Emirates Orders Further 32 Airbus A380s

June 8, 2010

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Airbus landed a record USD$11 billion order for superjumbos from Dubai's Emirates, the Arab world's largest airline, as the carrier shook off the risk of another recession and struck a blow to its older European rivals.

The request for the 32 double-decker A380s, which brings Emirates' Airbus order to 90 aircraft, was a splash start on Tuesday to the usually sedate Berlin Air Show, which is happening in something of a vacuum outside Europe's spiralling debt crisis.

Airbus, which has been facing a range of operational difficulties, called the unexpected vote of confidence the largest commercial aircraft order by dollar value ever. It came as parent EADS used the event to show off the capabilities of its embattled A400M military transporter plane.

While airlines had upgraded their industry forecasts this week, the sheer size and scope of the A380 order stunned Emirates' competitors.

"It is already to many of us a miracle that Emirates now already has more seats on intercontinental routes than Air France and BA together, with a relatively small home market," Lufthansa chief executive Wolfgang Mayrhuber said in a briefing at the International Air Transport Association's (IATA) annual meeting also in Berlin.

"One must assume that this is not an investment for the UAE (United Arab Emirates), but it is an investment for the world," he said.

BARGAINING CHIP

At first glance, some analysts were sceptical about the deal, with US aerospace analyst Richard Aboulafia suggesting it was most likely a bargaining chip for Emirates in its push to get landing slots in Berlin.

He said it was possible that ultimately some of the order might not be fulfilled.

But others said it fits with the model of the Middle East as a driver of demand as the industry recovers from the recession.

"It fits with the theory of strong Middle East demand and the Gulf providing a hub for the world, but whether it fits the practice remains to be seen," said Howard Wheeldon, senior strategist at BGC Partners.

Airbus sales chief John Leahy said there were no clauses in the deal allowing Emirates to cancel or convert to other types. All the Emirates' orders are expected to be delivered by 2017.

Emirates became Dubai's flagship company and one of the biggest contributors to the local economy after the property crisis devastated real estate firms. The government-owned group expects to earn USD$1.16 billion in 2010 and rivals more established names for traffic between Europe and east Asia.

SIZEABLE ORDER

Airbus also sold nearly USD$3 billion in narrow-body A320s and wide-body A350s to Brazil's largest airline TAM.

Germany, France and Spain said Tuesday they would provide development loans for the A350 once the World Trade Organisation had ruled on an aircraft subsidy dispute with the United States.

But it was the A380 order that brought German Chancellor Angela Merkel to the show, even though she has been under fire from the global aviation industry for proposing a new passenger tax.

Just as Emirates announced the order, a giant A400M buzzed over the show, demonstrating its aerobatic abilities.

The A400M European troop transporter was built to provide much-needed airlift to seven European NATO nations but is four years late and almost EUR€8 billion over budget.

The buyers -- Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey -- set a provisional EUR€3.5 billion bailout in March but the deal has yet to be formalised.

With an audience that included Merkel, whose government has severely criticised Airbus over the delays, the transporter performed a series of stunts and steep banking turns during its maiden public performance. It is expected to enter into service in 2013.

EADS said last week the two planes in testing were working well and two more test planes should go into service this year.

(Reuters)