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Why Not Price Airbus' Planes In Euros?  
User currently offlineA380900 From France, joined Dec 2003, 1091 posts, RR: 1
Posted (9 years 5 months 3 hours ago) and read 5983 times:

Pretty much what the topic says. Why is Airbus pricing its planes in dollars? By pricing them in Euros, they would suffer less from exchange rate shift and they could get dollar components for peanuts.

44 replies: All unread, showing first 25:
 
User currently offlineZvezda From Lithuania, joined Aug 2004, 10511 posts, RR: 64
Reply 1, posted (9 years 5 months 3 hours ago) and read 5908 times:

Because deals are worked out over long periods of time and most customers prefer to account in dollars. The customers don't want a deal that changes minute-by-minute as exchange rates fluctuate.

User currently offlinePelican From Germany, joined Apr 2004, 2531 posts, RR: 8
Reply 2, posted (9 years 5 months 3 hours ago) and read 5855 times:

The customers don't want a deal that changes minute-by-minute as exchange rates fluctuate.

This would only apply to US-customers (and from states with a fixed exchange rate).

pelican


User currently offlineF.pier From Italy, joined Aug 2000, 1523 posts, RR: 10
Reply 3, posted (9 years 5 months 3 hours ago) and read 5850 times:

I don't agree, because exchange rates change and currencies go up and down. Airbus must pay almost everything in Euro, so I think they should offer everything in Euro.

And then, I think it's stupid that European Airlines change money into dollars to pay an European supplier.


User currently offlineZvezda From Lithuania, joined Aug 2004, 10511 posts, RR: 64
Reply 4, posted (9 years 5 months 2 hours ago) and read 5824 times:

While it would be more convenient for airlines in the Eurozone and countries fixed to the Euro (included Lithuania, my home, for example), virtually every firm in the world outside Europe prefers to do international trading in US dollars. Europeans have been trying to buy petroleum from Russia and from the Middle East in Euro, but all the sellers say "Pay in dollars or no oil."

For some reason, much of the world seems to think of Europe as an island off the coast of England. It's still easier to spend GBP than EUR in much of the world. That may change as the Eurozone expands and people around the world get used to Euro.


User currently offlineA380900 From France, joined Dec 2003, 1091 posts, RR: 1
Reply 5, posted (9 years 5 months 2 hours ago) and read 5775 times:

It's not over. I'm sure some country will start selling oil in Euro in the near future. I'd rather have my money invested in a currency with a central Bank in Frankfurt than in a currency whose underlyings depend on Mr Bush's decisions.

User currently offlineTrex8 From United States of America, joined Nov 2002, 4497 posts, RR: 14
Reply 6, posted (9 years 5 months 2 hours ago) and read 5749 times:
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>I'd rather have my money invested in a currency with a central Bank in Frankfurt than in a currency whose underlyings depend on Mr Bush's decisions.

the real issue is the US trade deficit and the deficit spending by especially the present administration.
aerospace is a global industry, the A380 has almost half its suppliers in the US and quite likely over half the 7E7 will be built outside the US, while the Euro is doing great right now, and may continue to do so in the short term, the US$ has a longer track record of being a more reliable currency, though that may be changing!


User currently offlineKen777 From United States of America, joined Mar 2004, 8047 posts, RR: 8
Reply 7, posted (9 years 5 months 1 hour ago) and read 5721 times:

A lot of the world has already moved their money out of the dollar, which is why it is down.

As for major capital expenditures like aircraft the manufacturer had better have hedged against the dollar decline or they are going to have some hits on their profits. I think Airbus is pretty well covered up to about $1.35 (as I remember A discussing the issue) but if the Euro hits, say $1.50, then A is going to have a problem with delivering planes a lot cheaper than they planned. If this is a long term situation they the 380 may be taking a significant hit on launch orders. Playing the dollar game has turned out to be as complicated as the engineering side of aircraft development.


User currently offlineSrbmod From , joined Dec 1969, posts, RR:
Reply 8, posted (9 years 5 months 1 hour ago) and read 5685 times:

The reason is probably because a large number of the aircraft leasing and finance companies are US-based or are the overseas division or branch of an American company. The prices are quoted in US $ so that these companies don't have to worry about the fluctuation in the dollar. Much like the British Pound used to be, the US Dollar is the currency of choice for many people in countries where the local currency is very weak by comparision. The Euro is making a bid for this role for the future due to the decline of the Dollar's value against pretty much every single major currency in the world.

User currently offlineAirbusCanada From Canada, joined Nov 2004, 312 posts, RR: 0
Reply 9, posted (9 years 5 months ago) and read 5642 times:

100% of airbus’ revenues are in US Dollars.
50% of Airbus’ expenses are in US Dollars. And the Other
50% of Airbus’ expenses are in EURO.

That does not mean every airline pays US $ for their aircraft purchase.
For example Emirate’s $26 billion dollar mega order will be paid off in twelve different currencies to create a cushion against volatile currency rates. For example, a portion of that order is financed by British banks and Emirates will pay them in Pounds and the banks will pay Airbus in US dollars.
.


User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 10, posted (9 years 5 months ago) and read 5639 times:

On the contrary, the dollar won't go down too much more because a lot of countries either depend on US customers for sales or compete with US exporters. If the dollar goes down further, US manufacturers and workers will become frighteningly competitive in international markets and will regain marketshare in the domestic market that they lost due to the high dollar. The increased corporate profits and increased income tax base from increasing employment will lead to a reduction of budget deficit. The increased economic activity has already reduced the projected deficit for 2004 from over $500 billion to closer to $400 billion. US exporters are the most competive they have been since 1997 when the dollar started its ascent as a result of overseas investors searching for a safe haven after the Asian financial crisis. The dollar's value is on a trade weighted basis roughly where it was during the last year of Clinton's first term.

Anyway, as long as Europe pursues anti consumption policies via high Eurozone sales/VAT taxes and high income taxes, Europe will never be the customer of choice and countries that are trying to achieve low unemployment rates via exports won't have a reason to revalue their currencies in relation to the dollar. Investors may be willing to put their money in Euros in the short term, but since interest rates aren't that high the only way they will make money is due to an appreciation in the Euro's value. Unfortunately for Europe, European companies themselves will become less competitive with the rise of Euro so their stocks will be less attractive in the long run. And because of restrictive employment policies and high costs of employment in Europe, European companies and workers won't adapt well. It takes a strong, dynamic economy to weather an extremely strong currency. The US did fairly well inspite of the overvaluation of the dollar and assosciated bubble from 1998-2002. Japan didn't tolerate the high yen and associated bubble very well and suffered a decade long hang over from its ill effects. Europe will fare worse unless they change their policies.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineBuyantUkhaa From Mongolia, joined May 2004, 2828 posts, RR: 3
Reply 11, posted (9 years 4 months 4 weeks 1 day 21 hours ago) and read 5523 times:

AirbusCanada has given the solution, which in a simplified form could be that a plane costs e.g. $100m + €100m or something similar. While planes might be LISTED in dollars, the actual payment deal could have any shape, as mentioned above. And as any plane purchase always involves a good deal of negotiations, I'm sure "more-than-one-currency" solutions can be part of those negotiations.


I scratch my head, therefore I am.
User currently offlineERJ170 From United States of America, joined Apr 2004, 6731 posts, RR: 18
Reply 12, posted (9 years 4 months 4 weeks 1 day 20 hours ago) and read 5513 times:

Perhaps here is another aspect...

Though the current US administration is hurdling the country into a vast pit of hell, the longest his term can be is 8 years.. which is actually a short time. Then someone new comes in .. so the administartion has a very short term effect on the value of the dollar.

Also, the US Dollar is an industry standard. The Euro is the new kid on the block. It takes time. But the US Dollar will be the standard for the most part for many many years to come. The US Dollar is backed by some hard evidence (ie, Fort Knox and others) and the dollar will not devalue enough to cause a serious economic problem.



Aiming High and going far..
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 13, posted (9 years 4 months 4 weeks 1 day 20 hours ago) and read 5499 times:

Actually I think the dollar still has room to fall even further. Just this spring China and Japan spent an enormous amount of money to prop up the dollar leaving them with a combined $900 billion in U.S. treasuries. (Which are now declining in value) Foreign central banks are not going to pour money into a declining value asset forever. Investors have all but quit.

This would be a real bad time for Airbus to start pricing in Euros.


User currently offlineWarren747sp From United States of America, joined Feb 2004, 1136 posts, RR: 0
Reply 14, posted (9 years 4 months 4 weeks 1 day 20 hours ago) and read 5493 times:

Airbus should price their planes in Euros and see how long they can maintain their market share.
The cheap dollar is terrific for US export and great weapon to use against unfair trading practices.
W



747SP
User currently offlineAirbusCanada From Canada, joined Nov 2004, 312 posts, RR: 0
Reply 15, posted (9 years 4 months 4 weeks 1 day 19 hours ago) and read 5468 times:

Airbus should price their planes in Euros and see how long they can maintain their market share.
The cheap dollar is terrific for US export and great weapon to use against unfair trading practices.
W


Dont' understand what you meant?
if they price their plane in Euro now, it will actually generate more profit for them at least in the short term as 50% of their expenses are in US dollar.


User currently offlineUkair From United Kingdom, joined Mar 2001, 283 posts, RR: 0
Reply 16, posted (9 years 4 months 4 weeks 1 day 19 hours ago) and read 5439 times:

What about paying for a new aircraft in 'cash' .. that would be funny.

User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 17, posted (9 years 4 months 4 weeks 1 day 19 hours ago) and read 5412 times:

Though the current US administration is hurdling the country into a vast pit of hell, the longest his term can be is 8 years.. which is actually a short time. Then someone new comes in .. so the administartion has a very short term effect on the value of the dollar.
Have you ever considered that an overly high currency can be a bad thing, and that the current policies are a good thing? A high currency is a good thing for consumers and retailers (and their employees) and perhaps for some users of imported materials, but it is a bad thing for exporters of raw materials and manufacturers and their employees. Why else would Asian countries try and keep their currencies down? By the way, the dollar is more or less where it was in the middle of the Clinton presidency on a trade adjusted basis.

Dont' understand what you meant?
if they price their plane in Euro now, it will actually generate more profit for them at least in the short term as 50% of their expenses are in US dollar.

Pricing in Euros protects Airbus's profits but he was talking about marketshare. Pricing in Euros doesn't protect customers of Airbus, who would have to swallow the cost of an appreciated Euro or have to hedge against increases in the Euro or else look elsewhere for cheaper aircraft. To maintain marketshare Airbus would have to respond by cutting prices in Euros to become competitive with Boeing's dollar based prices, which would eat into profits unless they source more parts from non-Eurozone suppliers.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineAirbusCanada From Canada, joined Nov 2004, 312 posts, RR: 0
Reply 18, posted (9 years 4 months 4 weeks 1 day 18 hours ago) and read 5398 times:

Pricing in Euros protects Airbus's profits but he was talking about marketshare. Pricing in Euros doesn't protect customers of Airbus, who would have to swallow the cost of an appreciated Euro or have to hedge against increases in the Euro or else look elsewhere for cheaper aircraft. To maintain marketshare Airbus would have to respond by cutting prices in Euros to become competitive with Boeing's dollar based prices, which would eat into profits unless they source more parts from non-Eurozone suppliers.

You forgot the other side of the coin.
Let's say Airbus start using Euro as standard currency to sell Aircrafts and pay their suppliers.

Now let’s just say the dollar goes down 10% against other currencies.

Airbus lowers its prices by 10 percent to stay competitive.

But airbus will also save substantial amount by paying its suppliers in Euro, also it will save money on imported machinery.

On the other had Boeing has to pay more $$$ to its overseas subcontractors and pay more for imported machinery.


In A global organization, like Boeing and Airbus, I don’t’ think there will be any long term effect no matter what currency they charge to sell their planes.




User currently offlineA380900 From France, joined Dec 2003, 1091 posts, RR: 1
Reply 19, posted (9 years 4 months 4 weeks 1 day 18 hours ago) and read 5372 times:

Well, I still think Airbus should go for all euro trading. Now is the time. The Eurozone should also push for trading oil in Euro. All producing countries don't have to make the switch at the same time. One or two could be a start.

The dollar is weak nowadays, if the Euro does not take advantage of period of weak dollars to get a bigger pie of the international trade and reserves then it never will and there was no point in building this currency. It's time to go for the jugular. I would have expected this to take much longer but since the US are erring with Georgie Boy, let's make the most of it.


User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 20, posted (9 years 4 months 4 weeks 1 day 16 hours ago) and read 5325 times:

You forgot the other side of the coin.
Let's say Airbus start using Euro as standard currency to sell Aircrafts and pay their suppliers.

Now let’s just say the dollar goes down 10% against other currencies.

Airbus lowers its prices by 10 percent to stay competitive.

But airbus will also save substantial amount by paying its suppliers in Euro, also it will save money on imported machinery.

On the other had Boeing has to pay more $$$ to its overseas subcontractors and pay more for imported machinery.

In A global organization, like Boeing and Airbus, I don’t’ think there will be any long term effect no matter what currency they charge to sell their planes.


That is assuming that Boeing is paying foreign contractors in their local currency as opposed to contracts in dollars, or that Boeing and Airbus source the same fraction of parts from various countries. But that is not the case for any aircraft either company sells currently. Airbus and Boeing's current aircraft have more content from Europe and the US respectively, which means there is an advantage to be gained from currency shifts. And while Airbus and Boeing as higher level integrators may be able to source parts from cheaper locations to stay competitive, the many aerospace suppliers in the US and Europe that sell to these companies will be effected by the currency shifts.

The dollar is weak nowadays, if the Euro does not take advantage of period of weak dollars to get a bigger pie of the international trade and reserves then it never will and there was no point in building this currency. It's time to go for the jugular. I would have expected this to take much longer but since the US are erring with Georgie Boy, let's make the most of it.

Are you sure Europe really wants this? I don't think they can handle the implications of being the major reserve currency with the current economic state of France and Germany. I seem to recall various Euro politicians complaining about the weak dollar over the last year. Yeah, its helping with inflation, but its making domestically produced goods less competitive at home and abroad.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 21, posted (9 years 4 months 4 weeks 1 day 15 hours ago) and read 5298 times:

Atmx2000 is right. It is not just a few European politicians who are concerned about the stronger Euro. I think there is widespread angst what could happen if the trend continues. There is not a whole lot of room left before a strong Euro could choke off anemic growth there. There are no signs that they are interested in currency intervention either.

A380900's post belies what seems to be a common European view: that Europe can only succeed by taking away from the United States. This zero-sum game view is a false and unhelpful idea. But it actually goes a long way in explaining a lot of European, particularly French, policy.

The creation of the Euro allows firms and individuals in the Euro area to eliminate currency risk while trading in the zone. That is a tremendous benefit. The Euro may replace the USD as the reserve currency of choice but I also don't think that Germany and France are really interested in seeing that happen.

What would happen if Airbus priced in Euros?

For a large number of customers, the price would go sharply up. Don't forget that Airbus does quite a bit of business in the U.S. United was their largest customer (in terms of number of airplanes) until Lufthansa recently overtook them. Other countries such as China also hold a lot of USD. Airbus would join other Europeans firms that are taking a beating as the Euro appreciates and erode or even lose their pricing advantage.

They would of course save money on dollar priced components such as avionics and PW/GE engines.



[Edited 2004-11-28 08:55:49]

User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 38
Reply 22, posted (9 years 4 months 4 weeks 1 day 14 hours ago) and read 5270 times:

What would happen if Airbus priced in Euros?

For a large number of customers, the price would go sharply up.


There would be no price change until the currencies shifted again. Airbus would likely convert prices at today's exchange rates, unless the profit margins are already too low. The customers would no see change today. The key issue is that the risk for dealing with the euro's trade weighted exchange rate is transferred from Airbus to its customers.

[Edited 2004-11-28 09:52:09]


ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 23, posted (9 years 4 months 4 weeks 1 day 13 hours ago) and read 5200 times:

My assumption is that the dollar will keep moving down for a while longer. I think the dollar is still overvalued even as it sets new lows. At some point, Airbus will have to revise prices upward. I think that point would be reached sooner rather than later if Airbus actually started collecting Euros instead of USD. As a practical matter, I believe that Airbus customers and potential customers would see the changes pretty quickly.

That is a good way of framing the key issue of switching from USD to Euro.


User currently offlineDtremit From United States of America, joined Oct 2004, 28 posts, RR: 0
Reply 24, posted (9 years 4 months 4 weeks 1 day 11 hours ago) and read 5011 times:

United was their largest customer (in terms of number of airplanes) until Lufthansa recently overtook them.

Are you sure of that? As far as I can tell, Lufthansa only has 134 Airbus aircraft, compared with 152 for United, 158 for Air France, and 161 for Northwest. Largest in monetary value I could see, with all their widebodies.


25 N79969 : Dtremit, I should have added a "at one point in time" disclaimer. NWA and Air France are still able to take delivery of airplanes so they have eclipse
26 BuyantUkhaa : I wonder why this thread focusses so much on Airbus only. As said before, Boeing gets a considerable part of its components (more than 50% for the 7E7
27 Atmx2000 : I wonder why this thread focusses so much on Airbus only. As said before, Boeing gets a considerable part of its components (more than 50% for the 7E7
28 Ken777 : I would expect that, at the current time, the lower dollar does benefit B more than A. The real issue, however, is the degree that B can take advantag
29 Zvezda : A380900 wrote: "The Eurozone should also push for trading oil in Euro. All producing countries don't have to make the switch at the same time. One or
30 Atmx2000 : In terms of pricing oil in Euros, it makes no difference - the producers would still convert the dollar price to Euros. Oil, but the way, is one area
31 Burnsie28 : Why, the real answer is because the US dollar is the most recognized currency in the world.
32 A380900 : "Why, the real answer is because the US dollar is the most recognized currency in the world." Not necessarily forever. Especially with the way things
33 Warren747sp : Right A380900 you and Chirac are such wishful thinker trying to reclaim an empire long gone. Countries like CHINA or Japan will never switch to Euro n
34 Trex8 : If the $ keeps dropping, the Chinese and Japanese(and Hong Kong and Korean and Taiwanese and Singaporeans) are not going to sit around and watch their
35 Burnsie28 : Its not what the dollar is worth, its the fact everyone knows what it is, in the world 93% of the people if they saw a dollar bill they would know tha
36 A380900 : Regards for the US has been hurt quite a bit in the last few years. No offense but that's true. Ask any foreigner around you. Warren747sp. I think cou
37 Komododx : Well I think we can all assume (by that word some will already know I'm an economist) that most of the customers of Airbus pay or are invoiced in doll
38 Burnsie28 : The undisputed rule of the dollar is about to end. It is a matter of when. I would bet on sooner rather than later. I can see that you have not taken
39 Katekebo : To A380900, Maybe a little bit off topic... The world economy will be dollar based at least for the foreseeable future. Current dollar lows (and the h
40 Post contains images FLVILLA : Well theres only one way to sort out this dispute, switch everything into £ Sterling
41 Post contains images BuyantUkhaa : Pardon me, but the only way to solve this is to price them all in Mongolian Tugrik. After all, the world hasn't seen an empire as vast as Mongolia
42 Flyabunch : Not all Americans think the President Bush is leading us into "a vast pit of hell". In fact 51% said that they felt he was the better option on Nov. 2
43 Tripple7 : We will see an increase in exchange rate of the euro as long as the US central bank does not do anything about the US interest rate. It would become t
44 Post contains links Elwood64151 : the real issue is the US trade deficit and the deficit spending by especially the present administration. The "real" issue is China's currency is pegg
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