How the Airbus A380 Squeezes into the U.S. Airline Model

ATLANTA ( TheStreet) -- The Airbus A380 is a very big airplane, and the U.S. aviation system is very slowly growing into it -- even though not a single U.S. carrier has ordered one.

That growth was evident last week, when Atlanta Hartsfield-Jackson International Airport said it will start work on gate and runway improvements to accommodate Korean Air service to Seoul on an A380, seating 407 passengers. The airport says flights could begin as soon as January.
The U.S. aviation system is very slowly growing into the giant Airbus A380, even though not a single U.S. carrier has ordered one.

Whenever the flights begin, Korean would fly in full cooperation with its partner, Delta ( DAL), which operates the world's busiest hub at Atlanta. Delta also has a trans-Pacific joint venture with Korean, complete with antitrust immunity, enabling the carriers to schedule and price jointly, to split revenues and to code share, writing tickets on one another's flights.

The two airlines already partner on A380 flights from Seoul to Los Angeles and New York and code-share on Korean A380 flights from Seoul to Hong Kong. Additionally, Air France A380 flights from Paris to New York and Washington Dulles are part of a trans-Atlantic joint venture with Delta. In each case, Delta and its partners take advantage of partnership models that barely existed when the A380 first flew in 2007, soon after its positive reception on its first New York visit.

The obvious question here is: Why would Delta ever want to order an A380? Its partners can operate the aircraft and Delta can get many of the benefits.

Aviation consultant Robert Mann says that because U.S. law restricts foreign ownership of U.S. airlines (to 25% of voting shares and 33% of capital) immunized joint ventures and code-sharing, all within a global alliance, provide a default model for global carriers to pool their economic interests.

So far, the A380 serves five U.S. airports: New York Kennedy; San Francisco, Los Angeles, Washington Dulles; and Miami -- all top international gateways. It is flown by seven airlines: Air France, Korean and China Southern, members of the Skyteam Alliance; Lufthansa and Singapore, members of Star; Qantas, a member of Oneworld; and Emirates.

But US airlines' passengers fly regularly on the A380. American code shares with Qantas on flights from Los Angeles to Sydney and Melbourne. United ( UAL) code shares with Lufthansa on A380 joint venture flights from Frankfurt to Miami and San Francisco.

Mann says he is surprised at the high number of A380s that have been sold -- Airbus has taken orders for 253 and delivered 69 -- and at the array of U.S. airports. "I would not have expected to see some of the non slot-restricted airports you see today," he says. "I underestimated the impact of joint ventures and antitrust immunity."

Initially, many experts assumed the principal A380 routes would involve congested, slot-controlled airports such as London Heathrow, Tokyo Narita and Kennedy. Of course, Mann notes, once airlines buy A380s, "They have to put them somewhere." In the U.S., he says, the only real choices are major international gateways and major hubs.

One thing experts find unsurprising is that no U.S. airline has ordered an A380. "It simply doesn't fill the needs of U.S. carriers, as opposed to flag carriers of other nations," aviation consultant Scott Hamilton says. "You have so many interior cities in the U.S. that now have non-stop overseas service." Before deregulation and a profusion of Open Skies treaties, nearly all U.S. international service originated in a handful of coastal airports. Besides, Hamilton says, U.S. passengers prefer more flights throughout the day to fewer flights on bigger airplanes.

Hamilton says the A380 is "technically a great airplane, but because of delays and other problems, it is still a cash drain on Airbus." One problem, he says, is that it came to market at the wrong time, just before the start of a global recession. "But the market is growing into the A380, just as it grew into the 747," he says.

For the A380 to fly to the U.S., airports -- such as Atlanta -- must make accommodations. Today, of the top seven U.S. international gateways, only Chicago O'Hare and Newark do not have A380 flights. A planned O'Hare construction project includes 2013 completion of a runway that can handle large aircraft including the A380 and the Boeing ( BA) 747-8, airport spokeswoman Karen Pride says.

Miami International spent $4 million to prepare for Lufthansa's daily A380 service to Frankfurt, which began in June. The aircraft is operated seasonally for European sun-seekers. From June through September, the load factor was 89%, airport spokesman Greg Chin says. "No other airline has officially informed us yet that they will be using the A380 at MIA, but a few have expressed interest," Chin says.

At Boston Logan, attention is focused on another new aircraft, the Boeing 787.

On April 22, Japan Airlines will begin Tokyo-Boston 787 service. "Midmarket airlines like Logan are better suited for long international routes with a plane the size of the 787, rather than the A380," airport spokesman Matt Brelis says. Nevertheless, the A380 has landed a couple of times at Logan due to weather-related diversions from Kennedy, and passengers have been able to disembark.

A Korean Air spokeswoman did not return phone calls.

-- Written by Ted Reed in Charlotte, N.C.

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