The A380 Project
The A380 project was launched in December 2000 as the world’s largest commercial aircraft the Airbus A380 is a feat of engineering. It was meant to open up a new segment by addressing the changing market needs, congestion at the hub airports being one. With the environment having gained a profile, the A380 was designed with low emissions and low noise. The project took five years of preparatory development and testing that cost over US$600 million. The development cost was projected at US$10 billion and a tax windfall of 3 billion euro in Europe alone and induced worldwide employment creation of about 200,000 jobs. It was also going to give Airbus a foothold in all commercial aircraft market segments meant to challenge and surpassing Boeing in the over 500 passenger carrier aircraft segment as well.
The innovative manufacturing processes and novel materials required for the aircraft meant that there were however, going to be little or no synergies between the manufacturing of the A380 and the other Airbus families of aircraft.
Other factors that promised success for the project included the growth in air traffic that was twice the industrial average, increasing revenue per passenger, ground and air congestion and the availability of new technology to improve the economics of operating large aircraft.
The aircraft had 50 firm orders immediately after it was launched. The market for the A380 was projected to be 1235 aircrafts, 8% of all commercial aircraft deliveries and worth around US$77.4 billion. An expert analysis of market demand was successfully carried out as it catered a specialized clientele and numerous tests involving thus potential customers around the world were carried out.
The A380 is the biggest civil aircraft in the world and is produced by Airbus with a capacity to carry between 555 and 850 passengers. The development of this aircraft was probably one of the most significant and expensive project in the history of Airbus. Before the development of this plane, it had been assumed that due to growing number of long-distance flights and corresponding increase in fees paid by airlines per landing, it was reasonable to construct a double-deck, large capacity aircraft. That type of plane would have been capable of minimizing the operating costs for airlines especially on long haul flights such as between Europe and the USA.
The average price for one A380 was estimated to be US$ 290 million, making it, by far, the most expensive aircraft in the world. The pricing was carefully done covering all expected costs incurred. The first orders for the plane were received in late 2001 from Emirates Airlines for seven aircrafts. Further orders followed soon and the company seemed to be very successful in attracting new customers. In 2006, the first test flight took place.
The Project was a Failure
The company failed to fulfill its delivery and manufacturing obligations to customers on the agreed dates. In June 2005, Airbus announced that due to technical problems, mainly problems attributed to internal wiring in aircrafts, there were going to be delays in the delivery of the A380 to customers. Initially, the delays were scheduled to last six months, but on 13 June 2006, Airbus announced another delay of further six to seven months. This caused major shifts in the delivery schedule. The company was not going to supply the promised quantity of aircrafts on time in the following years. As a result of delays the chief executive officers (CEO’s) of both EADS (European Aeronautic Defense and Space Company) and Airbus resigned. The failure of the project reflected in their personalities as bearing poor project managing skills. The EADS share price fell by 26% and it incurred $6.1 billion in additional costs due to project delays.
Existing customers began to express their discontent and some of them cancelled the contracts with Airbus and chose to place new orders with the rival,...
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