Yet More A380 Delays (Merged)

UPS and FedEx are both Package carriers and should really like the A380F . I dont see them cancelling it unless they dont get compensated for the 8-9 months of lost revenue that the delay will yeild them . The 380 basically favours only the PACKAGE carriers therefore both these carriers will like it !! Same cannot be said for the bulk carriers which will prefer other aircraft.

About UPS evaluating their A380 order.

http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-10-20T211912Z_01_N20193616_RTRIDST_0_AIRLINES-UPS.XML&rpc=66&type=qcna

More bad news for the 380 superjumbo , Airbus have reduced the IRR from 19% to 13% for the jet for a projected sales off 700 odd jets !! This is going to hurt the investors ( private banks and Govts. who commited because airbus promised IRR of around 20% and nearabouts ) . Airbus also admitted that the A380 wont make any money for around a decade !!

Next delay for A380: A decade before break even
By Nicola Clark International Herald Tribune

Published: October 19, 2006

PARIS Airbus is unlikely to break even on the A380 superjumbo jet for at least another decade, as massive cost over-runs linked to the delay of the twin-deck plane push back the timetable for recovering development costs, company figures released Thursday indicate

“The A350 is doomed,” said Doug McVitie, managing director of Arran Aerospace, a consulting firm in Dinan, France. “If this is the schedule for the A380, I don’t see how they are going to be able to finance it.”

Meanwhile, it was not immediately clear how the later break-even date might impact the ability of Airbus to repay about $3.7 billion in European government loans that it has received for the A380 project since 2001

http://www.iht.com/articles/2006/10/19/business/airbus.php

Maybe orders from India can get their backsides out of this black hole that is opening up. Am I too gloomy?

I doubt it personally as Indian carriers are in a Tight rope due to heavy losses and both boeing and airbus are predicting a blood bath very shortly . When a boeing or airbus exec. tells and recomends the airlines ( in this case indian domestic airlines) not to buy aircraft at that heavy rate and to concetrate more on making money it is a slight sign of worry dont you think 😉

And 420+ probably also means that the stretch version, those version for which that huge wing was designed, will not happen, and the current short 380 is flying with a too large wing.

Probably not it was based on the 270 claims of the A388 which was made by airbus last year . Basically what they have done is not change that no. of 270 but admitted that the first 150 of the total 159 orders till date wont be at any significant profit as they have seen delays ( very heavy delays with the grounding of the fleet , compensation , dry production line , empty factories , stalled Production certification program , Redesign wiring , Getting Catia5 etc etc etc) and that airbus will be starting to roll out profits from the 151’st airframe and 270 from then on will lead to the break even ( 270+150 = 420) . This leads to a very big question which I am very positive will be asked by financial planners , investors and media folks in that does the 151-420 Airframes produced factor in the same heavy profit per airframe that airbus envisioned the A380 to get when they conceived the program and thought that it would virtually monopolize the VLA ( freighter and PAX) market because if you look at the 270 no it definately does !!! The A380 in its -8 form is not monopolizing the market as yet and will infact be outsold in the freight market for bulk carriers by the more economical and more feasable 747-8 ( allready 44 freight orders in less then 10 months of launch) . Even if you consider AIRBUS”s own claims of a 700-800 A380 sales in the 20 year period they have allready seen their profits erode from the 271-800 airframes generating revenues to them to the 421-800 airframe generating +ive revenue to them and this is only with a single year delay , I would also like to add that Most big aviation think tanks , lease companies etc dont agree with the 800 A380 VLA market strategy and dont see it taking in that many sales in 20 years , infact it was to take in those sales it would need to sell as much as 40-45 aircrafts every year which would seem rather imposible give that the market has seen considerable fragmentation over the last 5-6 years and specially in the last few years with many airlines prefering 7773ER over their 744’s due to better RASM near equal CASM and greater flexibility . Moreover in the long term one has to consider tough competition for some Legacy customers such as British airways that will be placing atleast a dozen VLA aircraft order in the comming months which surely means that airbus will have to stay competitive with 747-8 pricing as boeing has much greater flexibility with the 747-8 as its developmental cost is only 1/4 of the A380 and it has allready sold close to 1/3 of the A380 total sales in less then a year of launch ( the PAX version hasnt even been launched yet) not to mention the CASM with the Genex and an upgraded 464 PAX for the I !! If the VLA market continues to fragment then we will see the A380 and 747-8I basically dying at the hands of aircrafts like 777eER , A350-10XWB and to a lesser extent the 787-10 !! And if it doesnt fragment at that rate boeing will surely launch the Y3 in the 2017-2020 timeframe in the 400-500 PAX market and as a second gen. CFRP aircraft and being a 2 engined aircraft it would offer excellent CASM even when compared to a 600 PAX aircraft due to low fuel burn which contributes something like 40% to CASM .

I think that they will not make money till 2020, which is another word for never. They depend so heavily on Gulf Arab sales, it is frightening. Maybe orders from India can get their backsides out of this black hole that is opening up. Am I too gloomy?
Btw, our estimations here of a little less than 450 units were quite right.

And 420+ probably also means that the stretch version, those version for which that huge wing was designed, will not happen, and the current short 380 is flying with a too large wing.

And furthermore I would disolve Airbus S.A.S. and fully integrate it into EADS N.V., to hide the losses and give Airbus the money to build the 350 and a 300/310 & 320 follow-on.

I wonder what it was before all the delays?

Last year they came out and said that the no. was pegged at 270 . What is real interesting is that if you take the 270 and subtract it from 420 you get a damn near figure to the no. of orders they have secured now for the A380 which further strengths the fact that AIRBUS TALKED ABOUT IN THEIR CONFRENCE CALL talking of the delays of the 380 that they will be making no profits of the first 150 jets delivered .

Andreas Sperl, Airbus’s finance chief, raised the break-even point from 270, the last official figure given before problems with the world’s biggest airliner’s wiring led to delays in the delivery schedule.

http://www.guardian.co.uk/airlines/story/0,,1926919,00.html

What is even more interesting is and perhaps the info that the media/investors going into the future will try to extract from Airbus/EADS (since it is a publically traded company) would be HOW LONG ?? Because the early prediction of the A380’s 800 sale ( big dream IMO) was stated to be at around 20 years which makes about 40 aircraft orders per year , however if the 420 gets pushed farther back from the 10.5 years then the breakeven no.s would become higher as the production line wont be performing at the same level airbus envisioned when they came out with the original Outlook and the 270 no. aswell as the 800 no. which was offered to govts. and other investors . Moreover the 420 figure assumes that the Ammount of profit per airframe would be the same (after the first 150 ) as what was envisioned before the launch and delivery of the program which IMO is a bit optimistic as we have seen huge discounts allready to sell aircrafts and as retainers for the delays . The A380 isnt getting a free run for orders AAMOF the Boeing 747-8 has sold close to 50 Jets in less then a year of its launch and expect some serious long haul legacy competitions such as the one to replace the dozen 744’s at BA . Airbus with the 380F have put themselves in a PACKAGE freighter market ( hence UPS and FEDEX) whereas boeing 744 and 748 are in the BULK market and have raked in huge freighter orders and will do so for the forceable future . The 747-8 is said to offer lower CASM and is more flexible interms of airport infrastructre , although the 380 will lavishly outsell the 747-8I (PAX) however it would still be competing with it and other offers ( some airlines would rather use 7773ER’s in stead of both these aircrafts with a 10 abreast ) therefore generating competitive pricing . IMO unless the 380-9 is released airbus will not be having a free run in the market and the -9 would cost them further 2-4 billion $ and another 50-100 aircrafts to reach breakeven !!

http://www.guardian.co.uk/airlines/story/0,,1926919,00.html
http://online.wsj.com/article/BT-CO-20061019-704403.html
http://seattletimes.nwsource.com/html/businesstechnology/2003312713_webairbus19.html

We’re having a good discussion here –

http://www.airliners.net/discussions/general_aviation/read.main/3051135/1/#1

Official statement from EADS about the A380: Break-even at 420 units.

I wonder what it was before all the delays?

Official statement from EADS about the A380: Break-even at 420 units.

i heard a rumour this morning that Singapore Airlines may cancel there order for the A380.

That report is a product of a media that loves to see a big company hurt and then take jabs at it from all direction ( happened to boeing last decade)

– Singapore isnt cancelling any order what they are THINKING ABOUT CANCELLING is their LOI to buy upto 9 additional A380’s over and above what they have allready ordered . LOI – Letter of Intent was signed at farnborough and in no way signalled an ORDER being PLACED therefore they simply cannot cancel an ORDER but can simply cancel their plans to buy more aircraft or deffer their plans to a later date .

i heard a rumour this morning that Singapore Airlines may cancel there order for the A380.

If Airbus become government owned or controlled or even steered, Boeing will win in any WTO argument they currently have with Airbus.

Not a good situation as it may cost Airbus a great deal in terms of fines or heaven forbid, restrictions.

You have got to feel for Streiff and all the other bright and hardworking men and women at that company , they have the ability to do so much yet operate under constraints . In my opinion they do have to hedge risks with other suppliers and produce aircraft cheaper to stay competitive and for that they had a very good plan to set up a A320 line in china where the weaker currency coupled with the lower cost of operational would mean a leaner and cheaper A320 which would mean more sales ( they are still contemplating this idea officially ) however with the german Aquisition of the stake I seiously doubt that they would want any big job cuts , france doesnt want any , Spain is allready gearing up for positioning itself so that it doesnt get any significant job cuts and the picture looks dark to me !! They were doing so well primarily due to the fact that they were comming up with effeciency and their competitor let the reigns loose for the large part of the 90’s (in addition to producing wonderful aircraft) , however boeing has streamlined considerably and is at par with them interms of manpower ( before it as seriously bloated) , they have shared developmenal risk with other partners ( as in the 787) and have diversified into doing what they do best rather then doing everything themselves . A competitive and lean boeing is something that could be very challenging to overcome specially when airbus has constraints on itself to bring logical effeciency .

What I fail to see is why they just don’t come to terms that they want AIRBUS to be govt sponsored company and leave it at that. Don’t even pretend it’s not. Then just add up and quantify the losses due to inefficiencies that come with govt. influence. Give out that amount from govts to airbus each year to compensate and leave it be. Hell, even invite boeing and other manufacturers to help add up the money so they don’t think they’re getting unloyal competition.

Of course, that’s not going to happen.

What we will see is more german and spanish influence. Which is not necessarily any worse than it is now. What is bad right now is that so many planes are made in so many places. Okay, leave the factories opened but streamline the process. Make ALL the fins in one factory, ALL the tails in another, ALL XYZ in third, etc. Also let those factories take other orders for other manufactureres, in case airbus doesn’t get as many orders as they can handle.

Looks like EADS/Airbus will be more nationalized again.
With the German state again as shareholder “to balance the French influence”.
Only German speaking sources so far.

Edit: Looks like this all will come down as Germany vs France.

German politicians talking about the failure to form a European company, as EADS/Airbus is a French thing with European appendices. Tell us something new, man!

here is another article from buisness week highliting the challenges the new CEO faces –

http://www.businessweek.com/globalbiz/content/oct2006/gb20061010_868852.htm?chan=top+news_top+news+index_global+business

As Distiller wrote, here in Germany is serious talk in about Airbus ! Well, more the german media… 😉 😮

Airbus denies report it wants to sell five German plants

Yup!!

Looks like Christian Streiff is out and Louis Gallois is in?

http://www.forbes.com/markets/feeds/afx/2006/10/09/afx3075386.html

If Airbus waits too long they could end up trying to compete against a BWB. I’ll admit I know nothing about it’s viability as a passenger aircraft though. You could either get people seeing it as a leap ahead or scared of it because it breaks the traditional mold. Who knows. Probably a subject for a seperate thread.

Neither Airbus nor boeing will spend the enourmous ammount of money required to change status quo and introduce a BWB type of aircraft in a timeframe before 2030 or so , with the 2 companies going neck to neck and fighting very hard for their narrow body orders this would simply not happen .

BTW here is a much detailed explaination of the A380 delays –

http://www.businessweek.com/globalbiz/content/oct2006/gb20061005_846432.htm?chan=top+news_top+news+index_businessweek+exclusives

Kingfisher would be compensated because they have a order of A330’s out there that they can seek discounts on . I wonder what would happen to their order of 5 A350 mk1’s that dont exist anymore and the bigger A350’s would be 2 years late ??