In an editorial on Tuesday, the Wall Street Journal asked the (presumably rhetorical) question, is the Airbus A380’s demise an object lesson for socialists? The piece by WSJ’s editorial board member Holman W. Jenkins, Jr. is entitled, “Airbus’s Lesson for Young Socialists, Its A380 debacle shows how hard it is for state planners to outguess markets.” His argument is really problematic, but probably not in the way one might at first guess.
For starters, the argument isn’t really about socialism versus capitalism at all but about private versus state capitalism. I don’t disagree with the writer’s base assertion that private companies outperform government in making such guesses. I think he just picked a lousy example.
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First, a little background. The A380 is the largest passenger carrying aircraft ever with a capacity up to around 550 passengers on two levels in a typical configuration. It was conceived in the early 1990s as a competitor to the hugely successful Boeing 747, it was launched in the middle of that same decade and it entered service ten years later in 2006 after a series of predictable delays. Its development was subsidized by Germany, France and Britain to the tune of around $9 billion. Total development cost has been pegged at anywhere from $15 billion to $25 billion. The aircraft’s sales are, again, subsidized, albeit indirectly, by Gulf State airlines that are backed by their governments. The result is a marketplace for the A380 and for tickets to fly in it that’s dominated by Middle Eastern countries, which account for half of A380 deliveries. Those sales have been impressive in their own right—Airbus has delivered almost 250 of the half-billion-dollar behemoth, though none to North American operators. In fact, there are only a handful of airports in the United States the A380 can fly into, due to its size and special needs.
Back to the Journal. The assertion that the A380 should be an object lesson to young socialists is an odd one. One presumes that the A380 is a colossal failure when measured by the success of the Boeing 747. But it’s important to remember that the 747 was the result of a US Air Force program to develop a big air transport solution, a competition won by Lockheed with what would become the C-5 Galaxy. Boeing’s development costs for what would become the 747 were paid for only with the hope that the plane’s future would be wholly supported by direct government sales.
Like Airbus’s call on the A380, Boeing’s decision to launch the 747 was a wild ass guess that the market would be there for an airplane unlike any other that had ever been built. It turned out, there was such a market, though today, 50 years after its first flight, that market has dried up.
And it’s not because of anything about the 747. It is a far better airplane than the day it was launched, more efficient, more reliable and more economical to fly.
So why is the 747 going away? One word: ETOPS. Okay, that’s actually seven words crammed into a five-letter acronym. Regardless, ETOPS (Extended-range, Twin-engine Operational Performance Standards) is the rule that governs how far overwater a twin-engine plane can fly, and that distance, as you might not know, is pretty much as far as operators feel like going. Without going into great depth, the idea is that the plane needs to be able to fly somewhere and land if it loses one of its two engines, so it has to show it can do that and how it will do it. New twins from Boeing and Airbus are great at ETOPS. They can carry lots of (but not too many) passengers, and they can pull the whole thing off for much lower acquisition and operational costs that either the A380 or 747 can pull off.
So the demise of the Super Jumbo wasn’t a result of poor guesswork on the part of the state regarding the market for a plane. It was the result of everyone failing to see that twin-engine airplanes would be really good at flying from London to Sydney, etc. and would dominate the market for long routes.
There are probably better examples of socialist failures, regardless. First, you could go back a ways and look at the supersonic Concorde, one of the coolest airplanes ever, one that was heavily funded by the governments of France and the UK and which was unprofitable from the day it started flying until the day it was retired. But people love how forward thinking Concorde was, so they hate to bring that up. Or you could look at any number of projects Boeing has done for the government, like the V-22 Osprey, which is operationally really limited and not long for this world for a host of other reasons, on the least of which is the development of new technology that promises to obsolete the V-22 within the decade.
Am I sorry to see the A380 go away? (For the record, it will be around until about 2022). Not really. I am a huge fan of the Boeing 747, and I think the A380 is far more evolutionary than revolutionary and that its evolutions, like great size, are not necessarily smart ones.
But its demise is for the same reasons that the 747 is nearly out of orders and due to wrap up production around the same time as the A380. And those reasons are wholly unrelated to how either program got funded in the first place.