TOULOUSE, France (Reuters) - Europe’s Airbus is scrapping production of the A380 superjumbo, with lackluster sales forcing it to abandon a dream of dominating the skies with a 21st century cruiseliner.

The world’s largest airliner, with two decks of spacious cabins and room for 544 people in standard layout, was designed to challenge Boeing’s legendary 747 but failed to take hold as airlines backed a new generation of smaller, more nimble jets.

Confirming a shake-up first reported by Reuters, Airbus said on Thursday the last A380 would be delivered in 2021.

The move comes after Emirates - the largest A380 customer - was forced to reduce its orders for the iconic superjumbo after an engine dispute and a broader fleet review, opting to order a total of 70 of the smaller A350 and A330neo instead.

Without the anticipated level of demand from the Gulf heavyweight, Airbus said its assembly lines would dry up.

“This was a joint decision. We cannot run after illusions and we have to take the only sensible decision and stop this program,” Airbus Chief Executive Tom Enders said.

Airbus said it would enter talks with unions in coming weeks over the 3,000-3,500 jobs potentially affected. Enders later said the company could not guarantee all would keep their jobs.

The jobs at risk are mainly in France and Germany but there could also be an impact in Spain and Britain too.

Airbus took a charge of 463 million euros for shutdown costs, but is expected to be forgiven some 1 billion euros of outstanding European government loans under a funding system that stands at the center of a trade dispute with Boeing.

Airbus shares rose 5 percent on investor relief that Airbus would close a long-running chapter of losses on the A380, also buoyed by stronger than expected 2018 results.

Airbus will produce 17 more of the planes including 14 for Emirates and 3 for Japanese airline ANA.

As part of the restructuring, Emirates placed a new order for 40 A330-900neo jets and 30 A350-900 aircraft, partially restoring a purchase of A350s which it canceled in 2014.

Responding to behind-the-scenes concerns from airline customers from Asia to Europe, Enders stressed Airbus would continue to support the A380 as long as it remains in service.

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LEADING BUYER ‘DISAPPOINTED’

Emirates, which had built its global brand around the A380 and Boeing 777 and which has 100 of the Airbus superjumbos in its fleet, said it was disappointed by the closure.

“Emirates has been a staunch supporter of the A380 since its very inception,” said Emirates Chairman Sheikh Ahmed bin Saeed al-Maktoum.

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“While we are disappointed to have to give up our order, and sad that the program could not be sustained, we accept that this is the reality of the situation,” he added.

The decision came after Emirates failed to reach an engine agreement with Britain’s Rolls-Royce, which said on Thursday it noted the decision to shut down the program.

The A380 will remain a pillar of the Emirates fleet well into the 2030s, the airline said.

Emirates’ local rival Etihad of Abu Dhabi also disclosed it was cutting some Airbus and Boeing jet orders, highlighting growing questions over the growth of Gulf airlines.

Making its maiden flight in 2005, the A380 was a major step in Airbus’s efforts to compete on equal terms with Boeing and challenge what had been a cash cow for its arch-rival.

But sales of the industry’s largest four-engined jets have fallen due to improvements in lighter twin-engined alternatives, such as the Boeing 787 and 777 or Airbus’s own A350.

“What we are seeing here is the end of the large four-engined aircraft,” Enders said after halting the program in his last major decision before stepping down in April.

“There has been speculation that we were 10 years too early; I think it is clear that we were 10 years too late,” he added.

The prospect of a premature halt to A380 production emerged last month as part of a restructuring of Emirates orders first reported by Reuters.

On Wednesday, Reuters reported that Airbus was poised to ax the superjumbo.