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Singapore Airlines won’t renew A380 lease in blow to superjumbos

Airbus Group SE’s A380 superjumbo program hit fresh turbulence after Singapore Airlines Ltd. – the aircraft’s first buyer and currently its second-largest customer – said it won’t renew the lease for its first plane.

The lease on the A380 expires in October 2017 and “we have decided not to extend it,” Singapore Airlines said Wednesday.

The decision isn’t a fatal blow for the program, Airbus’s biggest and costliest jet. But it is another symbolic hit for the double-deck aircraft, for which Airbus has struggled to find customers after investing about $15 billion to develop.

(Manila Bulletin)

(Manila Bulletin)

Airbus said in July that it would slash production of the A380 to 12 planes a year in 2018 from 27 last year. The backlog of A380s to be delivered has eroded during years of no or few orders.

The A380′s size has become its disadvantage as airlines prefer relatively smaller planes such as the Airbus A350 and rival Boeing Co.’s 787 Dreamliner that can fly nonstop to their ultimate destinations, bypassing large hubs such as London Heathrow and Singapore’s Changi Airport.

Airbus, based in Toulouse, France, has said it will again start incurring losses building A380 planes at the lower production rate. Last year was the first in which the plane maker didn’t lose money on the A380 program since it embarked on developing the superjumbo jet in 2000.

The Singapore flag carrier currently operates 19 of the jets. The first five were taken on a 10-year lease deal.

“Decisions will be made on the four others later,” a spokesman for Singapore Airlines said.

Brendan Sobie, an analyst at CAPA Center for Aviation, expects Singapore Airlines to return all five of the early A380 jets in its fleet. “Their fleet plan and strategy has always been to replace those aircraft. Early model airplanes come with limitations and Singapore Airlines never wanted to be stuck with remarketing these five airplanes,” Mr. Sobie said.

Initial-production jets are generally less popular with airlines because they often come with early problems that manufacturers need to resolve.

Singapore Airlines isn’t the only airline turning its back on some of its A380 jets. Malaysia Airlines has decided to replace its A380 jets with the smaller A350 jets and is looking for customers to buy or lease its six jets, the airline’s chief executive, Peter Bellew, said in a recent interview.

Air France-KLM SA said this year that it had dropped plans to take the last two A380s it had ordered.

Other airlines have pulled the plug even earlier. Airbus said this year that French carrier Air Austral had canceled an order for two A380s, the latest in a raft of voided purchases of the plane. Previously, India-based Kingfisher Airlines Ltd. ordered the plane before the carrier folded in 2012. Russian carrier Transaero also was a buyer before it closed last year. Skymark Airlines Inc. of Japan ordered the A380 before the contract was voided over payment issues.

There are also doubts about some A380s in the Airbus order backlog. Virgin Atlantic Airways Ltd., the British airline founded by Richard Branson, has ordered six of the planes but has no plans to introduce them into service. The carrier also announced plans this year to buy Airbus’s A350-1000 long-haul plane, a more modern, twin-engine widebody. Ireland-based lessor Amedeo has ordered 20 of the planes, but so far has failed to place them with airline customers.

The Singapore Airlines A380s are owned by German leasing company Doric GmbH, which will need to find a customer for the returning plane. The lessor said it hasn’t yet been notified by Singapore Airlines about any plane returns. A Doric representative said the company is already in talks with potential new operators for any A380s that might come off lease, with some negotiations at an advanced stage.

Airbus declined to comment on the Singapore Airlines decision, saying it doesn’t discuss individual airline-fleet plans.

“We are confident in the market for secondhand A380s, which can be leased or acquired at attractive rates. This will offer a great opportunity for new entrants with new business models to start operating the A380,” a company spokesman said by email.