Reuters is reporting that Rolls Royce has bagged an order worth $9.2 billion at list prices to supply 50 of its Trent engines for the Airbus A380 airplanes ordered by Emirates. This is in stark departure from the Engine Alliance engines that the existing orders of Emirates A380s are coming with. The airline is the biggest buyer of these planes with almost 140 of them on order and 60 of them already in service.
The first A380 plane with the Rolls Royce engines would start only in 2016 but still this news is important. It is rare for an airline to switch engine supplier’s midway of such a big order as typically airlines would stick to one engine supplier to make sure consistency and the ease of maintenance of just one engine type. The airline also ends up making a good cost advantage as it’s able to negotiate good discounts on bigger orders. Along with this Airbus will be providing the Totalcare package which helps it offer its technical expertise around the world in maintaining Emirates A380 fleet. So what does this change in suppliers mean?
Given that Rolls Royce is now turning out to be the only player for the A380 engine enhancement and supply and Engine Alliance not too keen to push much effort for working on these engines. Emirates seems to have taken a long-term approach keeping in mind its long-standing demand for an A380neo that they want Airbus to start developing. Emirates CEO, Tim Clarke has gone on record many times stating that if Airbus decides to build the A380neo then the airline would be interested to place a big order for it and if this happens its only Rolls Royce engines that would be used for meeting the demands, hence the logical shift to them as it would help Emirates build engineering and maintenance expertise on the engine type. But the problem for Airbus in this case is that the overall demand for 4 engine jets has dropped sharply with no net new orders placed for the A380 last year and even this year the future is looking bleak. Hence the company would not be very committed to placing its resources for a project which does not have a future beyond one customer and something that isn’t enough to keep the production lines running long enough to make sure profitability. Even till date the A380 hasn’t turned around a profit for Airbus due to high initial costs and delays coupled with no new orders coming its way. What will remain to be seen is does the Emirates gamble of switching in anticipation of new model pay off? Or will Airbus stick to its guns and not invest in the A380neo project? This is a question only time can tell us.