PARIS Dec 5 Airbus and its engine makers have
acted to try to shore up the value of second-hand A340 aircraft
as the European planemaker tries to reduce its financial
exposure to depressed market prices of an aircraft that it no
Airbus has told bankers, airlines and other owners of the
aircraft that it is working on plans to increase the maximum
capacity by 8 percent to 475 seats in a bid to make it more
attractive to airlines looking to replace Boeing 747-400s.
Britain's Rolls-Royce is also fine-tuning engine
service contracts so that airlines can maintain the A340's four
engines for a similar cost to servicing the two larger General
Electric engines on the rival Boeing 777, Airbus said.
The move comes after parent EADS said in its 2012 annual
report that Airbus was "currently engaged in taking mitigation
action to reduce the impact of asset value guarantees falling
due in the coming years relating to A340s in particular".
Airbus stopped making the A340 in 2011 after improvements in
engine technology caused airlines to switch to two-engined
models such as the Boeing 777 and, in future, the A350.
But it has been left with a financial exposure to the
aircraft after issuing guarantees underpinning its resale price
when striking deals to sell it during a period of weak demand.
Additionally, it faces potential losses on deals to buy back
old A340s as it sells new aircraft of other types, people
familiar with the matter said.
"We share a motivation with the finance community to keep
the A340 in service for a good while," said Andreas Hermann,
Vice President Freighters and A340 Asset Management at Airbus.
As of Dec. 31, 2012, EADS had 1.046 billion euros ($1.43
billion) of asset value guarantees outstanding, excluding 333
million euros where the risk of execution was considered to be
It says the risk covers just part of the residual value of
the aircraft and is included in total EADS provisions for asset
value risks of 712 million euros, as of Dec. 31 last year.
Airbus does not break out the guarantees by plane type but
analysts say the A340 makes up a significant share.
Rolls-Royce reported gross financial exposure from such
support of 569 million pounds ($929 million)at the end of 2012,
but does not break this down by aircraft or the type of
The British engine manufacturer provides powerplants for
later models of A340 and has been criticised for being
inflexible in its service contracts. The company has told A340
investors that it would address this as part of efforts to boost
interest in the A340, according to Airline Economics.
Industry sources say airlines have begun breaking up old
A340s because their parts are sometimes worth more than the cost
of scrapping the plane. Some have been trying to sell them
because of the perceived inefficiency of running four engines
instead of the now-standard two engines on long trips.
Some 25 second-hand A340s are currently posted for sale.
Airbus officials urged a special meeting of A340 owners
hosted this week by Airline Economics magazine to take another
look at the aircraft's value and argued it could hold its own as
a replacement for older Boeing 747-400s.
They said the combination of low prices on the second-hand
market and reduced maintenance charges would make the aircraft
attractive against the 777, whose arrival combined with high oil
prices is credited with driving the A340 out of production.
Boeing officials rejected the claim, saying Airbus would be
able to resume production if the jet's economics made sense.
Airbus said it is working to get the plane certified for 475
seats in all-economy seating, compared with the current approved
capacity of 440 seats in the largest version, in order to
address demand from charter operators.
This would involve 18-inch-wide seats laid out eight across
in a single economy class or else 17-inch-wide seats in a
tighter nine-abreast layout in the main economy cabin if
airlines also wanted to reserve some space for a business class
Airbus has recently been running a campaign to establish a
minimum standard seat width of 18 inches in economy class.