Emirates cuts back on A380 service

Airbus spent $18bn on developing the A380, which is the largest passenger aircraft in the world with seating for 525 people in a three-class configuration.

Among its highly-touted features are private suites, stand-up bars, and on-board showers for first-class passengers.

As parts of its enormous growth strategy, Emirates ordered a total of 58 A380s - worth more than $17bn at list prices - making it by far the largest customer for the aircraft.

After waiting years to take delivery of the aircraft following a number of development delays, Emirates put its first two A380s into service for the carrier's Dubai-New York route. It later rolled out two more A380s to serve its London and Sydney routes.

Recession hits

In marketing the A380, France-based Airbus said the aircraft would be ideally suited to operate during an economic slowdown because of its fuel efficiency.

It also argued that the A380's large seating capacity would be most efficient during a recession because slumping demand often causes airlines to eliminate flights between secondary cities and focus on flying to larger hub airports.

However, the severity of the economic slowdown has poked a hole in these arguments. Earlier this month Emirates was forced to yank the A380 from service on the New York route due to falling demand, which was rumoured to be only 30% full on some flights.

The carrier said it would redeploy the two A380s it uses for its two daily flights to the Big Apple onto routes between the emirate and Toronto and Bangkok, starting June 1. Emirates plans to use Boeing 777s for the Dubai-New York route, which means it will have132 fewer seats to fill on the route each day.

The carrier said the redeployment was based 'solely on a change in capacity demands in these three markets'. This explanation is understandable, given that the International Air Transport Association has reported that first and business class travel has fallen for Middle East flights to all regions including North America, and that long-haul services are likely to be affected the most.

Even more worrisome, in its latest report the IATA nearly doubled its forecast for the projected loss for the global airline industry in 2009, to $4.7bn. IATA had previously projected a $2.5bn loss in December 2008.

In its report, IATA predicts that the Middle East will be the only region in the world to see a demand increase for 2009, but it still projects a loss for carriers in the region - blaming capacity rising ahead of demand. Given this backdrop, it is no surprise that Emirates is reportedly in talks with Airbus to delay delivery of several A380s.

Technical glitches

Emirates' decision to drop the A380 from its New York route was not the only bit of negative news that has recently emerged regarding the carrier's purchase of the super jumbos.

Only a few days prior to its announcement about changes to its New York route, Emirates met with Airbus officials in Toulouse to report problems with the aircraft. The carrier reportedly gave a 46-page presentation which described problems relating to heat-damaged power cables, defective engines, and numerous malfunctions.

The problems caused the planes to lose 500 hours of flying time due to grounding. Still, despite the glitches, Emirates has said that it remains confident in the A380.

'Technical issues are expected with new aircraft, particularly one that uses many new technologies,' said a company spokeswoman. 'Emirates has a good relationship with Airbus and we continue to work closely with them to address these technical matters. Airbus is pulling out all stops to sort things out.'

However, with 54 more of the double-deckers on order amidst a deep global recession with no end in sight, it is likely that Emirates will be looking to do some more manoeuvring to better manage its investment in the aircraft.