Wednesday, January 19, 2005

Jumbo or Dumbo?

A380: Jumbo or Dumbo?

Airbus unveiled yesterday the world's largest commercial jet, the A380 SuperJumbo, capable of carrying 800 passengers in its all-economy configuration, 555 in its three-class configuration. The question: does this signal the end of Boeing as a viable competitor to Airbus, or is this Airbus' Concorde, Edsel, and/or Le Car? The answer depends on how the plane performs, its acceptance in the market, and its cost to produce. Some of the trade-offs:

Dumbo: terminal infrastructure costs, long ground prep times, hidden development costs, limited deployment flexibility, passenger avoidance, soft hub demand, WTO pressure on subsidies, terrorist target.

Jumbo: traveler amenities (casino, beds, bars, work out area in first class config), lower fares, lower operating costs, added passenger and cargo capacity for high demand routes

In the 80s, super-size container ships that couldn't fit through the Panama Canal (post-Panamax) were introduced into the Pacific trade, dramatically lowering shipping and operating costs, and helping to promote the global trade boom. FedEx and UPS have both ordered 10 A380s apiece, no doubt fully understanding the economies of scale and the leverage of fixed assets against heavy demand - so this story isn't just about passengers. It's likely that, provided it can manufacture these beasts in an efficient manner (a big assumption), Airbus will further pull ahead of Boeing, putting increasing pressure on the release of their 7E7 Dreamliner in 2008. That plane is focused on point to point, high efficiency, mid-range passenger load. There's a market for both products, but it's telling that Boeing is also defensively upgrading its 747.