Airbus A380 faces strategy crunch after drop in orders

Wed Oct 23, 2013 12:11pm EDT
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By Tim Hepher

LONDON (Reuters) - Airbus is poised to review its A380 superjumbo after a slump in orders and has not ruled out shaving output of the world's largest jetliner while waiting for the economy to come to its rescue.

Despite aggressive marketing, sales of the 525-seat double-decker are running at idle as in tough times many airlines are focusing on narrower, lighter, two-engine models, including Airbus's own A350.

U.S. rival Boeing (BA.N: Quote) said last week that it was cutting production of the latest version of its 747 jumbo, while nearing a decision to launch a 406-seat version of its 777 twinjet.

Airbus has not booked a firm A380 order this year but has taken three cancellations. It has sold a total of 259.

Its sales chief is confident Airbus will sign a number of deals in the next two months to avoid ending the year with more cancellations than orders - an embarrassment for an aircraft hailed as a European wonder when it was unveiled in 2005.

But in its factories, Airbus is approaching a crunch point despite the jet's popularity with passengers after six years.

The immediate worry is that gaps in the production line for 2015 will force airbus to build jets it hasn't been able to sell - known as "white tails" - tying up cash in planes worth $400 million each at list prices, most of which is paid on delivery.

Time to avert the problem is running out because parts like metal forgings have to be ordered up to two years ahead.   Continued...

An Airbus A380 plane is seen on display at the MAKS International Aviation and Space Salon in Zhukovsky, outside Moscow August 31, 2013. REUTERS/Maxim Shemetov