Aviation analyst Richard Aboulafia recently published an opinion article at Aviation Week & Space Technology magazine, “Airbus Twin-Aisles—Big Needs, Limited Means“, in which he discussed strategic product portfolio options for Airbus. He was particularly critical to the A380. Let me bring a couple of passages from the article:
Historically, Airbus has spent more than Boeing on development as a percent of sales than. But during the past 15 years, the bulk of this heavy spending was squandered on the A380. Today, development spending is set to fall in line with the company’s new direction. Last year, it fell below 6% for the first time since the company was established (see graph). Given the requirements of funding the A350XWB and A320neo, Airbus isn’t likely to have the resources to fund both an A330neo and A380neo and a new large twin, too. Tough choices will need to be made. […]
In short, Airbus will be paying the price for the A380 for many years to come.
From these 2 paragraphs, the first assertions are factual: Airbus spends more on research and development than Boeing Commercial Airplanes and during the last years most of that spending was dedicated to the A380. In my opinion the last sentence overstates the issue of the current burden of A380 over the company’s future. If the A380 did not derail EADS during 2006-2010 it will not do so in the coming years. As numbers show and top management has indicated at investors events the A380 programme is expected “to emerge from the red by 2015“.
A380 MSN4 (credit: A. Doumenjou).
Today the A380 is a recurring cost issue, not more. The situation would be entirely different had Airbus (or rather EADS, now Airbus Group) applied the same accounting system that Boeing does (since the merger with McDonnell Douglas). EADS has passed in the profit and loss accounts in the previous years several one-off items related to the A380 valued in billions of euros (refer to yearly financial reports). What is left are R&D (mainly D) expenses to bring down unitary recurring costs and producing enough numbers of aircraft so that learning curve effects can be benefited from.
On the other hand, Boeing accounting system spreads the capital expenditures and research and development costs along what they refer to as an accounting block, which for example for the 787 now takes 1,300 airplanes to amortize those costs (previously were 1,100, see here a post on the 787 break even).
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