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Return of the superjumbo: A380 makes comeback despite high oil prices

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© Reuters. FILE PHOTO: A visitor takes a picture of an Airbus A380 as it lands after an air display at the 53rd International Paris Air Show at Le Bourget Airport near Paris, France June 23, 2019. REUTERS/Pascal Rossignol/File Photo

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By Jamie Freed and Tim Hepher

DOHA (Reuters) – Two years ago, dozens of Airbus A380s set course for storage in sites from rural France to the Gulf as the outbreak of COVID-19 accelerated the demise of the world’s largest jets.

Now, the iconic European double-decker is gaining a new lease on life as airlines scramble to cope with rising demand and shortages of newer models, though for how long is unclear.

The return of the four-engine behemoth at carriers such as Singapore Airlines (OTC:SINGY) and Qantas Airways – and soon at Japan’s ANA Holdings and South Korea’s Asiana Airlines – comes despite high fuel prices that make operating new-generation two-engine widebodies far cheaper.

“Passengers, they love the plane and we have a lot of business class seats on it so it is a very good aircraft to fly on high-demand routes,” Korean Air Lines Chief Executive Walter Cho said on the sidelines of an airline industry gathering in Doha.

Korean Air plans to have three of its 10 A380s back in service by the end of the year, up from one today.

Strong demand and delays in deliveries of new Boeing (NYSE:BA) 777X airliners have also forced a rethink at Lufthansa.

It will decide soon whether to bring back the A380, but has only 14 pilots with current approval to fly them and will train A350 pilots to double up, Chief Executive Carsten Spohr said.

The A380 was once billed by Airbus as a 21st-century cruiseliner with prospects for 1,000 planes in service. But only 242 were built after many carriers opted for smaller twin-jets.

Analysts say the fleet will never return to pre-pandemic levels.

Yet 106 are back in service, according to data firm Cirium, up from a low of just four when the crisis hit in April 2020.

There is little second-hand demand for A380s, so airlines often face a choice of flying or scrapping them.

“Keeping aircraft that have been written down … may be the least worst option,” said Ascend by Cirium Global Head of Consultancy Rob Morris.

Even so, Air France permanently retired its A380s during the pandemic, Thai Airways and Malaysia Airlines have put them up for sale despite weak demand from buyers and even current operators have sent some to be scrapped.

‘YOU WILL REGRET IT’

The downturn prompted many airlines to write down the value of their biggest jets.

Having taken that hit, they can fly the jet without expensive depreciation charges – though the price of fuel devoured by the plane’s four engines remains a huge headache.

Qantas took a A$1.43 billion ($995 million) charge in 2020, mainly on the then-grounded A380, but is now bringing back 10 out of 12.

The A380 has also won a reprieve in part because airlines do not yet have enough demand to resume multiple flights on routes like Dubai-London, Singapore-Mumbai and Sydney-Los Angeles.

One airline boss left unsurprised by the partial comeback is Tim Clark, president of Emirates. It is by far the biggest customer after ordering a total of 123 jets for its Dubai hub.

Clark fought in vain to persuade Airbus to re-invest in the A380 before the planemaker decided in 2019 to end output.

“Everybody’s been struggling with capacity. I’ve watched it all; people saying that the trend is over,” he told reporters.

“If you want to do that you will regret it,” he recalled himself saying about the industry-wide shift to smaller jets. “And now what happens is you are having to reactivate A380s”.

Emirates’ superjumbo fleet has not been immune from the crisis, however, with dozens parked and currently out of use.

Qatar Airways Chief Executive Akbar Al Baker said the A380, which the airline has pulled out of retirement after a dispute with Airbus over newer A350s, remains uneconomic to fly.

Whatever its long-term future, the superjumbo is unlikely to fulfil its original vision as a luxury flagship, instead carving out a humbler role as a workhorse to cover busy periods.

“If you want to ramp up capacity you need to bring back the big bird,” said Subhas Menon, director general of the Association of Asia Pacific Airlines.

“They will need that or otherwise they will not be able to meet the expectations of the consumer.”

($1 = 1.4378 Australian dollars)

(This story refiles to add dropped word in paragraph one)

Stock Markets

Easing chip shortages to help Volkswagen in H2 – CEO

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© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo

BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.

“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.

This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.

“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.

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Reliance Chairman Mukesh Ambani steps down as director of telecom arm

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© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas

BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.

Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.

India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.

Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.

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UBS Downgrades Ebay, Farfetch to Neutral on Guidance Risks

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© Reuters. UBS Downgrades Ebay (EBAY), Farfetch (FTCH) to Neutral on Guidance Risks

By Senad Karaahmetovic

UBS analyst Kunal Madhukar downgraded shares of Farfetch (NYSE:FTCH) and eBay (NASDAQ:EBAY) to Neutral from Buy.

EBAY shares are cut alongside the price target (to $48.00 from $60.00 per share) despite low expectations. Still, the analyst expects 2022 GMV to fall by 17%, which is worse than the guidance of 16%-14% and the Street’s consensus of 15%.

“We think the buy side may already be lower than the Street. YTD, the stock has been one of the better performers within the eCommerce space, benefiting from both a ~2% dividend yield and aggressive share repurchases. However, when the market rebounds, we think EBAY shares could lag smaller cap peers (which are likely to grow much faster in a recovery) until investors have better visibility into organic growth at eBay. Consequently, we think the shares likely will remain range-bound until visibility improves,” Madhukar told clients in a note.

The price target on Farfetch shares goes to $10.00 from the prior $13.00 as Madhukar sees too optimistic assumptions for growth from the side of the company’s management.

“In addition to slower growth, we think upside is limited by lack of visibility into key drivers of value, including FPS volumes and economics, as well as on China. Granted, the YNAP deal could be a positive catalyst (link), but if the disclosure is limited (like with the recent deal with Neiman Marcus Group or NMG), it may be challenging for investors to understand if it creates shareholder value or not. Last, FTCH remains a profitless-tech company in an environment where investors are acutely focused on profits, and thus, there is limited valuation support,” the analyst added.

Similar to eBay, Madhukar sees shares remaining “range-bound until we have better visibility into growth and/or the path to profitability.”

Shares of eBay and Farfetch are down 2.4% and 2.2%, respectively, in pre-market Tuesday.

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