MAS can do without A380s

  • Business
  • Wednesday, 23 Jun 2010

PETALING JAYA: The possibility of Malaysia Airlines (MAS) cancelling its A380s order from Airbus SAS is unlikely to hurt the national carrier as much as it will hurt the European planemaker.

This was because MAS had options to place orders for planes of other makes to make up for the impending loss of the six A380s, said analysts.

An analyst said that although the other aircraft might not be able to fly 15,400km non-stop or having a capacity as large as the A380s, there were other replacements such as the Boeing’s Dreamliner to fill up the gap. MAS, however, said it was not looking at aircraft make if it were to replace the A380s.

On Monday, MAS said it might consider cancelling the six A380s it ordered following repeated delays in delivery by French aircraft maker Airbus SAS.

Managing director/chief executive officer Tengku Azmil Zahruddin said there were plenty of aircraft available in the market.

He added that hypothetically MAS could consider Boeing’s 777-300 in place of the A380, if it were to cancel the order.

Airbus was initially scheduled to start delivering the A380s in January 2007 but has postponed it to January 2011 following delays in its programme. It was again deferred to August 2011. MAS is expecting to receive the first of six A380s in the first half of 2012.

Based on the 2008 catalogue price, an A380 costs between US$317mil and US$337.5mil.

An analyst said the impending cancellation from MAS, which was worth US$1.9bil, would add to the problems at Airbus.

Airbus has been facing huge issues related to production of the A380 aircraft. It had earlier paid RM329mil compensation to MAS for the delay.

“We are sorry about the delays (which are a knock-on effect of missing 2009 delivery target), but we are confident that we will meet the revised delivery schedule,” said Airbus media relations vice-president Stefan Schaffrath.

“The thoughts of cancelling the A380s order were mainly due to Airbus’ uncertainties in delivery of the aircraft as scheduled in 2012 vis-à-vis the third delay,” Kenanga Research said, adding that the cancellation could also lead to disruptions in MAS’ expansion plan and cost efficiency.

“Nevertheless, the management may leverage on its current fleet should it cancel the A380s order, while looking for replacements.

“We are neutral on the news at this moment as there is no final decision to cancel the order. In our opinion, the management is currently being prudent in making such a decision to ensure its expansion plan is still intact,” Kenanga Research said.

An analyst said MAS might not want to be left behind by other regional carriers and continue with its order. He said both Singapore Airlines and Thai Airways had ordered the A380s.

Singapore Airlines has 19 firm orders for the A380s and currently has 10 aircraft in operation. Thai Airways ordered six aircraft.

However, he said MAS also had to think about the load factor for the superjumbo jets.

While MAS is contemplating replacing the A380s with B777-300s or A350s, AmResearch Sdn Bhd noted that placing fresh orders now meant that MAS had a longer queue to join for new aircraft deliveries.

“Indications are that the earliest delivery for an A350 as an example – should MAS place an order now – would be in 2019,” it said.

AmResearch said the B777-300s would give MAS more flexibility than A380s. Its smaller seat capacity allows easier load factor management, while frequency can be toned down during low season.

“Additionally, B777s are about 20% cheaper than A380s – based on list price, meaning potentially lower capex layout,” it added.

On the downside, however, higher frequencies required during high-traffic season would put MAS at a disadvantage, given higher airport charges and flight crew overnight expenses.

Airbus, the world’s biggest maker of commercial aircraft, started deliveries of the A380 model in 2007 after running about two years late because of difficulties with cabin wiring.

While there might be a series of delays, Airbus said no airlines had cancelled their orders of A380 so far. However, logistics companies such as FedEx and UPS have cancelled orders for A380 freighters.

So far this year, Airbus has already delivered seven A380s – three to Emirates Airline, two to Air France, one to Lufthansa and one to Qantas Airways.

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