Airbus Cuts A380 Production Plans

An Airbus A380 aircraft is seen beside the runway during the Farnborough air show in the U.K., on Tuesday. ENLARGE
An Airbus A380 aircraft is seen beside the runway during the Farnborough air show in the U.K., on Tuesday. Photo: Agence France-Presse/Getty Images

FARNBOROUGH, England— Airbus Group EADSY 3.99 % SE slashed production of its A380 superjumbo jet in a retreat from one of its most ambitious projects—but one that triggered its biggest corporate crisis a decade ago, and since then never generated enough sales to justify its huge costs.

Airbus said Tuesday it would build just 12 A380 planes a year starting in 2018, down from the 27 it built last year. The company also indicated the program might soon plunge back into the red, after breaking even only last year. Airbus finally eked out a profit on the planes—launched in 2000—after slashing costs amid dwindling orders.

The company, based in Toulouse, France, said it expected to earn money on the planes this year and again in 2017. It plans to trim production this year and build 20 aircraft next year. Beyond that, it said, it will target “additional cost reduction initiatives to lower break-even further.” The double deckers cost $ 432.6 million each, though customers don’t pay list price.

Airbus launched the A380 to take on archrival Boeing Co. BA -0.93 % , which had long dominated the market for big planes, including the hump-backed 747. But building the A380 proved technically difficult and costly. The program ran years late and billions of dollars over budget.

Airbus struggled to tailor the highly bespoke versions that its customers ordered. It was thrown into turmoil when wiring problems surfaced after the first jetliner went into service. As customers were left waiting for planes, penalty payments mounted. Top company officials lost their job amid the crisis.

The aircraft maker has long insisted that despite the jet’s troubled birth, demand for the plane would grow as airports became more crowded and cities around the world became more populated. Airlines would increasingly turn to bigger planes such as the A380, which seats 544 people on average, to ferry more people more efficiently, the rationale went. Instead, carriers held off on embracing the jet, worried about how to fill so many seats on a single route.

As Airbus struggled with the A380, a new generation of fuel-efficient, twin-engine long-haul planes gained favor. Boeing and Airbus tilted to selling and building these much less expensive, but more flexible, jets. That shift stole orders for their biggest planes, the A380 and Boeing’s later iterations of the 747.

Airbus isn’t giving up on the jet completely. It is scaling down near-term production targets to meet current demand, but it is “keeping all options open to benefit [from] future A380 markets,” said Airbus jetliner boss Fabrice Brégier.

The company said it had orders for 126 A380s outstanding. Most of those are for Emirates Airline, the Dubai-based carrier and the plane’s largest customer. Airbus’s top salesman, John Leahy, said Tuesday he was in talks to find new buyers for the plane, with at least one deal targeted for this year.

The pullback comes after a particularly rough patch for A380 orders. Airbus earlier this year said French carrier Air Austral had canceled an order for two of the planes. Air France-KLM SA AFLYY 2.49 % this year also said it had dropped plans to take the last two A380s it had ordered. Malaysia Airlines, which owns six of the planes, plans to stop using them in about two years. And Qantas Airways Ltd. QAN 3.17 % , which flies the plane, has said it doesn’t want any more.

International Consolidated Airlines Group SA ICAGY 6.57 % Chief Executive Willie Walsh said the group, which includes A380-operator British Airways, might take more than the dozen it has ordered, but it was looking in the secondhand market to pick them up more cheaply than buying them new from Airbus.

A rare bright spot came late last year when Japan’s All Nippon Airways Co. ALNPY 1.26 % bought three of the planes.

That all has Airbus searching for new customers. Airbus earlier this year announced an agreement to supply a mega-order of airliners, including 12 A380s, to Iran Air, shortly after many economic sanctions were lifted on Tehran. That deal hasn’t been finalized, amid a delay in getting U.S. government approval. Mr. Leahy said he was “disappointed” the U.S. government licenses for the deals haven’t been received yet.

Boeing, meanwhile, has struggled to sell its own 747-8 jumbo jet. Boeing had already cut output on the plane to one every two months, starting in September. It has orders of just 21 of the 747s outstanding.

The A380 retreat comes as Airbus and Boeing warned at the Farnborough air show, the biennial aviation-industry trade gathering, that sales momentum for all sorts of jets was slowing. Mr. Leahy said Monday that reaching the plane maker’s target of about 650 plane orders for this year would be a stretch.

Still, Airbus and rival Boeing have announced plans to build more of their most popular planes after years of strong demand. Their backlogs for such jets have ballooned. Airbus’s backlog comes in at 6,000 aircraft, while Boeing’s tops 5,000.

Write to Robert Wall at [email protected] and Jon Ostrower at [email protected]


WSJ.com: US Business

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