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Leahy Expects To Sell 20 More A380s In 2007  
User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Posted (7 years 7 months 2 weeks 5 days 15 hours ago) and read 8684 times:

Quote:
LONDON (Dow Jones)--European plane-maker Airbus expects to sell 20 more of its double-decker A380 airplanes during 2007 from at least two new customers, John Leahy, Airbus' chief operating officer for customers, told financial television channel CNBC Europe Wednesday.

In an interview at Airbus' headquarters in Toulouse, Leahy said technical problems that caused about a two-year delay in A380 deliveries now appear to have been resolved.

"We're back on track ... We'll get the job done and get these airplanes out the door," Leahy said...

http://online.wsj.com/article/BT-CO-20070207-701923.html (Subscription)

Mr. Leahy remains confident regarding potential A380 sales, although it's fair to note that in 2006 he did fail to achieve his goal since the launch of the program to sign-up at least one new customer per year before EIS.

64 replies: All unread, showing first 25:
 
User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3390 posts, RR: 9
Reply 1, posted (7 years 7 months 2 weeks 5 days 15 hours ago) and read 8665 times:

Quoting Leelaw (Thread starter):
Mr. Leahy remains confident regarding potential A380 sales, although it's fair to note that in 2006 he did fail to achieve his goal since the launch of the program to sign-up at least one new customer per year before EIS

That is true but I would of been gob-smacked if he'd pulled that off last year with nothing but talk of delays, cock-ups and disaster.

I'll be impressed if he can get 20 sales this year. Start the speculation now as to who he's talking about:

3 more for Thai
2 more for QR
10 for the unidentified Indian airline
5 for China

or maybe the biggie - 20 for BA?


User currently offlineKappel From Suriname, joined Jul 2005, 3533 posts, RR: 17
Reply 2, posted (7 years 7 months 2 weeks 5 days 15 hours ago) and read 8635 times:

How does this tie up with the other thread about Airbus talking to two Indian airlines? Maybe he is (partly) referring to them.

Quoting Scouseflyer (Reply 1):
That is true but I would of been gob-smacked if he'd pulled that off last year with nothing but talk of delays, cock-ups and disaster.

Indeed, the fact that they even received more orders than cancellations is an achievement IMHO.



L1011,733,734,73G,738,743,744,752,763,772,77W,DC855,DC863,DC930,DC950,MD11,MD88,306,319,320,321,343,346,ARJ85,CR7,E195
User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3390 posts, RR: 9
Reply 3, posted (7 years 7 months 2 weeks 5 days 15 hours ago) and read 8636 times:

Quoting Kappel (Reply 2):
Indeed, the fact that they even received more orders than cancellations is an achievement IMHO.

Agreed!


User currently offlineSlz396 From , joined Dec 1969, posts, RR:
Reply 4, posted (7 years 7 months 2 weeks 5 days 14 hours ago) and read 8541 times:

Quoting Scouseflyer (Reply 1):
Start the speculation now as to who he's talking about:

3 more for Thai
2 more for QR
10 for the unidentified Indian airline
5 for China

or maybe the biggie - 20 for BA?

2 for QR is a given; they've said themselves they'd order 2 more once the compensation issue is settled.

10 for an Indian airline (Jet Airways) seems like a good possibility indeed, Air India maybe too, although I doubt such a deal could still be concluded this year...  Smile

LH, together with SQ and QF, was accidentally mentioned by Mr. Leahy as having ordered more A380s recently, until he realized his slip of the tong and corrected it... Supposing he was not completely talking out of his neck, but just didn't realise it was fully concluded yet, it can't but mean the German flag carrier is negotiating a follow up order... fully in line with their own comments they have never placed an order without a follow up order later on.

And don't forget the order count could also include the first order for the VIP version of the A380, called the Flying Palace... Wasn't there talk about not less than 2 customers who were about to sign for one each recently?


User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3390 posts, RR: 9
Reply 5, posted (7 years 7 months 2 weeks 5 days 14 hours ago) and read 8516 times:

Good point - forgot about LH!

User currently offlineCXfirst From Norway, joined Jan 2007, 3069 posts, RR: 1
Reply 6, posted (7 years 7 months 2 weeks 5 days 14 hours ago) and read 8468 times:

Hopefully BA will order some A380's, but I don't think they will order until after EIS if they ever order.

As an other thread says, Airbus are talking with 2 Indian Airlines, so if they have made a deal (and waiting for an air show to say it in), this statement will be good publicity, as they predicted it correctly and are gaining more orders.

-CXfirst



From Norway, live in Australia
User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 7, posted (7 years 7 months 2 weeks 5 days 13 hours ago) and read 8359 times:

Quoting Scouseflyer (Reply 1):
Quoting Leelaw (Thread starter):
Mr. Leahy remains confident regarding potential A380 sales, although it's fair to note that in 2006 he did fail to achieve his goal since the launch of the program to sign-up at least one new customer per year before EIS

That is true but I would of been gob-smacked if he'd pulled that off last year with nothing but talk of delays, cock-ups and disaster.

To challenge "conventional wisdom" a bit, Mr. Leahy was not totally hamstrung in terms of signing-up new customers in 2006. Just one-year ago Mr. Leahy saw "new" customers just over the horizon, and Airbus was offering similar assurances that the A380 program was on-track for deliveries to commence in late-2006; in fact, such guidance officially remained in place until June 13, 2006. Arguendo, for nearly six-months of 2006 the "marketing" landscape Mr. Leahy faced was essentially the same as what will confront him for much of 2007.


User currently offlineManni From South Korea, joined Nov 2001, 4221 posts, RR: 23
Reply 8, posted (7 years 7 months 2 weeks 5 days 13 hours ago) and read 8326 times:

Quoting Leelaw (Thread starter):
European plane-maker Airbus expects to sell 20 more of its double-decker A380 airplanes during 2007

Airbus remains very modest. After predicting only 200 A350XWB orders/commitments (I believe it wasn't specified), they now only predict 20 A380 sales. BA is not ,will they order but when will they order IMO. If they order this year the number of new A380 orders will likely exceed 20. Unless Mr. Leahy was reffering to new orders from new customers or customers without options.



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User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3390 posts, RR: 9
Reply 9, posted (7 years 7 months 2 weeks 5 days 13 hours ago) and read 8185 times:

Quoting Manni (Reply 8):
Unless Mr. Leahy was reffering to new orders from new customers or customers without options.

He's just making sure that he sets and acheivable goal - don't say that you're aiming high as you will miss your target!


User currently offlineManni From South Korea, joined Nov 2001, 4221 posts, RR: 23
Reply 10, posted (7 years 7 months 2 weeks 5 days 12 hours ago) and read 8089 times:

Quoting Scouseflyer (Reply 9):
He's just making sure that he sets and acheivable goal - don't say that you're aiming high as you will miss your target!

That sounds very plausible. I can already see the headlines, next year januari... Airbus sells twice as much A380s as predicted in 2007!  bigthumbsup 



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User currently offlineFCKC From France, joined Nov 2004, 2348 posts, RR: 4
Reply 11, posted (7 years 7 months 2 weeks 5 days 11 hours ago) and read 7957 times:

If Airbus gains 20 orders , and 2 new customers (as mentionned in the article) this year , it will be nice , but i suggest to wait for 2008 to see many more orders a year , after the EIS.

User currently offlineKatekebo From United States of America, joined Apr 2001, 704 posts, RR: 6
Reply 12, posted (7 years 7 months 2 weeks 5 days 10 hours ago) and read 7696 times:

Airbus needs to sell around 40-50 A380s per year to make the project profitable. At 20 sales per year it will be a big looser.

User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 13, posted (7 years 7 months 2 weeks 5 days 10 hours ago) and read 7673 times:

Quote:
...Airbus sales chief John Leahy reiterated that he expected 20 new orders for the aircraft from two customers in 2007.

"We have a lot of interest in the aircraft despite the problems we experienced last year," Leahy said.

The Airbus officials were speaking ahead of the first media demonstration flight of the world's largest airliner.

Leahy told Reuters on board the plane that Airbus expects to sell 800 or 900 A380 aircraft over the life of the programme.

Leahy said he did not expect further A380 cancellations after U.S. express service FedEx cancelled 10 planes last year...

http://today.reuters.com/news/articl...A380-UPDATE-1.XML&rpc=66&type=qcna


User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3390 posts, RR: 9
Reply 14, posted (7 years 7 months 2 weeks 5 days 10 hours ago) and read 7609 times:

Quoting Leelaw (Reply 13):
Leahy said he did not expect further A380 cancellations after U.S. express service FedEx cancelled 10 planes last year...

That's very significant - it suggests that they've kissed and made up with UPS


User currently offlineSlz396 From , joined Dec 1969, posts, RR:
Reply 15, posted (7 years 7 months 2 weeks 5 days 10 hours ago) and read 7604 times:

Quoting Katekebo (Reply 12):
Airbus needs to sell around 40-50 A380s per year to make the project profitable. At 20 sales per year it will be a big looser.

I don't see where that idea comes from.

Just because Airbus will increase production to the maximum of 45 to cope with delays, doesn't mean their line needs to run at maximum capacity for it to be worth wile.

If fact, since most of the expenditure on the A380 is uncapitalized (and thus accounted for in the profit + loss accounts of EADS over the past 7 years), Airbus will most likely book profits on A380 sales with sales numbers well below what you seem to think.

Remember it is only the capitalised part of the expenditure on the A380 which still needs to be accounted for (i.e. depreciated) over let's say 25 years.

Airbus sells 20 planes for €X BN, with a cost of €Y BN to build them.
X-Y is what is called the operating profit.
Some operating profit will be consumed in that year's P+L accounts covering depreciation of the capitalized investments from the past.
Any operating profit left over in that year will appear in the accounts as profit on A380 sales.

It has been assumed roughly €3BN to 4BN of the total investment on the A380 is capitalized, thus Airbus will need to offset an annual depreciation of about €120M to €160M only through sales, the rest is pure profit from an accounting basis. In short: anything North of a modest follow up order more than covers the bills.


User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 16, posted (7 years 7 months 2 weeks 5 days 9 hours ago) and read 7523 times:

Quoting Slz396 (Reply 15):
Airbus will most likely book profits on A380 sales with sales numbers well below what you seem to think.

True in terms of financial accounting. However, the financial performance of a long-term project is measured using cost accounting/capital budgeting techniques. By these metrics Airbus will need to deliver 420 A380s to "break-even," 750 units to achieve a sub-par IRR of 13%, and 900-1000 units to achieve an IRR of 19%, still below the 20%+ IRR promised at the time of the program launch. The A380 program has a long way to go to be the cash and profit cow that was hoped for in 2001.

[Edited 2007-02-07 15:11:25]

User currently offlineAirFrnt From United States of America, joined Jul 2004, 2826 posts, RR: 42
Reply 17, posted (7 years 7 months 2 weeks 5 days 5 hours ago) and read 6788 times:

Quoting Leelaw (Thread starter):

Mr. Leahy remains confident regarding potential A380 sales, although it's fair to note that in 2006 he did fail to achieve his goal since the launch of the program to sign-up at least one new customer per year before EIS.

A important note is that 20 a year won't get it done (20 year life cycle = 400 frames, which is under the 420 orders needed for operational break even and far short of the 550-650 frames needed to meet their ROI to investors) And if Y3 launches five years after the 787 launches, it won't have a shot at even 20 a year.

Quoting Slz396 (Reply 15):

If fact, since most of the expenditure on the A380 is uncapitalized (and thus accounted for in the profit + loss accounts of EADS over the past 7 years), Airbus will most likely book profits on A380 sales with sales numbers well below what you seem to think.

I would love to see your sources on this statement because the contradict what everyone including Airbus is saying.

Airbus self funded a large portion of this project, true. Airbus therefore doesn't have as much debt on this project, true. But the money that Airbus spent was a "capital" investment. In other words, the money that Airbus spent building facilities, purchasing parts, etc is not counted as a Profit or Loss. It's counted as a investment, with a depreciation schedule etc. Therefore you can see the impact in the cash flow statements and the minimum operating capital, but not the profit and loss estimates. When do you see it against the P+L? When Airbus has to take charges reflecting that capital is lost and can not be recovered by profit.

In other words, Airbus has spent the money, but they also left a IoU on their books saying that they will recover this cash when the A380 sells above the break even threshold. Airbus self funding means that they won't be killed by the banks, but it will still be very ugly on the books.

(The 1/3rd of the project that was financed by launch aide, and probably another 1/3rd that was funded by banks is another matter)

Don't believe me, go look at Airbus's cashflow problems the next few years.

You can verify this by looking at the break even numbers. Airbus had to raise the break even number from 270 to 420. 420-270 = 150 or almost exactly the number of orders that Airbus had when the debacle occurred. Airbus effectively had to write off any profit from their entire A380 orderbook, still make up the operational costs with the next 270 frames and then start making a return on their investment.

Quoting Slz396 (Reply 15):
It has been assumed roughly €3BN to 4BN of the total investment on the A380 is capitalized

Assumed by whom? Airbus is probably easily blowing through 3-4BN US right now per year on this project. That money has to come from somewhere.

Quoting Slz396 (Reply 15):
anything North of a modest follow up order more than covers the bills.

270 new frames on top of 150 frames (which Airbus states is the break even) is hardly a follow up, and that would only cover the bills, not make a profit.

Quoting Leelaw (Reply 16):
By these metrics Airbus will need to deliver 420 A380s to "break-even," 750 units to achieve a sub-par IRR of 13%, and 900-1000 units to achieve an IRR of 19%, still below the 20%+ IRR promised at the time of the program launch.

The 420 number is correct according to Airbus, but I think the 13% IRR number and the 20% IRR number is about 100 higher then it actually is. Of course, Leahy is now stating that he expects to sell 800-900, and if he is still being driven by the IRR number, that's correct.


User currently offlineStitch From United States of America, joined Jul 2005, 31011 posts, RR: 86
Reply 18, posted (7 years 7 months 2 weeks 5 days 5 hours ago) and read 6560 times:
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A fleet of 25 A338s and 40 748Is (assuming LH converts their 10 A388 and 20 748I options) would make LH a force to be reckoned with on long-haul, to be sure...

User currently offlineBoogyjay From France, joined May 2005, 490 posts, RR: 4
Reply 19, posted (7 years 7 months 2 weeks 5 days 4 hours ago) and read 6177 times:

Quoting Slz396 (Reply 4):
Air India maybe too

I doubt it. They are focused on the merger with IA that should officially be announced very soon (this month). And after that, they'll be busy swallowing this merger (not just AI, IA too).

AI is upgrading its 6 owned B744 and it'll received lots of 773 in the near future.

They might order the A380 one day, but not yet.


People are citing A380 customers whereas the article states 2 NEW customers.

I'd say 9W and a big bet : SA.

Cheers !


User currently offlineEI321 From Iraq, joined Jul 2009, 0 posts, RR: 0
Reply 20, posted (7 years 7 months 2 weeks 5 days 3 hours ago) and read 6065 times:

Quoting Katekebo (Reply 12):
At 20 sales per year it will be a big looser.

20 a year would equate to 600 over a 30 year production life. That would mean sales of 750 approx.


User currently offlineFlysherwood From United States of America, joined Jul 2006, 1115 posts, RR: 0
Reply 21, posted (7 years 7 months 2 weeks 5 days 3 hours ago) and read 6018 times:

Quoting Scouseflyer (Reply 1):
I'll be impressed if he can get 20 sales this year. Start the speculation now as to who he's talking about:

Why? With the kind of money that Airbus has tied up with this program, he better do better than 20 this year. At that rate it would take him another 15 years just to break even on the frame? OUCH!!! Talk about setting his sights low.


User currently offlineRbgso From United States of America, joined Jun 2006, 593 posts, RR: 0
Reply 22, posted (7 years 7 months 2 weeks 5 days 3 hours ago) and read 5844 times:

Good to see John talking to the press again. That's another sign things are slowly returning to normal at Airbus.

User currently offlineAirFrnt From United States of America, joined Jul 2004, 2826 posts, RR: 42
Reply 23, posted (7 years 7 months 2 weeks 5 days 3 hours ago) and read 5804 times:

Quoting EI321 (Reply 20):

20 a year would equate to 600 over a 30 year production life. That would mean sales of 750 approx.

Sales cycles are shrinking not expanding. There is no way the A380 (in it's current form) will have a 30 year cycle.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 24, posted (7 years 7 months 2 weeks 5 days 2 hours ago) and read 5620 times:

Quoting EI321 (Reply 20):
Quoting Katekebo (Reply 12):
At 20 sales per year it will be a big looser.

20 a year would equate to 600 over a 30 year production life. That would mean sales of 750 approx.

1)It's called "time value of money"...the further out the project goes, the less of a profit it will get...
2)I'm open to a debate...maybe you can explain to me where Leahy gets his 1600+ VLA's of which Airbus will get 50% (700-800) sales....how about a quick rundown... Smile

Cheers.



"Up the Irons!"
25 Flysherwood : You are forgetting that they are already into this project for seven (7) years!
26 Sacamojus : I love it when a.netters talk about finance. I don't know the accounting principles in the EU but in the U.S. Research and Development is an expeditur
27 Bbobbo : EADS is governed by IAS 38, which allows development costs to be capitalized (research costs must still be expensed).[Edited 2007-02-07 23:01:58]
28 EI321 : Er, No. I stated production life. The A380 has not been in production 7 years, it hasent even entered service yet. Im not sure about this, are you ta
29 AirFrnt : Building factories isn't R&D. True, but banks do still look at IRR, and Airbus's only published metrics are IRR at this point. And the last report I
30 Post contains images TeamAmerica : I've been working on projects for a Swiss company. All proposed capital projects are subject to IRR review and approved on that basis (18% IRR requir
31 OA260 : Hmm I think he said 20 and deliberatley set his sights low, so If this year he sells 30 or 40 it will look alot better for them. I do however think th
32 Sacamojus : "And the last report I read speculated that the NPV is far worse then IRR because of the huge cash flows problems for the next 10 years." After 10 yea
33 Post contains images Leelaw : This is true as a general proposition in financial accounting under the accounting principle of conservatism, as research may not "bear any fruit." H
34 Sacamojus : "This is true as a general proposition in financial accounting under the accounting principle of conservatism, as research may not "bear any fruit." H
35 DfwRevolution : "Production life" is inconsequential. The product's sales life is what drives production, and that clock starts ticking the day the launch order is p
36 Post contains images Jacobin777 : 20 years is an arbitrary number....it doesn't have to be Leahy or anyone else. For the A380 program to "break even" (I'll use that term loosely), Air
37 AirFrnt : Not in the airline biz, for reasons detailed below. Everything in the airline business is controversial. Billion dollar products that may or may not
38 Dougloid : Not nearly as complicated as it sounds. Even I understood it and I'm not a finance major. And when you figure it out what it's saying is future cash
39 PlanenutzTB : OK, let the countdown begin. It's February 7 and the current order total for this year is zero. Each cancellation should count as -1. Let's start a be
40 Jacobin777 : I think it will certainly be a positive net number...Airbus will certainly have a few A380 sales.....
41 Racercoup : So help me understand this, 420+ orders to break even. 159 orders now, 20 more expected this year......that's supposed to impress me if I own EADS sto
42 Racercoup : Even Leahy must be having a problem spinning this as good news......
43 Manni : If, and that's all it is at the moment, if UPS cancels Airbus will lose 10 orders, not 20.
44 WingedMigrator : Does it have to? So what if it can't? Two important points bear repeating. (1) the program will generate positive cash flow starting in 2010, regardl
45 Post contains images Jacobin777 : It absolutely does...even if it will generate positive cash flow...in its simplistic form, Airbus was touting that $1 dollar in would eventually be $
46 WingedMigrator : Exactly, and rightly so. And there's nothing you could do about it. Except to sell and take the loss. And there's nothing Airbus can do about it. Exc
47 Post contains images 2wingtips : It's about as "if" as your opinion it's a "matter of if and not when BA order the A380". If they can't snag BA this year, the A380 is in real trouble
48 Post contains links and images Jacobin777 : .I see your point ..I guess we actually agree on the subject then.. ..well, here is something of interest.. http://news.independent.co.uk/busine...is
49 Leelaw : The "launch decision" in 2000 was based on a "break-even" of 250 units delivered and IRR of 20%+, which was officially revised by Airbus to a break-e
50 Steve6666 : Not under IFRS, and many other common GAAPs. (In US GAAP maybe, I have no idea) Not under IFRS. This is quite a change from most common GAAPs. IFRS i
51 Post contains links Leelaw : Here's another report/interpretation of Mr. Leahy's remarks offered before yesterday's publicity/demostration flight from the Associated Press: http:
52 AndesSMF : 20 additional orders would not be surprising. 100 additional orders would be good. Still doesn't stop the fact that those additional orders would not
53 Post contains links Leelaw : Here's what Mr. Leahy told ATWonline yesterday: http://atwonline.com/news/story.html?storyID=7850
54 SSTsomeday : I don't think you can spread out the sales of the 380 evenly over that period of time and expect a profit. I believe they would have to sell a larger
55 Scouseflyer : Haven't they already got the slots for these 10 reserved so 10 copies of the T7 is no suprise at all?
56 Post contains images Astuteman : FWIW I think WingedMigrator is correct insofar as, by the time we know for absolute certain whether the A380 makes a positive return or not, Airbus w
57 Post contains links Manni : As expected QR appears to be one of the airlines who Airbus eyes to sell additonal A380 to. http://www.gulf-times.com/site/topic...sion=1&template_id=
58 EI321 : Isnt airbus looking for more risksharing partners in future projects? Do you mean man power of financial commitments? I doubt there will be a lack on
59 Post contains images Jacobin777 : Yes they do..those slots were originally from a 1998 order..... Astuteman, I agreed with WingedMigrator as I finally understood his point of view.. .
60 Post contains images Astuteman : . That was my point, really. The A380 failing to make positive ROI will be bad for the A380 programme and that's it. . If financial constraints broug
61 Post contains images Jacobin777 : Let's just hope the "Aviation Gods" does not make that happen..
62 BoomBoom : Public opinion is irrelevant here. It's the airlines that place orders.
63 Columba : If he expects only 20 more A380s this year I believe that he has big doubts of BA signing BA as a customer this year. But this must not mean that BA w
64 Incitatus : Anybody can sell another 20 A380s in 2007. The question is: at what price? At a giveaway sale he can sell even 2000. Airbus's spin machine is still sp
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