Impact of Airbus A380 on Singapore Airlines

A380, a White Elephant with wings?

While the A380 undoubtedly represents a remarkable technical achievement and represents a new generation of aircraft to challenge its much older ancestry it is unclear at this stage whether some of the design and operating assumptions under which this aircraft was conceived are playing true. We have seen previously that other aircraft models representing technological advances such as the Concord have not proven to be game changers in the long run. We have also seen in other industries that a superior product does not always turn out to be the dominant product, e.g. Betamax vs. VHS and HD-DVD vs. Blueray. Timing may be everything, and it may well be that Airbus has been unfortunate in their timing. The repeated delays to the delivery schedule have meant that the window between the release of the A380 and the B787 is short enough for Airlines to adopt a wait and see approach. This, coupled with the Global economic downturn, meant that the economic environment is sufficiently different from that into which the aircraft was expected to operate and consequently the advantages that the A380 can offer have been negated.

The A380 is built around the assumption that airlines will continue to fly smaller planes on shorter routes (spokes) into a few large hubs, then onward to the next hub on giant airplanes. Therefore, there is a definite Market segment for the A380 in terms of comfort long haul travel between busy airport hubs and also large capacity shorter haul flights between busy slot constrained airports. This trend is consistent with many other airlines that are still placing orders for the A380, although some may have requested for delay in deliveries. However at this point in time, with current prevailing market conditions, we do not see that the A380 is representing a significant economic advantage for SIA. Were market conditions to regain quickly, we would begin to see utilization rates increase across the route network and consequently SIA will be able to better leverage its investment in the A380 aircraft. We can also surmise that SIA is currently targeting the A380 not only at the Long Haul market under the Hub model, but as a targeted segment of their Long Haul Hub route network. With this in mind, we can say that SIA does not consider the A380 to be a universal game changer in terms of their Long Haul fleet. This is further borne out by their investment in other aircraft such as the B787 instead of exercising their options on further extending their A380 fleet.

As oil prices continue to soar, and airline companies struggle with tight margins, planes that fly faster, fit more passengers, and consume less fuel are at a premium. Whether A380 or B787 should be used would be highly dependent on the chosen route of market density, growth rates so long as when capacity shift takes place, profit from small aircraft must be equivalent to breakeven