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Airbus Needs To Sell Around 500  
User currently offlineJet-lagged From United States of America, joined Mar 2002, 867 posts, RR: 0
Posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12392 times:

From the Economist:
http://www.economist.com/business/displayStory.cfm?story_id=3915112

"Airbus needs to sell around 500 (out of its target sales of 700 over 20 years) to earn a real return on the investment."

Before the break-even number was, what 250? Then 300? Then 320? Now the Economist contends that a 'real return' is higher still. When I think it thru, I get about 400-500 units will be sold. However magnificent the machine may be, if the Economist they have their number right, that could be a challenge for Airbus.

219 replies: All unread, showing first 25:
 
User currently offlineKL911 From Ireland, joined Jul 2003, 5084 posts, RR: 12
Reply 1, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12371 times:

Since when does the economist know anything about running a company like Boeing or Airbus? It's a magazine, and they are always wrong...


Next trip : DUB-AUH-CGK-DPS-KUL-AUH-CDG-ORK :-)
User currently offlineJMJAirways From Sweden, joined Apr 2005, 216 posts, RR: 0
Reply 2, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12356 times:

what's the price tag on one A380 ?

And what did the whole project cost ?



I am willing to pay extra for a A346 flight !
User currently offlineN844AA From United States of America, joined Jul 2003, 1352 posts, RR: 1
Reply 3, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12322 times:

Quoting KL911 (Reply 1):
Since when does the economist know anything about running a company like Boeing or Airbus? It's a magazine, and they are always wrong...

The Economist is consistently one of the best-informed publications I read and, more often than not, on-target. Are you disputing their accuracy, or the accuracy of the financial/business press in general?



New airplanes, new employees, low fares, all touchy-feely ... all of them are losers. -Gordon Bethune
User currently offlineSunnyb From Canada, joined Jul 2004, 247 posts, RR: 0
Reply 4, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12296 times:

From: http://news.bbc.co.uk/1/hi/business/4482105.stm

A380 in Figures

- List Price: $285M
- Orders so far: 154 ($44B at list price)
- Orders to break even: 250 ($71B at list price)


User currently offlineEA CO AS From United States of America, joined Nov 2001, 13253 posts, RR: 62
Reply 5, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12251 times:
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Eek. And odds are that EK - being the largest single order - is paying a price far below list.

So the breakeven is probably more around 265, give or take (best guess).



"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
User currently offlinePlaneSmart From New Zealand, joined Dec 2004, 790 posts, RR: 0
Reply 6, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12232 times:

Best informed? Whose figures do they use? Supplied by Scott Carson?

Airbus has been innovative with aircraft pricing and packaging, and they are equally creative with contractor pricing and payments.

500 could turn out to be correct, but the guess is certainly based on zero data and analysis. S&P would have the best idea after Airbus.

Breakeven also has to have time factored into it. Could be 400 sales in 10yrs or 500 in 15yrs.

Also takes no account of transfer pricing applied to derivatives, as B are so skillfully doing with 787 pricing.


User currently offlineJMJAirways From Sweden, joined Apr 2005, 216 posts, RR: 0
Reply 7, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12227 times:

I still think they will get more orders and break-even in maximum 5 years...
They will have sold a total of around 300 in 5 years !

Best Regards



I am willing to pay extra for a A346 flight !
User currently offlineGrantcv From United States of America, joined Apr 2005, 429 posts, RR: 0
Reply 8, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12208 times:

The Economist might usually be well informed, but that article isn't quite right. First, I don't think that the A380's sales are obstinately stuck at 154 - two of the orders are very recent and haven't even been finalized as far as I know. And 154 orders at launch isn't bad. I don't recall the 747 having anymore and I seem to remember the 757's orders being a bit "stuck" when it first came out. Claiming the plane will be a failure is getting rather tiresome at this point - it has sold well, it flies, and it is poised to be the "Queen of the Skies" for the next 20 years at least. Does Airbus they need to sell 500 planes to break-even. Well, if anyone knows the truth there, it is not likely to be a reporter at the economist.

User currently onlineBlueSky1976 From Poland, joined Jul 2004, 1834 posts, RR: 4
Reply 9, posted (8 years 11 months 3 weeks 3 days 19 hours ago) and read 12190 times:

Maybe folks at The Economist are already factoring in the development cost of A380-900?? Has anyone thought of that possibility?


All Hail Mighty Triple Seven, The MURDERER of the so-called "Queen"!!!!
User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 10, posted (8 years 11 months 3 weeks 3 days 18 hours ago) and read 12133 times:

Breakeven (Cost-Volume-Profit) Analysis is not a very useful technique for evaluating the financial performance of a long-term project. The 500 unit figure is probably derived from a more sophisticated approach like internal rate of return.

User currently offlineSllevin From United States of America, joined Jan 2002, 3376 posts, RR: 6
Reply 11, posted (8 years 11 months 3 weeks 3 days 18 hours ago) and read 12100 times:

Quoting Jet-lagged (Thread starter):
"Airbus needs to sell around 500 (out of its target sales of 700 over 20 years) to earn a real return on the investment."

The key phrase here is real return.

That means "the point at which you would have gotten as much of a return as if you had taken the money and invested it in stocks/bonds/real estate/etc."

Steve


User currently offlineDfwRevolution From United States of America, joined Jan 2010, 912 posts, RR: 51
Reply 12, posted (8 years 11 months 3 weeks 3 days 18 hours ago) and read 12065 times:

Quoting JMJAirways (Reply 7):
I still think they will get more orders and break-even in maximum 5 years...
They will have sold a total of around 300 in 5 years !

However... that is roughly double the number of A380 already ordered. Name me another 150 potential A380 orders from an airline other than EK...

Also, orders don't mean break-even. Deliveries do. No way they will deliver enough to break-even by 2010-2010.


User currently onlineBlueSky1976 From Poland, joined Jul 2004, 1834 posts, RR: 4
Reply 13, posted (8 years 11 months 3 weeks 3 days 18 hours ago) and read 12040 times:

Quoting DfwRevolution (Reply 12):
Name me another 150 potential A380 orders from an airline other than EK...

Optimistic scenario: everyone who already has it on order IF A380 delivers the performance promised by the manufacturer.



All Hail Mighty Triple Seven, The MURDERER of the so-called "Queen"!!!!
User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 14, posted (8 years 11 months 3 weeks 3 days 18 hours ago) and read 12007 times:

Quoting Sllevin (Reply 11):
"the point at which you would have gotten as much of a return as if you had taken the money and invested it in stocks/bonds/real estate/etc."

...or alternatively, compared to the rate of return on other successful long-term programs within the organization (e.g. A32X, A300, A332, etc.), the competition (e.g. 744, 777, etc.), and/or other manufacturing industries, etc.


User currently offlineAC777233LR From Canada, joined Apr 2005, 75 posts, RR: 0
Reply 15, posted (8 years 11 months 3 weeks 3 days 18 hours ago) and read 11988 times:

Quoting N844AA (Reply 3):

The Economist is consistently one of the best-informed publications I read and, more often than not, on-target. Are you disputing their accuracy, or the accuracy of the financial/business press in general?

I completely agree! But they are wrong sometimes, remember they predicted $5 long term oil prices in '97 or '98.

As noted above the article is referring Airbus' need to sell 500 aircraft to make a reasonable profit on their investment. Simply breaking even by selling 250-300 380s would be a failure. To be considered a success Airbus must make a good profit, needing to sell at least 500.


User currently offlineAC320 From , joined Dec 1969, posts, RR:
Reply 16, posted (8 years 11 months 3 weeks 3 days 17 hours ago) and read 11945 times:

Also remember the article is talking about the aircraft sales required during the next 20 years....I don't think anyone ever said the A380 was a short term project.

User currently offlineGemuser From Australia, joined Nov 2003, 5551 posts, RR: 6
Reply 17, posted (8 years 11 months 3 weeks 3 days 17 hours ago) and read 11895 times:

Well DfwRevolution, as well as the 150 odd orders there are 60 options, plus the rumored extra 45 from EK, that only leaves another 45 orders to reach 300 and I think China alone could easily take that many.

Of course the question "will all the options be exercised?" is unanswerable at the moment and the extra EK order is speculation, the options are at least a fact, the only extra fact in this question at the moment.

Will the options be exercised? Lets take a look at QF, the only A380 customer I know enough about to even speculate about. QF have publicly announced that the A380 will be used SYD/MEL-LAX and SYD/MEL-LHR, with MEL-LAX being first. At ONE flight a day that is 10 aircraft, out of 12 ordered. QF currently have 37 weekly flight to LAX and 28 to LHR (when SYD-AND OLD: Hong Kong - Kai Tak International (HKG / VHHH) (closed), China - Hong Kong">HKG-LHR goes daily). If they all were A380 that's 4 daily to LHR = 12 aircraft, call LAX 6 daily, that's another 12 aircraft giving 24 or 2 more than current orders + options.

Of course this has A LOT of speculation in it, but it does define some parameters. QF will need between 10 and 24 aircraft to serve just SYD/MEL-LAX/LHR, with all A380s. This does not allow for other possible routes. I think a SIN and/or BKK turn around is possible, a service to India is another and of course SYD/MEL-DFW hangs there as a very tempting treat, if in reality the aircraft can carry an economical payload DFW-SYD. QF would LOVE to get non stop access to AAs major hub at DFW, but it MUST be non stop.

What is true for QF is, of course, not necessarily true for the other airlines that have ordered it, but if QF likely needs about double its current order AND EK may double its current order can SQ, MH & TG to name three be far behind?

In summary, a doubling of current A380 orders does not appear unreasonable from current customers and there ARE other potential customers out there, as speculated on this board from time to time. All assuming the aircraft meets or exceeds it performance targets.


Gemuser



DC23468910;B72172273373G73873H74374475275376377L77W;A319 320321332333343;BAe146;C402;DHC6;F27;L188;MD80MD85
User currently offlineCruiser From Canada, joined Apr 2005, 1000 posts, RR: 7
Reply 18, posted (8 years 11 months 3 weeks 3 days 17 hours ago) and read 11875 times:

Quoting AC320 (Reply 16):
Also remember the article is talking about the aircraft sales required during the next 20 years....I don't think anyone ever said the A380 was a short term project.

The A380's should each last approximately 20 years, and I think that most of the orders are in. If new airlines want to add the A380 after a few years, they will likely be able to pick them up on the used market. Emirates should have some available for sale a few years after they take their first delivery! I admit, I like the A380, but I doubt there is much of a business case for it.

Cruiser



Leahy on Per Seat Costs: "Have you seen the B-2 fly-by at almost US$1bn a copy? It has only 2 seats!"
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 912 posts, RR: 51
Reply 19, posted (8 years 11 months 3 weeks 3 days 17 hours ago) and read 11831 times:

Quoting Gemuser (Reply 17):
Well DfwRevolution, as well as the 150 odd orders there are 60 options, plus the rumored extra 45 from EK, that only leaves another 45 orders to reach 300 and I think China alone could easily take that many.

China has taken a grand total of five A380-800 to be delivered in time for the 2008 Olympics. Does that sound like legitimate demand for a large airplane, or showing-off when the world is looking at China? I don't see how another 40 A380 from the Chinese airlines seems reasonable at all....

Assuming all options are converted and EK places a follow-on order you are looking at an airplane with approx. 1/3 of its backlog in the hands of a single airline who by any estimate is already speculative growth. Maybe China should just wait and pick-up some EK birds real cheap...


User currently offlineScottB From United States of America, joined Jul 2000, 6574 posts, RR: 32
Reply 20, posted (8 years 11 months 3 weeks 3 days 16 hours ago) and read 11809 times:

Quoting PlaneSmart (Reply 6):
Best informed? Whose figures do they use? Supplied by Scott Carson?

Ah yes, I see -- The Economist is now an American propaganda rag used to slander Airbus and all things European, right?  Yeah sure

What the article is getting at (and as Sllevin explains) is that having the A380 project only reach break-even or be slightly profitable means that it was a failure as an investment -- if Airbus operated like most publicly traded companies. You have to consider the opportunity cost of the capital investment made in the program; i.e. if Airbus had invested 10 billion euros in some other project or even in financial instruments, would they have achieved a better rate of return? Could they have invested in other ways relevant to their business that would have given them better margins? If the answer to that question is "yes," the A380 is a failure in terms of return on investment.

It's along the lines of IBM choosing to sell its personal systems group to Lenovo. That was a profitable business for IBM -- that division made $162 million in profit last year on $13.0 billion in revenues. The problem is that the operating margin for their personal systems group was only 1.25% percent -- a real dog compared to the the company's margin of 12.5% as a whole. Without that underperformer, the company's margin would have been 14.1%, and that's why they're selling it to Lenovo. They feel they can invest in other areas which will yield a better return.

I don't think that anyone with half a brain doubted Airbus's ability to design and construct the A380 (nor would they doubt that Boeing could if they chose to embark on a similar project). My feeling has been since the A380 was launched that the prospects were murky at best for the A380 investment being worthwhile. There certainly is not room in the global market for two A380-sized aircraft, given the somewhat lukewarm orders since launch, so it would have been irresponsible for Boeing to have developed its own VLA.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 21, posted (8 years 11 months 3 weeks 3 days 16 hours ago) and read 11777 times:

Most, if not all, of the initial 150-odd orders were placed in 2000 at a price in the region of $US150M. per unit. This is confirmed by this press story about Qantas from the time:-

"The airline received deep discounts for being an early buyer of Airbus' all-new superjumbo jetliner. The list price is $220 million, but industry experts say the European plane maker has been selling them for as low as $150 million per jetliner."

http://www.unionrecord.com/biz/display.php?ID=386

And by the more recent Gellman Report:-

"The study says Airbus could realistically have expected to sell just 496 of the large aircraft in the first 20 years of the programme. To date, the authors say, the A380 has been sold for $130m-$145m, compared with the $199m building cost.

"Between 2006, the year of the first commercial flight, and 2025, the programme will produce a “net negative cashflow of $8.1 billion” the study concludes. As state-aid payments are judged over 17 years, the report also looked at the financial position between 2000 and 2017. It was judged to produce losses of $6.9 billion. Gellman said yesterday: “The project produces a cashflow that is absolutely enormous, and I think it bears some comparison with the Channel tunnel.”


http://www.timesonline.co.uk/article/0,,2095-1572218,00.html

As far as I know, Airbus has not challenged any of the figures.



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineLnglive1011yyz From Canada, joined Oct 2003, 1606 posts, RR: 15
Reply 22, posted (8 years 11 months 3 weeks 3 days 16 hours ago) and read 11767 times:

Quoting DfwRevolution (Reply 19):
China has taken a grand total of five A380-800 to be delivered in time for the 2008 Olympics. Does that sound like legitimate demand for a large airplane, or showing-off when the world is looking at China? I don't see how another 40 A380 from the Chinese airlines seems reasonable at all....

Chinese families are travelling at a more furious pace than ever.
Never mind the huge numbers of travellers who are increasingly travelling to China as well.

I think the need WILL be there.

Everyone forgets. The world said we didn't need the 747. There were just as many people who said we didn't need it back in the 60's, and now, we're seeing it here again.

The capacity will be there.

NO manufacturer is going to build ANYTHING that there won't be a demand for.

1011yyz



Pack your bags, we're going on a sympathy trip!
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 912 posts, RR: 51
Reply 23, posted (8 years 11 months 3 weeks 3 days 16 hours ago) and read 11720 times:

Quoting Lnglive1011yyz (Reply 22):
Chinese families are travelling at a more furious pace than ever. Never mind the huge numbers of travellers who are increasingly travelling to China as well.

I think the need WILL be there.

But that is in no way a prerequisite for super-large airplanes. India has 1 billion people and they have yet to order the A380 and went for the 777/787 in their recent fleet review.

Airlines have a certain amount of money with which they can buy airplanes. Everything from the E190 to the A388 competes for that money, and the aircraft that stands to generate the best return per dollar invested will be the first priority. Explain the incongruity in the fact that India placed midsized aircraft over large aircraft? Now, explain the incongruity in the fact that China has ordered five A380 and sixty 787?

"Hmmm" I wondered quietly to myself

Quoting Lnglive1011yyz (Reply 22):
Everyone forgets. The world said we didn't need the 747. There were just as many people who said we didn't need it back in the 60's, and now, we're seeing it here again.

The size of long-ranged airplanes has been steadily decreasing since the 1980s, and given the volume with which 787-sized airplanes sell, that gap will only continue to alienate the A380.

Quoting Lnglive1011yyz (Reply 22):
NO manufacturer is going to build ANYTHING that there won't be a demand for.

Two points:
1. Concorde
2. The words "pride project"

It has happened before...


User currently offlineUnited Airline From Hong Kong, joined Jan 2001, 9106 posts, RR: 15
Reply 24, posted (8 years 11 months 3 weeks 3 days 16 hours ago) and read 11697 times:

Quoting Lnglive1011yyz (Reply 22):
Chinese families are travelling at a more furious pace than ever.
Never mind the huge numbers of travellers who are increasingly travelling to China as well.

For now people still seem to overestimate the total number of chinese travelling around the world. It is increasing rapidly but still not that many compare to western countries.

Can Airbus sell 500?


25 Confuscius : It won't be so bad for Airbus because they don't have to repay the "government loans" until the A380 becomes profitable.
26 HAWK21M : Is 60 Aircraft a Year the Production rate. regds MEL
27 Mariner : Why is that incongruous? The A380 is for extremely high density routes - which may be limited in number but which certainly exist. The B787 is for le
28 A380900 : The economist is the "truth revealed" for the business elite around the world. This veneration is somewhat ridiculous. It may be less crappy than mos
29 ContinentalFan : That doesn't answer the legitimate question about the A380's business case. I think the responses in this thread make it clear that concerns expresse
30 Mariner : But it has been addressed. The issue is in the use of the words "reasonable return." To an economist, the words "reasonable return" do not mean "brea
31 Jet-lagged : Thanks for some thoughtful posts folks. Opinions seem to very whether the Economist is respectible or lamentable. I'll admit that I lean towards the f
32 NAV20 : There would appear to be no prospect of the A380 generating any kind of positive return for some years to come. And, given that the development costs
33 Mariner : NAV20: I would doubt - very much - that the stock market reaction has anything to do with the present - quite stirring - news about the A380. If what
34 NAV20 : Sure, mariner, combination of factors. But it's an odd situation - from the viewpoint of investors, there are only two big airframe manufacturing firm
35 Mariner : I would very much doubt that. Most Boeing investors are US based. The shares have gone up some because the news from Boeing has been very good this p
36 Leelaw : I'm not sure about Airbus, but economists, managerial (cost) accountants, and financial analysts would define breakeven point as: PX = VX + F, where
37 KL662 : Can you explain this, please? Are you speaking of financial derivatives, or plane model derivatives?
38 PlaneSmart : Plane model derivatives.
39 EmmenezMoi : It is also very partial. I consider each and every article in there to be an op/ed piece (rather than factual news). I don't think that is true. Airb
40 Leelaw : NAV20's observation is not without some historical merit. The 747 had approximately 150 orders booked at the time of its first flight, as does the A3
41 Airbazar : You guys have to look way beyond the purchasing price. There are other value added benefits for the company associated with selling an aircraft. There
42 DLPMMM : Given the factual information given in this thread alone regarding launch pricing, development costs.... and disregarding the emotional and biased bla
43 EmmenezMoi : Valid point. I guess it all depends on one's definition of "some years"...
44 Iadbgo : We might also want to ask what a "real' return means? Obviously a one Euro profit isn't going to matter much to Airbus...but a 100 million Euro profit
45 TeamREGAL : Not true. Boeing: 736, 764 Airbus A318, A342 However, I do agree that there is a demand for the A380 excluding the 900 variant. REGAL[Edited 2005-04-
46 B2707SST : I'd take that a step further -- the key issue is not just pure return, but risk-adjusted return. The A380 should not just provide a comparable return
47 Post contains images TeamREGAL : Yes, but one cannot make accurate judgements by comparing past (especially 30yr.-old) scenarios with present. Now realize that I am not arguing again
48 FCKC : One more time a wrong information coming from the USA.............. Where did this newspaper find this 500 number ? Can we speak seriously and with so
49 Post contains images Backfire : A bit like A.net then
50 NorCal : They are saying that it needs 500 to provide a real return, not to break even. Two different things, some people in this forum have given explanation
51 Ken777 : Well said Regal - I've just added you to my RR list. I've made more than 60 flights to Australia from LAX over the past 10+ years and have seen some v
52 FCKC : NorCal Thanks for your comment. I highly appreciated your intelligent spirit. Glad to see young people like you are the future of the USA. It's great.
53 Pihero : Why don't we drop the 380 vs 787 comparison once and for all ? In most of these posts there is the assumption that B got their market analysis right a
54 B2707SST : The Economist is a British journal, albeit one with worldwide contributors and circulation. --B2707SST
55 Grantcv : Have times really changed? When the 747 was new, in the early 70's both hub-and-spoke and point-to-point existed - actually point-to-point was more c
56 AirFrnt : The economist is a British publication. Yep. I'll start: So let's assume that Airbus breaks even on the A380 at 350 planes. The development cost for
57 Post contains images Leelaw : Hmmm...what's the old platitude: those who fail to learn from history are doomed to repeat it. They have, and then again they haven't. Here's another
58 Atmx2000 : The Economist is a British rag. That's some logic you've got there. First thing there was no significant drop of in 747 orders after the A380 launch
59 Art : From The Economist: "Airbus needs to sell around 500 (out of its target sales of 700 over 20 years) to earn a real return on the investment." There is
60 Post contains images TeamREGAL : ...But were they as divided as two separate markets as they are now? ...But was it headlining it the way it is now? The 707 was a revolutionary aircr
61 TPASXM787 : Exactly! Was he trying to say there has never been a losing product before? They can forecast demand all they want, but until hard cash is sitting in
62 Post contains images TeamREGAL : You can always learn from history and that's one reason it exists, but time changes rules, people and places. That doesn't mean that differences don'
63 Post contains images NAV20 : I roughed out some cash flow figures. I’ve ‘rounded’ some of the numbers for simplicity. They’re all in $US – and mostly in billions. I have
64 Post contains images Monteycarlos : I think the magazine knows a bit about whats going on at large companies, however I think that the figure they have come up with is not correct. I fo
65 Dynkrisolo : May I ask you who they are? The 250-350 figure is from Airbus not from analysts or economists, at least not ones without Airbus ties.
66 Mariner : But this is not what The Economist is saying. They are saying that at 500 frames, Airbus will (a) have broken even, (b) made a profit and (c) made a
67 Monteycarlos : So CNN's Chief economist works for Airbus or has Airbus ties? Along with those of BBC? Go to google and search for yourself.
68 PlaneSmart : There is an incorrect assumption that all R&D costs, manufacturing costs and discounts are exclusively for the account of Airbus, or for the 787, Boei
69 NAV20 : The Economist says 'around 500', Mariner. My rough figures indicate rather more, maybe 600. That's a close enough correlation for present purposes! Th
70 AirFrnt : I think that your numbers are off because you factor in that $3 billion as a incremental cost. I believe that it is already in the cost of the develo
71 Monteycarlos : Yep, early on they were saying 200 if I'm not mistaken and I read an article the other day that stated over 300. The conjecture was how much over 300
72 NAV20 : I COULD maybe have made those figures show a break-even of 350. By assuming that the aeroplane was a runaway success, with orders pouring in, so that
73 Mariner : "A close enough correlation"? Wow. If your "rough figures" accept a 20% differential as "a close enough correlation", then I'm glad you're not my acc
74 Stirling : The answer to that would be a resounding YES! I notice you're too young to remember the OPEC Embargo of the early 70's. Just wait for the DollarEuro
75 Monteycarlos : Whats the saying NAV? "Leave economics to the economist?" We don't all know that. Many people assume that. And with the 747Adv not being a "direct" c
76 Post contains links NAV20 : Mariner, yes, when we're guessing about how many sales they may need over a period of ten or twenty years, 500-600 is close enough. As to 'damn close
77 Monteycarlos : Why don't you tell us your basis for your pessimistic forecast? And give us something tangible and not your mock demise-of-airbus calculations!
78 Mariner : (a) ".....if the euro remained at its present level of $1.32." If the euro had stayed at .90 cents, then maybe 250 was too high. Just as if oil had s
79 Post contains images NAV20 : Please see #63 above, Montey - all based on published figures. I don't mind people disagreeing with me - that's what talkboards are FOR! But they mig
80 Atmx2000 : Well the value at launch was around $0.92, so if that 250 figure came out then, and if 60% of the A380 is from the Eurozone or the UK, the European c
81 Post contains links Monteycarlos : Oh I read it... and if you didn't read my reply I said I believed it was wrong. Which is why I said leave economics to the economists. You are simply
82 NAV20 : Dead right, Atmx2000. To make the arithmetic even simpler, the full 'list price' of the A380 is $US220M., and the costs of production are reckoned to
83 Mariner : Atmx2000: Which is part of the problem is trying to ascertain the figures for the A380 or any aircraft. We have no idea what contracts - sales of airc
84 Post contains images NAV20 : Hoping to settle the disagreement, Montey - I didn't actually say 600 as a conclusion. A 'first' for me - quoting myself! - but what I actually said w
85 Monteycarlos : So what, you want me to agree that they'll need 616 aircraft to break even?
86 NAV20 : No, Montey - just to agree with 'at least 500'? I made it clear that the 616 was based on 'my own rough figures.' 'Around 500' is the Economist's figu
87 Jet-lagged : AirFrnt and NAV20, thanks for putting up facts and figures and showing your calculations. I think you are on to something. Can you post a financial sp
88 Mariner : NAV20: I'm sorry, but how can you go on repeating this? The Economist does not say that 500 is the break even figure. The Economist says that 500 may
89 NAV20 : Mariner, no-one can really tell - 'Airbus Industrie' isn't actually a company at all, it's a division of EADS, a European defence manufacturer. EADS
90 NAV20 : Jet-lagged, about doing a full DCF on a spreadsheet, sorry, no, life's too short! Besides, we don't know what it will cost EADS to borrow the working
91 Monteycarlos : Well no I refuse to be told what to agree with! I have told you that I have read the articles supporting the 250-350 airframes contention and they ha
92 Mariner : NAV20: You're dodging the issue again. You see, even that is incorrect. EADS is an acronym - European - Aeronatutic - Defence - Space. It is not a Eur
93 Monteycarlos : Perhaps it is this that is causing me troubles.. especially because the entire R&D costs for last financial year for Airbus only amounted to 1.734mil
94 NAV20 : Really, Mariner - the Economist also said, "..scepticism will grow that the €12 billion ($15.7 billion) project will never earn a profit." A 'real r
95 Monteycarlos : Isn't a real return the money you make after taking into account inflation?
96 Mariner : NAV20: I guess you haven't bothered to read my reply #30. Ah, well. I guess you haven't read my reply #83. Ah, well. We wouldn't get anywhere, because
97 Post contains links B2707SST : Sometimes; it can also mean a return greater than the opportunity cost of capital, which is the return you would get for investing in other physical
98 Monteycarlos : Isn't that the normal profit which equals 0, the economic profit being the greater than earning and the economic loss being the less than earning all
99 Post contains images NAV20 : Fair enough, Mariner - I'm sure that that IS the difference between us. it sure DOES matter whether the thing is profitable. The A380 does not 'exist
100 B2707SST : Technically, yes; real return is the nominal return less inflation, while economic profit is real return less opportunity cost. However, people tend
101 Mariner : You are absolutely entitled to your opinion. And with that opinion, I disagree. cheers mariner
102 NAV20 : B2707SST, I did indeed mean recouping the entire project cost - I don't know any other way of analysing an investment! What's more, if it's already E1
103 Brussels : I believe IRR is more often used to evaluate the financial performance of a project. Breakeven analysis only shows how many orders you need to breake
104 Leelaw : Applied R & D, testing, and production startup costs are always expensed as incurred in financial accounting under the accounting principle of conser
105 Jet-lagged : Neither. It was to point out that a reputable source (Economist) is raising for perhaps the first time the topics of 'return' and not 'breakeven' on
106 Atmx2000 : I'm sure the countries of the EU will derive plenty of tax revenue from the a program that merely breaks even. But a very large fraction will have to
107 Alessandro : Planesmart, exactly, the sub-contractors are taking a part of the burden of developement costs, something not everyone understand. I think the A380 co
108 Dynkrisolo : They were quoting what the Airbus executives said. It wasn't their own analysis. At the price they have been selling the 380, they will need to manuf
109 Cedarjet : Yes it is - see A380900's reasons why, which are also mine. Exactly. It's just a pro-rightwing America, anti-Europe rag. Clinton shags a consenting a
110 Post contains images Leelaw : Does being on the receiving end of an oral hummer technically qualify as a "shag," or does it depend on what the definition of "is," is?
111 Monteycarlos : Yeah I thought this may have been the case with the article. Oh ok, thanks for that B2707SST! I'm have figured that I am not convinced on your assump
112 USAF336TFS : Thank you Monte for bringing some reason to this discussion. How we go from a comment that the Economist says to America bashing, again, astounds me.
113 Dynkrisolo : I may not know exactly, but I do follow the industry news very, very closely. If some analysts had said something different, more than likely, I woul
114 Post contains links NAV20 : Fair question, Montey - but I don't know HOW many times I've posted this article! It refers to Qantas 2001 order specifically, but one can surmise th
115 Art : I read this when it was cited some time ago. I am curious as to how the $199m building cost figure was obtained. Any ideas? Is it a guesstimate?
116 AirFrnt : Exactly. That's the problem I have with the A380. There is no way that the building cost on the A380 is US $190M. Airbus would never earn their money
117 NAV20 : Sorry Art, can't help. I used $190M., which seems about right when set against a $220M. list price.
118 Mika : Also, orders don't mean break-even. Deliveries do. No way they will deliver enough to break-even by 2010-2010. Ok, the A380 is a bad A/C and bad a inv
119 Mariner : Buit - what is it you want to achieve? This is the first time I have taken part in a "serious" A380 thread, largely because I am uninvolved. It will
120 PlaneSmart : Unless we have detailed financial information from inside A & B, no-one on this site, has anything better than a guess about project specific costs, r
121 Dynkrisolo : Where do you get this idea? It is a very high risk project that's why Airbus has to tell the world that they can breakeven at 250. They want to give
122 PlaneSmart : Dynk 'Where do you get this idea? It is a very high risk project that's why Airbus has to tell the world that they can breakeven at 250. They want to
123 Dynkrisolo : Sorry, by saying this, you just don't have the understanding the technology risks associated with the 380. If you think Airbus can just extrapolate f
124 Post contains images Lehpron : Whole project cost I see as a constant @ E12 billion but somehow with the drop in value of the dollar, it rises over time... Dividing the total now b
125 Monteycarlos : Well you've mentioned one, The Economist. If you pull a couple more then maybe I'll start considering the view. Maybe then, I will also give some con
126 NAV20 : Montey, about the building cost at $190, I'm pretty sure I've read that several times. In any case, the Gellman Report says $199M., and Airbus haven't
127 Monteycarlos : Yeah the markup in that case would be very slim indeed considering they are selling some of them off at $150mil US (a loss) or even as low as $135mil
128 Monteycarlos : "Unless Airbus can soon unveil some new orders for the A380, possibly at the Paris air show in June, scepticism will grow that the €12 billion ($15.
129 Art : There seems to be an acceptance that build price is $190 million or so. Who (apart from Airbus) actually knows what the build price is? $10 or $20 mil
130 Monteycarlos : That Gellman report puts it at $199m US. I think there was a Guardian article mentioned by NAV20 that put it at $190m US. I think that might be close
131 Post contains images Dynkrisolo : It's not just the manufacturing cost that can affect the breakeven point. Interest rate, inflation rate, selling price, cost overrun or underrun, man
132 NAV20 : Sorry, should have explained this before - the term 'real return' usually means the return on a project after taking account of inflation. Say it tak
133 Jet-lagged : I think that is likey. It also varies by level of risk. In a previous life I was employed at a well known food and beverage company. As started new b
134 NAV20 : Good question, Jet-lagged. I don't know for sure, but I've always assumed that it is mainly expenditure on research and design development and therefo
135 Art : I agree with all you say. My reason for wanting to know if the $190 million build figure quoted is accurate is this: the launch discount prices of $1
136 AirFrnt : I think it's more or less Gallileo arguing with papel doctrine. Sooner or later the numbers are going to come back and haunt them. 1) Airbus needs to
137 Mariner : I repeat the question - what would you have Airbus do - cancel the A380? Give everyone their money back? And when you wake up what will happen? I don
138 PHXinterrupted : Nobody is suggesting they cancel the program, so you can stop repeating yourself.
139 Mariner : I guess you didn 't read reply #99. cheers mariner
140 Post contains images NAV20 : Good God, Airfrnt, did they? They must really be getting desperate
141 DLPMMM : If you read my reply #42, you will see that after analysis I thought it was a workable program but questionable if Airbus would make their money back
142 Byrdluvs747 : Did that really happen? I'm normally pro-EU but that's shameful. If the A380 flops, I won't lose any sleep.
143 Stirling : I am curious, what aircraft has launched with the most orders, or, rephrased, what aircraft has had the most orders prior to entering into REVENUE se
144 ComeAndGo : And what is everyone talking about, including people on this board? Sonic-cruiser ?? High-speed business jets?? HST ?? A total failure but missed by
145 PlanesNTrains : That's just another way of saying "Shut up and keep your opinions to yourself." I don't know if the A380 will be a financial success or not, and it w
146 Post contains images Mariner : It isn't intended to be that. It is intended to be exactly the reverse. Perhaps surprisingly to you - because he and I have sparred a lot about this
147 Schipholjfk : Oh come on dude... find another reason to blindly support Airbus. But bashing The Economist magazine is totally foolish. The Economist is probably on
148 Bill142 : It is also fair to say that QF and SQ are getting good prices as well. They both ordered when it was still the A3XX.
149 N79969 : I think anyone who really wants to get a dispassionate idea of what the Economist is trying to say should read B2707SST's posts above. His remarks are
150 Stirling : ....and I thought I was the only one! If you don't mind me asking...which one? Yes it is. It's the perspective of men like you that brings me to this
151 Post contains images PlanesNTrains : I can agree with that. I joined just so I could quit yelling at the computer screen at some of the moronic comments people make. IMO of course. I can
152 Post contains images Mariner : My (British) father was an engineer for Imperial Airways. In 1939, a flying had some mechanical problems at Alexandria, Egypt, and my father was sent
153 Post contains links N79969 : The report below was discussed before in a mislableled, misleading thread. http://www.speednews.com/A380-CPA.pdf This report several noteworthy analys
154 Stirling : That is quite a document. It should be required reading for anyone who wishes to engage in intelligent discussion on the A380. Page 4. "To realize ful
155 AirFrnt : Mariner - It's not feasable for Airbus to write off the program right now. They made their bed, they need to sleep in it. However, _if_ airbus is sti
156 Daedaeg : N79969 that's a very comprehensive report. Are there similar reports outside of Airbus PR that gives a more favorable case for building the A380? It w
157 Astuteman : One thing you can guarantee is that the actual build cost will continue to change, predominantly downwards. It will be affected by exchange rate fluc
158 Stirling : It is my opinion, that the biggest concern for Airbus right now is not what Boeing is doing, but rather, how to address the damaging effects of the e
159 Dhefty : Please refer to the thread, "Who will be the first to cancel an A380 order". You will gain an understanding of the history of the 1992 Agreement betw
160 N79969 : Daedaeg, I agree. I would be interested in reading a dissenting analysis that concludes the A380 will be a cash cow in the not to do distant future. T
161 Mariner : I think that is/was my point. I agree. If they are, then yes, it will. So I am completely unclear as to what all the bitchin' and moanin' is about. A
162 Post contains links Schipholjfk : My friend... you clearly do not understand how Chapter 11 works. It's not a protectionist move. Please start with regarding the link below: http://ww
163 Mariner : Thanks for the condescension. I am very aware of that document - and many others relating to the bankruptcy laws in the US. Chapter 11: you can gussy
164 N79969 : It simply is not. Chapter 11 is not state action to protect a firm. Chapter 11 is a law of general applicability available to firms and individuals.
165 Jeffrito : U.S. Chapter 11 is probably the best (albeit still flawed) example of a "necessary evil" of civil law whereby debtors and creditors are protected fro
166 Mariner : N79969: It was legislation enabled by the "state" - Congress. It is called Chapter 11 Bankruptcy "Protection". Insolvent companies seek the "protectio
167 PM : Would you care to back that up with some facts before some people start believing it's actually true? Oops. Too late! My understanding is a little di
168 Dynkrisolo : But it is. It is allowing the creditors, who themselves are private businesses, to decide whether they want to keep the debtors' business going. The
169 Joni : I glossed at this report but really don't see the merits therein that other posters have seen. IMO it's just the same Boeing tripe rehashed: fragment
170 N79969 : Your understanding of the law and also capitalism is mistaken in this instance. The Congress and President established laws by which businesses and c
171 N79969 : This is the kind of meaningless belittlement I referred to earlier. Joni, Yes they conclude that the A380 will not make money however they back their
172 Alessandro : Airbazar, exactly, A380 could be added into package of other Airbuses and promote smaller planes, a great advantage that Boeing have had for +30 years
173 Jacobin777 : well besides the obvious, another idea which struck me was that this plane might be needed in the future (given the amount of "heavies" being retired
174 N79969 : Alessandro, Alessandro, I refer you to page 88 of the report I linked above. It addresses the issue of sub-contractors and risk sharing. I respectfull
175 Alessandro : Which reply-# N79969? This thread is massive, so I can´t find it. So you don´t think Boeing sold any other planes due to the B747? What the A380 is
176 NAV20 : Worth mentioning that the Gellman Report assumed that Airbus would sell 496 A380s over the period 2006-2025. They then worked the cash flow through an
177 PM : That's not really true. RR's problems were sustaining cash-flow to continue development of the engine. That the TriStar sold less well than the DC-10
178 Post contains links N79969 : Alessandro, It was in reply in 153 and now below for easier reference. http://www.speednews.com/A380-CPA.pdf See page 88. As to your second point, I u
179 Post contains images NAV20 : Slight correction, PM. The government of the day didn't 'carry the company through'. They bought the company's assets (including rights to the RB211
180 PM : "Most of the employees ... lost their jobs." Most must mean at least 51% and implies a lot more. Is that historically true? More than half and, say,
181 NAV20 : You could be right about the cars, PM - it was a long time ago. My point was, though, that the government didn't pour in subsidies - it let the origin
182 PM : It was a long time ago. I was still at school! For all I know, you are right. I suppose that my point is that the government prudently took whatever
183 NAV20 : PM, there is nothing wrong with government intervention per se. But the objectives have to be clear. In the case of the RB211, the objective was to sa
184 PM : What a very curious argument. One (RR) failed through "inefficiency and bad management" but deserved to be saved. The other (Airbus, I assume) is "in
185 NAV20 : As I thought I'd already pointed out, PM, 'RR' was NOT saved....... The company was allowed to go broke. Some of the products were saved.[Edited 2005-
186 PM : Methinks you are splitting hairs (or grasping at staws). Tell the current management of RR that the are less than 40 years old. You'll find on their
187 Joni : Well as I mentioned already, they don't refer to any sources (at least I didn't notice any in my admittedly cursory reading) for the actual sales pri
188 Jeffrito : Mariner - You are very naive! Free market "rules" are simply academic principles: Adam Smith, etc. But the "rules" of free markets only exist within
189 Mariner : Why so condescending? They may be only "academic principles" to you, but (a) are they wrong? and (b) but is it naive to strive for them or hold them
190 Mariner : You have failed to persuade me. It is still called "bankruptcy protection", which is all I have ever claimed for it, as in: Insovent companies in man
191 Astuteman : I can't see much merit in either swearing blind by this report, or trashing it. We're talking about selling A380's for 20 years plus ( could be 30 + f
192 OldAeroGuy : Couldn't agree more. No one is likely to say anything new on this topic pending actual airplane performance, certification and order developments. We
193 Jeffrito : Did you read the post? The point is that market rules are no more or less wrong than, for example, the laws of thermodynamics. That is to say: it is
194 Mariner : At what point did I say they were wrong? In fact I specifically said: But this is all by the by: You consider me a redneck? I am enchanted! A redneck
195 Jeffrito :
196 Mariner : A question is not a statement. But enough of this. You consider me a redneck, or to have redneck ideals. That is so ludicrous it ends any debate righ
197 Jeffrito : Don't get me wrong ... but so much of your dialog has this Laurel & Hardy quality: You: Is it wrong? Me: It is not wrong. You: I didn't say it was wr
198 PlaneSmart : DIP is more secure than unsecured funding, but it is by no means secured funding for the financiers. Not by a longshot. If you call writing off $100m
199 Post contains images Mariner : I'm not surprised. I make my living writing dialogue. cheers mariner
200 Mariner : All this provisos completely dodge the issue. I do not for one moment suppose that the various European governments would allow Airbus to fail, if on
201 N79969 : Joni, This is a bogus response. Find just one or two examples of how they have incorrectly analyzed the issues. Perhaps they used assumptions unfavor
202 Mariner : Which is a little like saying the Shaker communities were not communist. Those Shaker villagers were, I grant you, not Communist. cheers mariner
203 N79969 : Mariner, You arguments become even more irrelevant and detached from reality as time goes on. I can only imagine what non-sequitur you will write abou
204 Mariner : "You" arguments? I am more than happy to keep you guessing. cheers mariner
205 N79969 : mariner[/quote] While I and several others have clearly explained or illustrated the function of chapter 11 in the U.S., it's fundamentally free-marke
206 Mariner : N79969: I hardly see a point in responding to that attack. But what the hey, it is a rainy Sunday afternoon, and you seem fond of personal barbs. Ther
207 Post contains images Allstarflyer : Well, that's the whole crux of this issue, is it not? It took me well over an hour to read through this thread, and it's been most entertaining, and
208 Post contains images NAV20 : As it happens, I used earn most of my living from project analysis. The normal method with 'front-end-loaded' projects - where you spend a lot of capi
209 Dhefty : I've been recommending everyone to read the Gellman report, but now I am also going to add your excellent comments on project analysis to that recomm
210 Astuteman : Exchange rate fluctuations could very easily make that happen. - I sincerely hope the pigs are kept off the laxatives........ The costs WILL fall any
211 N79969 : I think there is little doubt that Airbus will benefit from a learning curve. I think the real challenge will be to find customers willing to pay $22
212 NAV20 : I should add, Astuteman, that a DCF is never 'finished' - in that you constantly update them right through the project, whenever conditions change. S
213 Joni : Well, for the third time, I didn't see in their report any sourcing for their figures for the realized sales prices, or their estimated build prices.
214 NAV20 : One of the authors was George Hamlyn, who was previously with Airbus (their North American representative, I think). If he'd been marketing the thing,
215 Art : My sentiments exactly. IIRC the report estimates build cost at about $200 million, apportioning about $150 million for the airframe. If the estimated
216 NAV20 : I'm afraid not, Art - it would just mean that the hole EADS is digging for itself with the A380 will not be quite so deep. Taking Year One, interest/
217 NorCal : I've read through most of the Gellman report. Are there any Airbus reports or figures or anything that someone can provide so that I can make a good c
218 Art : I follow your maths. If your estimates are near the mark, A380 will make a spectacular loss in year 1. I wonder how soon that would start to show in
219 NAV20 : Good question, Art. The answer is, probably around March 2007, possibly March 2008. But whether it looks 'spectacular' or not will depend on how many
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