to go through the hubs.

Did the A380 saga make Airbus a better company?

Yes, the A380 and all the fiasco around it made the A350 definitely the best airplane program we’ve ever had. The smoothest introduction we’ve ever had and the smoothest manufacturing, because we got rid of the little kingdoms in Hamburg, Toulouse, Nantes, and Munich that basically fragmented our approach, didn’t take to each other, and made it impossible to optimize an aircraft program. Spending 25 or 30 billion Euros on the A380 just to get that education seems like a very inefficient way to get that education.

What did you as a salesman personally learn from the A380?

The commercial department has to have much more input upfront on the design and performance parameters of an airplane. If you let the engineers just go off, designing what they think is really cool, you end up like we did with the A380. In commercial we never really focused on the fact that we built an airplane not optimized as the -800, but really built a -900, and we just had to put up with the -800 for a few years until we came out with the -900. Had we all sat around the table and discussed that strategy upfront, I would have been inevitably against it, as would have been the airlines. Who wants to buy a suboptimal aircraft? We should have had better intelligence with the engine guys, you have to know what’s happening with the engines and not just getting blindsided when they sell to your competitor engines that are 12 percent better than your engines on airplanes that need to compete with each other. You need to have enough control over your engineers so that they don’t put things into airplanes that the commercial people never asked for. With the A350, I think we got a lot of that sorted out. And the same is true for the A320neo.

Things again became more complicated as you gave the A380 customers too much leeway in coming up with their own interior design ideas, no?

The new thing that was tried with the A380, which in hindsight was truly stupid, was to say every airline would be modifying their A380 cabins so much anyway, why bother with a standard specification, we’ll just have everyone do what they want to, they are all big airlines. We just have an Emirates or British Airways specification. That was a serious industrial and design mistake. Because that means every different airplane is ahead of version. If there was a standard airplane that was designed as a standard A380-800, Emirates would be modifying the standard specification to put in its showers. But as there was none, they started from scratch on an empty sheet of paper to design their showers. Everybody’s airplane became completely unique and a completely different airplane from everything else. With a series of changes from the standard design, it becomes a whole new clean sheet of paper design. That was a serious problem and industrial error.

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John Plueger (CEO) and Steven F. Udvar-Házy (Chairman) of Air Lease with John Leahy (middle) at the Farnborough Air Show. Mr Udvar-Hazy is Airbus’s biggest and most influential customer. Gregory Willis (CFO

Do you see any newly conceived aircraft as big or bigger as the A380 in the future?

I think that’s inevitable that we’ll get there, it should be a big twin. Boeing saw that as a distinct possibility with their 777X. The trouble they have is that the 777 fuselage is a little too narrow, you need it to be a little bit bigger than that. Because you still got London-Heathrow, you still got Los Angeles, you’ve got around 50 airports all over the world that, if traffic continues to grow at 3-4% a year or even faster, you are going to end up with congested hubs, and even going hub-to-hub is a point-to-point trip. If you can make that 400- to 500-seat airplane 15% more efficient than the 300-seat airplanes, you are giving people a really good reason to go hub and spoke. The problem with the 747 and the A380 is that there is no real economic reason now.

Andreas Spaeth will be publishing a book looking back on the program titled “A380 – the last giant” (initially in German) in March 2021.

2 COMMENTS

  1. After reading this I now understand why Airbus missed on the A380. I was shocked to read that the design of the aircraft was not led by the commercial department with customer input. The program should have been designed based on validating customer requirements against market research and forecasting. No aircraft should be designed by inhouse engineers, without any industry studies on technology migration. What John says, the airlines can force people to fly hub to hub if the price is right versus an overall desire to fly point to point with less people on the flights. Strategy, research, market validation, creates the right product to meet the correct need.