Hi
I,ve just noticed this artical about Airbus’s Long term survival. It dose’nt look good as things stand. But Would EDAS and its European Partners ever let Airbus Fail???
Anyway take a read of the following and see what you think.
Rising euro threatens Airbus long-term survival: EADS chief
1 day agoBERLIN (AFP) — The high level of the euro against the US dollar threatens the long-term survival of Airbus, the head of the European plane maker’s parent company EADS warned in an interview to appear Sunday.
If the situation continues, “we are going to have to cut our development projects” and “delocalise part of our production into the dollar zone,” Louis Gallois told the weekly Bild am Sonntag.
It was the latest in a series of warnings from executives of the plane maker sparked by the seemingly inexorable rise of the euro, which nudged 1.50 dollars at the weekend.
Airbus’s production is centred on Europe and its costs calculated in euros, but its sales are in dollars in common with the rest of the industry.
The current euro-dollar exchange rate is “very clearly a threat to our existence, not immediately but in the long term,” Gallois said. “On such a basis, we cannot reasonably make any plan for the future.”
On Thursday Airbus chief Thomas Enders warned that the company might have to take new measures to counter the euro’s rise against the dollar, which he said had “exceeded tolerable limits.”
Even though Airbus has reported plenty of new orders it expects “enormous losses” from foreign exchange effects, Enders told an Airbus works committee meeting in Hamburg.
“We are going to have to take another look at our industrial model,” Anders added. “It is not sufficiently resistant as it is.”
The Airbus chief executive warned that “radical measures” would have to be taken and said all spending by the company would have to be reviewed.
Gallois told AFP in September that restructuring plans for Airbus were “calculated on the basis of 1.35 dollars per euro and that every time the dollar loses 10 cents we lose one billion euros.”
Airbus has launched a cost-cutting plan dubbed Power8 that includes the elimination of around 10,000 jobs in an attempt to save 5.0 billion euros (7.4 billion dollars) by 2010.
It was drawn up in response to trouble with the company’s flagship A380 super jumbo jet programme that plunged the group into crisis last year.
The plan hit immediate problems, sparking concerns for jobs among workers and trade unions and made Airbus and EADS a target for German and French politicians.
According to next week’s edition of the German magazine Focus, citing an internal company document, Airbus envisages increasing the working week of its employees from 35 to 40 hours, with no extra pay.
By: swerve - 26th November 2007 at 14:28
You fail to see the real problem here. The backlog might well be the reason for the losses!
The contracts for these planes has already been signed. This also means the amount of money they will get, or more specifically the amount of DOLLARS they get, it set in stone. Now that the dollar has fallen in value, the income has also fallen in value.
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True, their income has fallen in value in terms of currencies that have risen against the dollar. Some of their costs (those in dollars, e.g. for US-built engines) have also fallen.
About that backlog: Many things to consider. e.g. what’s the lead time on components? Different for different components. Could be an opportunity to switch to lower-cost sources by the time parts have to be bought for some of that backlog. Contracts are now being signed for deliveries in about 2015. What level will the dollar be then? Short-term, it may well fall further. But in 7 or 8 years time?
BTW, not all of Boeings costs are in dollars, especially for that massive backlog of 787s, for which manufacturing has been deliberately spread around the world, with large parts made in Italy, Japan, etc, so Boeing isn’t laughing all the way to the bank on everything. It has a cost advantage on current deliveries, but Boeing knows very well that can change, & quite quickly.
By: tenthije - 26th November 2007 at 12:04
But I doubt it’s quite that bad. China’s just signed up for 110 A320 & 50 A330. Airbus has production booked up for years ahead.
You fail to see the real problem here. The backlog might well be the reason for the losses!
The contracts for these planes has already been signed. This also means the amount of money they will get, or more specifically the amount of DOLLARS they get, it set in stone. Now that the dollar has fallen in value, the income has also fallen in value.
A while ago Airbus mentioned that the worst they could imagine the dollar falling was 1,35 USD per the euro. Let’s assume the contracts where signed with that exchange rate in mind. At the moment the exhange rate is 1,00 EUR for 1,48 EUR.
In short, for the planes sold yesteryear Airbus is making 10% less money then expected. And then I am making the rather large assumption that Airbus has sold the planes with their then worst case exchange rate scenario in mind!
Of course this works both ways in that parts and components bought in USD have become cheaper. But that won’t offset all exchange rate losses.
Im sure Boeing is alot more worried than Airbus is over the dolllar rate. Boeing will be strangled if the dollar keeps dropping in value.
Boeing is laughing all the way to the bank! Their components are mostly bought in USD, their personnel costs are fully in USD, their development costs are completely in USD and their income is in USD. They have a much smaller currency risk.
Had Boeing been on the domestic market only, your argument would make sense. Mid to long term the American market will shrink and with it purchases too. But for the international duopoly that is the aviation market this is no risk. Even if the US market shrinks, there will still be sufficient purchases from abroad to keep Boeing afloat.
I agree, sell in Euros, that should make the job of selling a little easier.
Why would an airline agree with buying a plane in Euros when they know money can be made/saved by using ever declining dollars? I do not think the airlines will go with it. The current slump in the dollar rate is likely temporary only, Airbus will have to sit it out. Whether that is only for a few week, months, or years remains to be seen.
*** edit *** Just realised that this is the first time I actually had use from my economy classes! 😀
By: andrewm - 26th November 2007 at 11:41
I buy parts for my A320 simulator from a company that supplies hobbyist and airlines across the world. They are having a tough time so have reverted to Canadian Dollar (they are Toronto based) and have not seen falling sales as a result.
I a sure Airbus will survive but it might be severely effected. Im sure Boeing is alot more worried than Airbus is over the dolllar rate. Boeing will be strangled if the dollar keeps dropping in value. At least Airbus would only be hit in the short to medium term for now.
By: jbritchford - 26th November 2007 at 11:35
I agree, sell in Euros, that should make the job of selling a little easier.
There is less wrong with airbus itself and more just that it is a victim of the circumstances of the world economy at the present time.
By: kilcoo316 - 26th November 2007 at 11:20
They should detach themselves from the dollar then. Just sell in Euros.
Unfortunately (for Airbus) their principal competition will benefit from lower export prices as the US dollar continues to drop.
By: swerve - 26th November 2007 at 11:17
EADS couldn’t stop Airbus failing. Airbus is most of its revenues: it goes down, EADS goes down.
But I doubt it’s quite that bad. China’s just signed up for 110 A320 & 50 A330. Airbus has production booked up for years ahead.
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November 25, 2007 at 10:57 pm