A380-MSN002 - Aeroscopia Museum

Times were apparently flush in October 2007 for Saudi Prince Alwaleed bin Talal, the billionaire investor. In that month he placed an order for the first VIP version of Airbus’ double-decker A380 plane, the world’s largest passenger airplane. It was such a momentous occasion that Airbus trumpeted the news in a press release the following month. “Prince Alwaleed’s order means that Airbus’ sales success in the corporate jet market now extends from its smallest aircraft, the A318 Elite, all the way up to its largest, the A380 Flying Palace,” Airbus executive John Leahy boasted in the release.

In the more than five years that have passed since then, lots of big numbers and fanciful scenarios have been floated about Alwaleed’s “Flying Palace.” Among them: that the Prince paid as much as $485 million for the massive plane, that he had elaborate plans to install a Turkish bath and prayer mats that electronically turned toward Mecca, that the plane had enough room to park a Rolls Royce onboard, and that Alwaleed was supposed to take delivery of the plane in 2013. All of those stories are wishful thinking.

What really happened to the plane is a tale of what appear to be outsized expectations for a speculative flip prior to the 2008-2009 global financial crisis. In October 2007, Alwaleed ordered a test flight version of the A380: Serial number 002, essentially a second hand plane, which one source said was about 23,000 pounds heavier than the current version of the plane. Another source says Alwaleed did a fantastic job negotiating with Airbus, and got the price down to $130 million, roughly 50% of which was to be paid in yearly installments following a $19.5 million down payment; the remainder was to be paid upon delivery. Airbus agreed to deliver the plane “as new,” with new engines and new systems in July 2010. For comparison, list price for a new A380 is more than $300 million; the A380-800 listed at $390 million last year.

Then the Prince’s core asset –Citigroup shares — began to fall in value in late 2007. According to sources who do not wish to be named, Alwaleed’s employees were instructed to find someone else to buy the plane. In March 2008, one employee found a U.K. aircraft leasing company, Chartwell Aviation, willing to pay $268 million, but Alwaleed rejected the deal, saying he wanted nothing less than $300 million, according to a source with knowledge of what happened.

When I visited Alwaleed in Saudi Arabia in October 2008 as the financial crisis was beginning to take hold, I asked him why he ordered the jumbo jet, especially since he already had a fully decked out Boeing 747. Does one person really need a plane designed to carry anywhere from 525 to 800 people? His answer: “I want to sell it to someone else and make some money.”

By the spring of 2010, the prince began negotiating to sell the plane to Saudi Arabia’s King Abdullah, according to two sources with knowledge of the deal. In May 2010, a contract was drawn up to sell the plane to King Abdullah for $150 million. By that time, Alwaleed had defaulted on several payments to Airbus, according to two sources, not so much because he didn’t have the money, but because he didn’t want the plane. At one point, sources say Alwaleed had to pay Airbus an additional $10 million to get a 6 month delay on the delivery of the A380.

On June 26, 2011, Airbus and Kingdom 5-KR-199 – the corporate entity Alwaleed was using to buy the plane – entered into a “novation agreement” that made the Saudi Ministry of Finance –essentially the King’s bank account — the new buyer. The contract was signed by the Saudi Minister of Finance, Airbus executive John Leahy and what appears to be Prince Alwaleed on behalf of Kingdom 5-KR-199.

In February 2012, ahead of the 2012 Forbes Billionaires List, Kingdom Holding Chief Financial Officer Shadi Sanbar insisted to Forbes that the A380 had not been sold, and claimed it as an asset owned by Prince Alwaleed worth $330 million. (FORBES discounted the value of the A380 for the 2012 Billionaires list to $150 million; it probably should have been half of that.) Sanbar’s insistence that Alwaleed still owned the plane in February 2012 contradicts the facts as laid out in the June 2011 agreement signed by the Saudi Ministry of Finance.

In February 2013, Kingdom Holding’s Sanbar told FORBES the A380 plane had been sold, without disclosing a buyer, a sales price, the date of the sale or an explanation for the sale. Asked again in early March about the A380 sale, Sanbar told FORBES: “The Prince has not disclosed nor wishes to disclose why he sold the plane. HRH [His Royal Highness] asserts that it is none of anyone’s business why he chose to sell the plane.”

Sanbar added that delivery of the A380 was completed at the end of 2012. A spokeswoman for Airbus told FORBES that the company “does not disclose information on our customers’ planes.” The press office of the Saudi Arabian embassy in Washington, D.C. had not replied to a phone call and two emails from FORBES as of press time. A source with knowledge of the plane says the A380 is still sitting on Airbus property in Toulouse, France, void of any interior decoration.