Branson warns of threat to A380 maker

they will immediately switch their 380s to Singapore-Australia

IIRC the kangaroo route was always going to be the first dedicated route for them anyways (same thing with emirates). I think when they have enough 380’s they will first push to do the Syd-SIngapore-LHR route . The pacific route will follow much later.

But LHR will be seeing almost double the A380 traffic then any US airport IMO , so its a pretty decent investment for them as most of the airlines that have ordered this airacraft will atleast use some for comming into LHR . LHR is probably the most suitable airport for the A380 .

That may well be, but there are still going to be many restrictions on traffic when an A380 is in; only certain taxiways and stands will be used, and there will be restrictions on which a/c can pass abeam an A380 on another taxiway. In fact, with the current wake vortex considerations, and the airfield restrictions, it might well prove to be the case that it will cause more disruption and delay than the extra passenger numbers warrant.

I’ve heard that although SIA will bring one in on the inaugural revenue earning A380 flight (rumour is that it’s in the contract with Airbus), they will immediately switch their 380s to Singapore-Australia.

This extract from this article which expalins a bit futher about the funding that’s received:

“After four years of public sniping, the European Commission and America’s trade officials agreed a deal in 1992 that ruled out production subsidies (the British and German governments wanted that too) and limited refundable launch aid to Airbus to 33% of the development cost of a new model. The Europeans agreed that support would go only to projects likely to repay the money within 17 years; and that the interest rate for the first 25% of refundable loans would be at government rates, but the rest would be at one percentage point above that. Furthermore, repayments would be by a royalty on sales (to continue even after full repayment), rather than only at the end of the loan period.”

Found a couple of “interesting” articles to read:
Measures affecting Trade in Large Civil Aircraft

and

Airbus v Boeing revisited: international competition in the aircraft market

The investment is repayable at a real rate of return, usually via levies on sales of the product.

Levies on sale ? What if the product flops and doesnt sell ? How is the money recovered then? Is that why they call it a Risk Sharing Investment?

Also this speaks only of the UK grants which i beleive are available to all qualified aerospace companies with UK plants,what about french and german financing .

The US airports are not special in that regard, LHR is going to be the same

But LHR will be seeing almost double the A380 traffic then any US airport IMO , so its a pretty decent investment for them as most of the airlines that have ordered this airacraft will atleast use some for comming into LHR . LHR is probably the most suitable airport for the A380 .

interesting article..

US airports plan ground restrictions for A380

http://www.theage.com.au/news/travel/us-airports-plan-ground-restrictions-for-a380/2007/04/30/1177788002519.html

The US airports are not special in that regard, LHR is going to be the same.

Hope you’ll allow time for this answer to be developed! (Please can I have A380 delays worth of time ?;) )

House of Commons Written Answer:

Source: Hansard

Asked by: Andrew Miller (Ellesmere Port & Neston, Labour)

To ask the Secretary of State for Trade and Industry what the cost (a) gross and (b) net after loan repayments was of support by the UK Government to Airbus programmes in each year since 1985.

Answered by: Margaret Hodge (Minister of State (Industry and the Regions), Department of Trade and Industry)

Launch investment is a risk-sharing Government investment in the design and development of civil aerospace projects in the UK. It is not a loan. The investment is repayable at a real rate of return, usually via levies on sales of the product.

The amounts paid to Airbus in launch investment and the amounts received from Airbus in repayment of launch investment in each of the years from 1984-85 to 2005-06 inclusive are set out in the following table, with the net figures (Receipts-Payments) in the final column.

£ million
Year… Paid.. Rec’d. Diff
1984-85 0046.5 0000.0 -0046.5
1985-86 0073.0 0000.0 -0073.0
1986-87 0086.0 0000.0 -0086.0
1987-88 0044.5 0000.0 -0044.5
1988-89 0087.8 0000.0 -0087.8
1989-90 0122.5 0010.0 -0112.5
1990-91 0134.0 0034.0 -0100.0
1991-92 0003.5 0055.4 -0018.1
1992-93 0028.6 0040.9 +0012.3
1993-94 0000.0 0029.4 +0029.4
1994-95 0000.0 0019.2 +0019.2
1995-96 0000.0 0029.3 +0029.3
1996-97 0000.0 0042.7 +0042.7
1997-98 0000.0 0085.4 +0085.4
1998-99 0000.0 0134.6 +0134.6
1999-00 0000.0 0167.4 +0167.4
2000-01 0000.0 0119.7 +0119.7
2001-02 0136.0 0103.4 -0032.6
2002-03 0139.0 0088.7 -0050.3
2003-04 0255.0 0078.3 -0176.7
2004-05 0000.0 0091.7 +0091.7
2005-06 0000.0 0110.5 +0110.5
Total.. 1226.4 1240.5 +0014.1

Therefore in that 20 year period, more was repaid than lent. Trying to find more recent figures.

——-

This extract from Hansard 06 Dec 2006

“I entirely agree with the hon. Member for Northavon that Airbus is a success story. I did not recognise his figures and if I am wrong, I will write to him. The figures that I have for launch investment are in the region of £1.2 billion and the return has been around £1.3 billion, of which £530 million went into the A380 and £700 million into the A320, the A330 and the A340.”

Hansard 25th May 2005

“, repayable launch investment is a sensible decision for the British taxpayer because it is repayable. For example, the Government supplied £250 million in repayable launch investment towards the A320. Repayments from Airbus UK to the Treasury now total more than twice that amount and continue to grow with each aircraft, with royalties being paid.”

You say Airbus would love it if they didn’t have to repay more than the amount lent to them…….well wouldn’t any borrower love it if they didn’t have to pay interest? Are you saying that they have to pay back more than they would have had to pay if they had borrowed via conventional means? If that is so, what was the benefit of the government backing? Surely they could have attracted private capital at some point.

Although not up to date on economics of the industry at this point in time , i can pretty much say that the incentive to seek govt. funding through loans etc is because airbus can get favourable rates of interest as compared to going to the open market seeking funding . Case in point would be with the A350 development , A financial investor would obviously be weary of putting money into airbus’s new product specially when the previous one was billions over budget , late by years and has not great orders to show so far . Airbus I believe does also go to the gen. markets to seek funding and has done so before . Another advantage of seeking govt. funding and loans is that the govt. will be reasonably less visitious in asking money back with interest because they can always consider a healthy airbus as a part of the social economic structure .

The money is repayable whether or not the aircaft is making a profit – I’m pretty sure you’ll be able to find some docs on the web about the paying back of the loans. I daresay Airbus would love it if they didn’t have to keep on forking out money on A320s as I’m led to believe that they have repaid substantially more than the amount of money lent to them for that project (err..that sentiment seems rather reminiscent of the company I work for!) .

Several points/questions:
1. How can Airbus continue to pay back if the product is unprofitable? This seems illogical to me, its not as if they can just print money. Doesn’t everyone have to pay back their loans, or declare bankruptcy?

2. If one product is unprofitable, they have to steal assets from another product line, or borrow more money, or get a golden investor, etc. But at some point most real companies have to macroeconomically generate cash.

3. You say Airbus would love it if they didn’t have to repay more than the amount lent to them…….well wouldn’t any borrower love it if they didn’t have to pay interest? Are you saying that they have to pay back more than they would have had to pay if they had borrowed via conventional means? If that is so, what was the benefit of the government backing? Surely they could have attracted private capital at some point.

Please elucidate.

The A330 is looking more like a tool for compensation for A380 delays and A350 delays which is sad because in its class it is head and shoulders above the competition currently . QR and EK are expanding like crazy , i wouldnt be surprised if EK bought 15 A380’s for there new LCC venture Clark has been talking about . About the A350 , the A330 compensation might work out for some airlines who can lease cheap A330’s as interim however with boeing thinking about expanding production rate beyond 2010 this plan might hit a roadblock. QR is allready alledged to be behind the 30 boeing 787 order (By SpI) so does that take from the 60 or so A350’s they wanted to order or not is beyond me . I think that eventually both EK and QR will order both 787 and A350 while prefering the 8 and 9 varient of the former and the 1000 varient of the latter in the long run!

Just as EK and Airbus are reported to have come to a conclusion on the compensation deal.
Coincidence? I think not.

Get 4 free A330s when you order an A380 :diablo:

I believe there’s an interesting article in tomorrow’s Flight International. Something along the lines of EK in talks for 60 A330s and QR thinking about 40 A330s, plus rumours abound of another 15 A380s for EK which may be announced shortly.

Lets see how this turns out , IMO the A380’s flyin into the US wont have any extra restrictions put over the long term , maybe a few early on but then once it is in service the concerned bodies will turn around !

interesting article..

US airports plan ground restrictions for A380

http://www.theage.com.au/news/travel/us-airports-plan-ground-restrictions-for-a380/2007/04/30/1177788002519.html

The problem with the A380 is two fold . Firstly it somewhat competes with the 748 because the CASM of the 748 is said to be very competitive , secondly the fragmentation of long haul flying due to the ability of the smaller jets (the 330’s , 340’s 777’s) to fly long haul at very competitive CASM’s (but with better RASM) when compared to there competition ie. 744 . THIS will remain somewhat similar with the introduction of the 789 , 787-10 and A350-900 and 1000 . Infact the single most competitive aircraft for CASM to the A380 *(and the 748) will most likely be the A350-1000 . It would definately eat into a lot of the potential market for the 380 just like the 777 has done with the 744 in the past .

Secondly by going into the niche market , and then loosing billions through mismanagment , delays etc and by completely underestimating boeing they have let go much control of the potential 5000 aircraft mid sized market where they had a killer product in the A330 . Boeing is close to reaching 600 orders firm for the 787 and if one adds the options and the slots aswell the book is most likely very close to the 900-1000 mark , and this is before Unveiling and much before EIS . Airbus is yet to firm up any of its models for the A350 and is years behind , yet other then being few inches wider ( XWB – still isnt as wide enough as its half competitor (designed to compete against 787 and 777) the T7 ) it is basically a Me 2 aircraft from what we have seen. Doesnt use All CFRP fues ( remains to be seen how the panel approach pans out) , doesnt use bleedless engines etc etc, it remains to be seen what happens when they firm up configuration in the comming years of what becomes of there promises and what changes the aircraft goes through (it has gone through so many allready) . So was it worthwile hedging billions onto a niche market , getting stuck with dwindling sales and hickups of high magnitude and loosing out on the biggest widebody boom of the decade ?

Moreover because airbus is stuck up with the A380 , and will be doing there best to get it back on track and then trying to deliver more and more to imrpove the cash flow , instill the Cost saving measures , and getting funding for the A350 family , boeing would be investing in the 737 RS program because they are selling widebodies like crazy , and widebodies have higher profit margins ( well known to the industry) . Just look at there order value in the last 2 years and this year , it is miles ahead of airbus . Boeing has no cash flow issues , the Profit is rising by the quarter , and they are selling large ammounts of 787’s , and 777 and will do so well into he future . The 747-8 program has so far done well and the F version alone will yeild them decent-good returns given that it has ZERO competition in its class uptil perhaps 2014-2015 and the I version can hang on and pick up order here and there.

No matter which way we look at it , airbus locked in upto 20 billion dollars into a program which has yeilded not much and isnt looking to yeild major cash flow in the comming 5-8 years . While the A350 program which comes in the biggest market for commercial aircraft by value is years behind its competitor and comes at a time where airbus’s reputation is not the best . The competition is so far doing great with the 787 and is looking to improve the 777 to better compete in the short term with the A350 and is delivering the 787 .—> soon will start on the NB replacement

The A380 has created a major drain on the cash flow into airbus and has sacrifised there position to a GREAT extent in the most lucrative market in the buisness ( mid sized long haul market – 5000 aircraft over 20 years) For this reason alone one can conclude that if one looks into the comming decade the A380 has hurt airbus’s position , had airbus gone into developing the A350 at the same time or earlier then the boeing 787 (and pushed the technology to the limit) and then focused on the 320E they would have been in a much better position despite of what boeing would have done with te 744 or 748 . The A350-100 EIS in 2010- would have killed any 747-8 , 9 or 10 in almost everything except maybe freight !!

[QUOTE=J Boyle;1108416

Who would lose the “development costs” funds?
Airbus or it’s various state sponsors who gave them loans repayable if and when the plane makes a profit?
[/QUOTE]

The money is repayable whether or not the aircaft is making a profit – I’m pretty sure you’ll be able to find some docs on the web about the paying back of the loans. I daresay Airbus would love it if they didn’t have to keep on forking out money on A320s as I’m led to believe that they have repaid substantially more than the amount of money lent to them for that project (err..that sentiment seems rather reminiscent of the company I work for!) .

I think things will be brighter for Airbus when they actually deliver the first few a/c and they are finally put into service.

Just some other questions though…

Does anyone know when and where the first commerical flight of the A380 will be? Am I right to assume that because Singapore Airlines are the launch customer, it will probably be first used on a Singapore to London (one would hope?)!

With all the announcements from airlines saying that they have cancelled their orders for the A380, can anyone provide a revised and accurate list of the number of A380s that are still on order, and which airlines are still due to take delivery of them?

Thanks gents, I stand corrected & updated. Bex

Ere, they only cancelled their orders coz the A380F coz those nice chappies in Tolouse offered them nice deals on brand new A330 instead. Bex

No they didn’t. Fed Ex went away and bought Boeings.
http://www.msnbc.msn.com/id/15605861/

UPS originaly had loads of A300Fs on order but swapped the vast majority for an A380F order. They now cancelled that too.
http://blog.seattlepi.nwsource.com/aerospace/archives/112255.asp

Neither have ordered anything else from Airbus yet.

It’s worth remembering that Boeing delivered ninety three (93) 747s in 1970, the second year of deliveries. This huge influx of cash early in the program paid down a lot of the development costs.

A fair point, well made.

It’s also worth remembering that, for an 18 month period, Boeing no attracted orders at all for the B747 and that at one point, thanks to problems with the JT9D engine, 30 B747 airframes were standing idle at Everett.

All of which goes to show what a fantastic job Boeing made of recovering from this crisis and, as we all know, the company went from strength to strength. But it was a damn fine-run thing at the time.

Maybe Airbus can do the same? Who knows, who can tell, etc, etc?

Ere, they only cancelled their orders coz the A380F coz those nice chappies in Tolouse offered them nice deals on brand new A330 instead. Bex

So will SRB be tempted by some nice new A330’s too…? Don’t think so somehow. I’ll be interested to see where the first commercial A380 cancellation comes from. SRB (IMHO) is making the noises, so far.