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A350XWB Launch Aid At Risk Due To A380 Fiasco?  
User currently offlineArt From United Kingdom, joined Feb 2005, 3347 posts, RR: 0
Posted (7 years 7 months 3 days ago) and read 8846 times:

If the A380 were cancelled (not that that I think it will be), the governments that provided launch aid would lose all the capital they risked on the project. More likely, the A380 problems will result in profits on the program being severely curtailed.

Launch aid for has the A320 series has provided a very good return for the governments involved. The return on the A330/A340 investment is not clear to me. The return on the A380 looks bleak. The launch aid provided may result in a 100% loss.

In view of the A380 experience - possible or likely loss of around $4 billion launch aid - will the governments concerned still be prepared to provide launch aid funds for the A350XWB?

49 replies: All unread, showing first 25:
 
User currently offlineJustloveplanes From United States of America, joined Jul 2004, 1002 posts, RR: 1
Reply 1, posted (7 years 7 months 2 days 23 hours ago) and read 8797 times:

I doubt there will be a 100% loss for the A380. The program has been delayed, but its not dead. I think launch aid as has been practiced to date is in jeopardy, but as part of an EU/US trade agreement.

JPL


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 2, posted (7 years 7 months 2 days 23 hours ago) and read 8769 times:

According to the terms I've seen (as summarised in the Gellman Report) launch aid provided under the 1998 rules is repayable with interest - either in the form of royallties on sales or as a lumps sum after 17 years.

So whether the A380 is cancelled or not doesn't matter. So long as EADS/Airbus doesn't go broke in the meantime, the EU taxpayers will eventually get their money back, with interest.

Whether EADS/Airbus will be able to afford to repay it, some time about 2018, is another matter.



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineFlySSC From France, joined Aug 2003, 7379 posts, RR: 57
Reply 3, posted (7 years 7 months 2 days 23 hours ago) and read 8723 times:

Quoting Art (Thread starter):
If the A380 were cancelled

If ... If ... If .....
If my Aunt had balls, I would call her "Uncle" !
Do you really believe the A380 program, at this stage, could be cancelled ? come on !
And I think it is very premature to call it a "fiasco", just because of the delays announced.
All these "problems" will be forgotten in 2 or 3 years when the A380 will be fully part of the World's Sky with various airlines.
The A380 is not the first new aircraft to face delays for the first deliveries... and according to some recent news, ... it will not be the last.


User currently offlineAither From South Korea, joined Oct 2004, 844 posts, RR: 0
Reply 4, posted (7 years 7 months 2 days 23 hours ago) and read 8723 times:

Fiasco ?

The A380 should be still flying in 2030...

So a one year delay is embarassing & costly but more important factors will determine the success or failure of this program.



Never trust the obvious
User currently offlineZeke From Hong Kong, joined Dec 2006, 8646 posts, RR: 75
Reply 5, posted (7 years 7 months 2 days 22 hours ago) and read 8700 times:

Quoting NAV20 (Reply 2):
Whether EADS/Airbus will be able to afford to repay it, some time about 2018, is another matter.

I dont think anyone is expecting the 350 to outsell the 787. If Airbus maintains its current market share I dont think the program will be unsuccessful.

If one were to assume the current MD11, 757, 767, 772 operators remained with Boeing, and the A300/310/330/340 remain with Airbus, it would still be 35% market share to Airbus.

35% market share of the projected future demands is a large chunk of change, last years orders alone were worth $95 billion, and annual turnover of 28 billion I dont think the company is going broke anytime soon.

I think it will be happy times ahead for both a & B.



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlineArt From United Kingdom, joined Feb 2005, 3347 posts, RR: 0
Reply 6, posted (7 years 7 months 2 days 21 hours ago) and read 8595 times:

Quoting FlySSC (Reply 3):
And I think it is very premature to call it a "fiasco", just because of the delays announced.
All these "problems" will be forgotten in 2 or 3 years when the A380 will be fully part of the World's Sky with various airlines.

Any new aircraft can be subject to delays. It seems that Airbus has failed to keep its customers in the picture with all sorts of unfortunate consequences for them. I call the unprecedented series of delays (due principally to project mismanagement) and the damage done through customer relations mismanagement a fiasco. I would be astonished if it were forgotten in 2 or 3 years.


User currently offlineCYatUK From United Kingdom, joined Apr 2006, 810 posts, RR: 0
Reply 7, posted (7 years 7 months 2 days 19 hours ago) and read 8411 times:

Quoting Art (Reply 6):
I would be astonished if it were forgotten in 2 or 3 years.

With the right financing everything can be forgotten within days. I may be wrong on this but I seem to recall that despite the A380 problems Airbus is still in a better financial position.



CY@Uk
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 8, posted (7 years 7 months 2 days 19 hours ago) and read 8411 times:

Quoting Art (Thread starter):
In view of the A380 experience - possible or likely loss of around $4 billion launch aid - will the governments concerned still be prepared to provide launch aid funds for the A350XWB?

On the contrary, I'm sure it will be used to make the case that more launch air, repayable launch investment, etc., is vital.

Quoting Art (Reply 6):
I would be astonished if it were forgotten in 2 or 3 years.

I'd be willing to bet that this will be discussed on a.net until the sun goes nova!
 Wink



"When all is said and done, more will be said than done".
User currently offlineCHIFLYGUY From United States of America, joined Aug 2006, 141 posts, RR: 0
Reply 9, posted (7 years 7 months 2 days 19 hours ago) and read 8398 times:

There is no danger, financially at least, to the A350 launch. This product is critical to the survival of Airbus and the Euro governments will simply not allow it to not happen due to a lack of financing, even if it means losing the US tanker bid, which is a long shot anyway. This is regardless of what happens with the A380.

User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 10, posted (7 years 7 months 2 days 19 hours ago) and read 8389 times:

Quoting Lumberton (Reply 8):
On the contrary, I'm sure it will be used to make the case that more launch air, repayable launch investment, etc., is vital.

Agree entirely, Lumberton. In cash flow terms alone, Airbus needs a financial transfusion amounting to some billions, or there ain't gonna be no A350XWB.

It also appears likely that that transfusion is going to have to come from government-controlled sources. No private investment source could risk clients' money on EADS' current outlook.

IMO, all that remains to be seen whether the 'rescue' money is called 'launch aid' or something else. And whether it comes from the European governments or the Russian one.



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineJoni From , joined Dec 1969, posts, RR:
Reply 11, posted (7 years 7 months 2 days 19 hours ago) and read 8318 times:

Quoting Justloveplanes (Reply 1):
I doubt there will be a 100% loss for the A380. The program has been delayed, but its not dead.

As other writers have already said, I don't think the delays (annoying and disturbing as they are) amount to anything like sufficient reason to call the program a "fiasco".


User currently offlineDougloid From , joined Dec 1969, posts, RR:
Reply 12, posted (7 years 7 months 2 days 19 hours ago) and read 8280 times:

Never say never, boys.

I was there when Singapore cancelled an order for 20 MD11s for a lot less offense than Airbus is giving the potential operators of the A380 nowadays. They do not like being shoved around and I am sure there's a payoff somewhere.

I would not be very surprised if *some* orders were cancelled. Addison suggests that the delays are working to the advantage of people who are making more money with delay compensation than they would if the airplanes were delivered and carrying passengers or freight. I'm not as sanguine.

The proximate result of the continuing series of A380 and A350 flaps and clusterfucks at Festung Airbus will be remembered long after the localized problems are worked through and a lot of industry people out there may rethink future acquisitions-that's the outfall from this mess. It's going to take a lot of work to overcome this, and it's a tossup as to whether they can bring it off.


User currently offlineFuturecaptain From , joined Dec 1969, posts, RR:
Reply 13, posted (7 years 7 months 2 days 19 hours ago) and read 8280 times:

Quoting Lumberton (Reply 8):
I'd be willing to bet that this will be discussed on a.net until the sun goes nova!

Without a doubt there will always be an active topic about the whalejet's delays, even after the sun goes nova and we all type in the dark.

Quoting CYatUK (Reply 7):
With the right financing everything can be forgotten within days.

I doubt the airlines will forget how late the a/c is and it will make them more cautious launching Airbus a/c in the future. A few A330's thrown at them doesn't change the fact the a/c they ordered in over a year late.

With the UK selling its share in EADS and Russia buying up a portion how do you think that will affect launch aid? The UK has a huge budget, IDK about Russia's, but do they have hge amounts of money to throw around into new Airbus a/c?


User currently onlineStitch From United States of America, joined Jul 2005, 29694 posts, RR: 84
Reply 14, posted (7 years 7 months 2 days 18 hours ago) and read 8273 times:
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Quoting NAV20 (Reply 10):
It also appears likely that that transfusion is going to have to come from government-controlled sources. No private investment source could risk clients' money on EADS' current outlook.

Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources to fund the Sonic Cruiser, 7E7, 787, KC-767, and 748 programs.

Not to mention RLA is like what, a third of any Airbus program's initial financing package? They have to get the other 66% somewhere, just like Boeing does. The A380 program is over budget and running late, but not only have airlines not cancelled, at least two have ordered or MoU'd more (SQ and QR).

Last I heard, EADS stock is still pretty stable after this latest delay, so it's looking like the markets aren't panicking this time like they did the last time a delay was announced because the airlines are committed to the program so the short-term forecast might be a bit gloomy do to the delays, but long-term, they expect Airbus to deliver all ~170 frames plus more.

So I don't see Airbus having to fund the A350 at 50% - much less 100% - RLA. EADS can't afford to do it, anyway, because it will trigger US trade retaliation. EADS isn't that important to the EU. After all, when the WTO ruled against the export tax credit Boeing (and others) were using to save hundreds of millions a year, the US folded rather then risk $4 billion a year in EU trade retaliation. I imagine the US has a similar "arsenal" of sanctions to employ against the EU if they increase funding on the A350 program beyond what is allowed under the 1992 agreement.

They should be perfectly able to get the money on the open market, they'll just have to pay a higher price to do so.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 36
Reply 15, posted (7 years 7 months 2 days 18 hours ago) and read 8235 times:

Quoting Stitch (Reply 14):
Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources

Agreed, Stitch. But the 'internal sources' included firing most of the top management AND giving pink slips to around 30,000 people. Those options are not open to EADS.

I wouldn't mind betting that Gallois and Streiff, the day they were appointed, got their brief direct from the Elysee Palace. And that, in broad terms, it said:-

"You have a free hand to do whatever it takes to get the company out of trouble. Only exceptions to that rule are, DON'T cancel the A380, DON'T fire anyone except top management, and DON'T switch too much production around between France, Germany, and Spain."



"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineArt From United Kingdom, joined Feb 2005, 3347 posts, RR: 0
Reply 16, posted (7 years 7 months 2 days 18 hours ago) and read 8217 times:

Quoting Futurecaptain (Reply 13):
Without a doubt there will always be an active topic about the whalejet's delays, even after the sun goes nova and we all type in the dark.

Your typewriter will melt before the sun goes dark, making it difficult to type. You will melt, too. Typing on a melted typewriter with melted fingers is going to be even more difficult when it then gets dark!


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 17, posted (7 years 7 months 2 days 18 hours ago) and read 8210 times:

Quoting Dougloid (Reply 12):
when Singapore cancelled an order for 20 MD11s for a lot less offense than Airbus is giving the potential operators of the A380 nowadays. They do not like being shoved around and I am sure there's a payoff somewhere.

IMO, SQ had other viable options at that time. There probably aren't any at this time for SQ in lieu the A380, or at least none the current management would admit to. Their star is hitched to the A380.



"When all is said and done, more will be said than done".
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 18, posted (7 years 7 months 2 days 18 hours ago) and read 8190 times:

Quoting Stitch (Reply 14):
EADS isn't that important to the EU

Respectfully disagree. Its an undeniable success commercially. Symbolically, it may be even more important....



"When all is said and done, more will be said than done".
User currently onlineStitch From United States of America, joined Jul 2005, 29694 posts, RR: 84
Reply 19, posted (7 years 7 months 2 days 18 hours ago) and read 8190 times:
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Quoting NAV20 (Reply 15):
Agreed, Stitch. But the 'internal sources' included firing most of the top management AND giving pink slips to around 30,000 people. Those options are not open to EADS.

As one of the 30,000 let go, and the consequent effect it had on the local SEA economy for a few years, I can understand the EU's desire not to see a wholesale shedding of jobs. But even in Japan, "lifetime employment" came to an end.

Still, I do agree with you that you will not see workforce shedding on anything like the scope Boeing did. For one thing, Airbus is not going to outsource a lot of their production work because they don't have the contentious labor issues Boeing does with their personnel. When the machinists struck last time, they just ensured most of the 787 would be built outside of PAE. That is why even as Boeing is back to record sales and deliveries, they're not back to record employment.  Sad

But still, if Airbus needs to "shrink to grow", I am sure they can come up with incentive plans to get folks to leave, as Ford is now doing and many other companies have done in the past (including Boeing).


User currently offlineCHIFLYGUY From United States of America, joined Aug 2006, 141 posts, RR: 0
Reply 20, posted (7 years 7 months 2 days 18 hours ago) and read 8172 times:

Quoting Stitch (Reply 14):

Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources to fund the Sonic Cruiser, 7E7, 787, KC-767, and 748 programs.

Stitch, there is one very important difference between the Boeing and Airbus situations. Boeing was suffering because of underinvestment, Airbus is suffering from overinvestment. Arguably the former is much easier to recover from than the latter. Boeing also benefitted significantly from defense spending increases post-9/11.

The A380 is going to be an "overhang" on Airbus' performance for quite some time, just like dotcom overinvestment continues to drag on many industries.


User currently onlineStitch From United States of America, joined Jul 2005, 29694 posts, RR: 84
Reply 21, posted (7 years 7 months 2 days 18 hours ago) and read 8159 times:
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Quoting CHIFLYGUY (Reply 20):
Stitch, there is one very important difference between the Boeing and Airbus situations. Boeing was suffering because of underinvestment, Airbus is suffering from overinvestment...The A380 is going to be an "overhang" on Airbus' performance for quite some time, just like dotcom overinvestment continues to drag on many industries.

Aye, probably true. But I still don't see it as a concrete weight that will drown Airbus as many on this board feel. I still feel Airbus can move forward under the current agreements. They may not enjoy as strong margins and RoI as they have in the past, but hey, they had a great five year-plus run. Time to let Boeing enjoy the sun a bit.  Smile


User currently offlineArt From United Kingdom, joined Feb 2005, 3347 posts, RR: 0
Reply 22, posted (7 years 7 months 2 days 17 hours ago) and read 8109 times:

Quoting Stitch (Reply 19):
But still, if Airbus needs to "shrink to grow",

Why should it need to shrink? The A320E should steal the lead from the 737NG, the A350XWB seems to be a design driven by customer corrective input solving some of the non-competitive A350 and A340 problems, the A380 should (eventually) sell well.

The A380 foul up is not going to stop airlines ordering Airbus products but I think it is going to reduce future Airbus sales from where they could have been. I think it will also make finance for new Airbus projects more expensive or more difficult to obtain, reducing Airbus profits.

Quoting Joni (Reply 11):
As other writers have already said, I don't think the delays (annoying and disturbing as they are) amount to anything like sufficient reason to call the program a "fiasco".

Perhaps "fiasco" is too strong a term to describe a situation in which the one hand (Hamburg) does not appear to know what the other hand (Toulouse) is doing and vice versa. I suppose you could call it a "misunderstanding" but a misunderstanding that will cause major disruption to airlines' planning, directly cost Airbus several billion dollars and indirectly cost them a lot more in the future due to the damage done to their credibility.


User currently offlineCYatUK From United Kingdom, joined Apr 2006, 810 posts, RR: 0
Reply 23, posted (7 years 7 months 2 days 16 hours ago) and read 7995 times:

Quoting Futurecaptain (Reply 13):
I doubt the airlines will forget how late the a/c is and it will make them more cautious launching Airbus a/c in the future. A few A330's thrown at them doesn't change the fact the a/c they ordered in over a year late.

With the UK selling its share in EADS and Russia buying up a portion how do you think that will affect launch aid? The UK has a huge budget, IDK about Russia's, but do they have hge amounts of money to throw around into new Airbus a/c?

I don't think that the aid UK is providing is all because of BAE. Don't forget that all Airbus' wings are manufactured here and that any problems between the UK and EADS may have an impact on that.

Also, I am definitely sure that when airlines sign up to be launch customers there are numerous terms and conditions under which this agreement is signed - and the possibility of delays (and compensations) are part of it.

People are moaning about the A380 as if they are loosing money themselves! Nobody seems to recongise the fact that this plane is unique and carries very complex rechnology. A delay of 1-1.5 years on the programme is nothing compared to the 20-25 years that is expected to be in service as well as the advantages that it will bring.



CY@Uk
User currently offlineAirFrnt From United States of America, joined Jul 2004, 2822 posts, RR: 42
Reply 24, posted (7 years 7 months 2 days 10 hours ago) and read 6618 times:

Quoting Art (Thread starter):
In view of the A380 experience - possible or likely loss of around $4 billion launch aid - will the governments concerned still be prepared to provide launch aid funds for the A350XWB?

Sure. Because Launch aide has never been about commercial practicality, it's been about national prestige and jobs.

Europe propped airbus up for 20 years before they finally had a plane that would sell. They will continue to do so now.

As far as investment goes, there will be no shortage of idiots in the world who would invest in Google at $400 a share. Airbus, even with the A380 production snafus are infinitely better investment then that.


25 Post contains images A300605R : I think that will be a very important factor in the future of Airbus.
26 NYC777 : Yeah I agree, I wouldn't be surprised if the A350XWB faces the same problems that the A380 is facing.
27 Post contains images A300605R : Hopefully not.
28 Glacote : Is this statement based on the analysis of EADS fillings or on your guesses? The $15 billions A380 program was financed on 1/4th state loans and free
29 Dw747400 : Delayed flows are not as significant as the dramatic costs of a long, drawn out testing and redevelopment program, numerous customer penalties, and e
30 Shenzhen : Well, if you took that 20 billion (15 plus inventory and such) and bought Government bonds, they have already lost 2 billion over two years, without
31 Post contains links NAV20 : And $3.33B. in 'state loans' doesn't amount to "a financial transfusion amounting to some billions"? The short answer about EADS' current financial s
32 MCIGuy : I don't see this happening. Airbus will be very busy for the next few years with A380 and then A350. Not to mention, their cash will be tied up. By t
33 Futurecaptain : It only makes it the most delayed commercial airliner in HISTORY. But yes, that is nothing. right? Lets face it, the A380 was a presteige plane, Airb
34 Sebolino : Wait NAV20. I may have a bad recall, but I think you were one of the first and most active in the anti-A squad when it was to say that the launch aid
35 Joni : The A380 will in all likelihood bring Airbus profits, not "overhang". Profits both directly because the program will be profitable, and from being ab
36 Art : The A320E is a modest step forward. IIRC the aim is for >3% improvement in fuel burn. Correct me if I am wrong, but I don't think it requires big fun
37 Post contains images Trex8 : those who are "converted" often become the greatest proponents of any view!
38 Post contains images Sebolino : Agreed. Except that there is a possibility that the program will never be profitable. A small one I believe. Anyway, even if not profitable, the loss
39 Zvezda : The private capital markets make much riskier investments. Have you heard of junk bonds? Higher risk simply means higher interest rates. There is no
40 NAV20 : I think your memory IS at fault, Sebolino. I don't know the terms on which launch aid was advanced in the early years, but I've always made it clear,
41 CYatUK : Not really. It is going to be in passenger service for 25 or so years and in cargo service for even more. The delay is really nothing compared to the
42 Art : If either Boeing or Airbus thought the way you do, they would go out of business.
43 DAYflyer : According to the Gellman report, they have 17 years to pay it off. Even if it were to be cancelled, which I HIGHLY doubt, they would have sufficient c
44 CYatUK : I think you may have misunderstood my point. All I am saying is that you better get something right even with a delay rather than on time and wrong.
45 Art : OK, sorry if I misunderstood your point.
46 Post contains links BoomBoom : Our favorite analyst, Richard A., addressed this in his WSJ op-ed piece The Airbus Debacle: http://online.wsj.com/article/SB1150...7384778.html?mod=t
47 Art : I think I get the picture: building aircraft to satisfy demand and bring in cash is a good idea if you are Boeing but a bad one if you are Airbus. Ai
48 Post contains links BoomBoom : No, you missed the picture: http://online.wsj.com/article/SB1150...7384778.html?mod=todays_us_opinion
49 Glacote : You must be kidding right? These arerepayable loans and have been factored in every Airbus program. And again you shall only count on the the eventua
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