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Wednesday, 19 September, 2001, 20:33 GMT 21:33 UK
Turmoil threatens superjumbo orders
The new Airbus A380
The A380 may suffer from a lack of new orders
The ongoing turmoil in the airline industry has left an ominous question mark hanging over the fate of Airbus' new A380 superjumbo.

Airlines across the world have sought cutbacks amid a slump in passenger numbers following last week's terrorist attack on the US.

New demand for such large aircraft is likely to dry up in the short term

Anthony Bor
Merrill Lynch

Many carriers have begun to renegotiate or postpone orders placed for new aeroplanes.

The German airline Lufthansa is now thought unlikely to place an order for the A380, having said earlier this month that it would seek approval from its supervisory board to buy the superjumbo.

In addition, British carrier Virgin Atlantic, which plans to shed 1,200 jobs, told BBC News Online that it is holding discussions with both Airbus and Boeing about new orders placed.

A spokeswoman said that the company would possibly look to delay orders, but said it was too early to be specific.

'Hotel in the sky'

The A380 has been billed as a hotel in the sky, because of the facilities it will offer to the 555 passengers on board. However, because of its sheer size it will be particularly vulnerable.

Our 2004 forecast now has Airbus producing only a nominal profit

Nick Cunningham
Schroder Salomon Smith Barney

"New demand for such large aircraft is likely to dry up in the short term," Anthony Bor, a transport analyst at Merrill Lynch in London, told BBC News Online.

In a note to clients, Nick Cunningham of Schroder Salomon Smith Barney, said: "Our 2004 forecast now has Airbus producing only a nominal profit, not helped by the very high development costs of the A380."

Out of fashion

The hyperbolic dimensions of the superjumbo, which can carry 35% more passengers than its nearest rival Boeing's 747, seem oddly out of place in the current climate.

In the grip of an economic slowdown and the aftermath of last week's attacks on the US, the airline industry is struggling to stem over-capacity on its existing aeroplanes.

Some are even looking to decommission aircraft, leaving them lying in the desert until passenger numbers pick up.

The idea of a hotel in the sky idea is "a pipe dream in a bull market", one analyst said.

'Cautiously optimistic'

For its part, Airbus said it remains "cautiously optimistic" about new orders.

David Velupillai, a spokesman at the company's headquarters in Toulouse, France, said it has not yet received any cancellations or postponement of orders for the A380.

"The programme is still going ahead... We plan to start building soon, the need is there, and we will deliver in 2006."

He added that that company takes a long-term view and believes passenger numbers will have doubled in 15 years, increasing the need for larger aeroplanes.

He declined to comment on what might happen in the coming months, but said the company is monitoring the situation closely.

Currently the A380 has attracted 67 orders from eight carriers, including Virgin, Singapore Airlines, Air France, Qantas and Emirates.

Airbus' arch rival Boeing announced on Wednesday that it would be slashing 20,000-30,000 jobs by the end of next year as airlines cut flight schedules and aircraft orders.

See also:

09 Aug 01 | Business
EADS and Airbus sales rocket
23 Apr 01 | Business
Airbus loans "fair"
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