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USD-Euro Sales Success B Vs A  
User currently offlineOlle From Sweden, joined Feb 2007, 305 posts, RR: 0
Posted (7 years 3 months 2 weeks 1 day 3 hours ago) and read 2324 times:

During the last years the USD - Euro exchange rate has been moving from 0,84 to todag more then 1,38.


Airbuses had its first year of #1 before Boeing in Sales at 0,84 and is now fighting with getting expenses down. What will it mean for B vs A if the USD - Euro becomes 1,5?

34 replies: All unread, showing first 25:
 
User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3397 posts, RR: 9
Reply 1, posted (7 years 3 months 2 weeks 1 day 2 hours ago) and read 2296 times:

"What will it mean for B vs A if the USD - Euro becomes 1,5?"

It becoems harder and harder for A to remain competative - one thing that they might do is to start to price their supplier contracts in $s to take away the problem - but I'm guessing they'd like the rate to go down first!


User currently onlineFlighty From United States of America, joined Apr 2007, 8634 posts, RR: 2
Reply 2, posted (7 years 3 months 2 weeks 1 day 2 hours ago) and read 2287 times:

This currency issue has been a sledgehammer for B vs A.

For one thing, it makes Euro zone customers better able to afford Boeing jets priced in dollars, which have grown cheaper in euros.

For another, it chokes the life out of Airbus when it continually has to raise the dollar price of _its_ jets. Or, it can choose to just eat the massive costs from this, or underprice in Euros.

Airbus will apparently try to get more suppliers in the dollar zone (including Asian peggers) to diversify against this. And furthermore, Boeing diversifies its suppliers geographically in part for similar reasons.

The world doesn't have a main currency anymore, so the norm is some basket between yen, dollars and euros. Airbus and Boeing are each trying to eliminate this annoying risk, but in the meantime... advantage Boeing.

[Edited 2007-07-12 00:39:11]

User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 3, posted (7 years 3 months 2 weeks 1 day 2 hours ago) and read 2287 times:

According to M. Gallois in this news report, the weak dollar could force Airbus to manufacture outside Europe!
http://news.yahoo.com/s/afp/20070711...orexeurocompanyairbus_070711124740

Quote:
PARIS (AFP) - The current weakness of the dollar against the euro poses a threat to the future of large aircraft manufacturing in Europe, the chief executive of European plane maker Airbus warned in an interview published on Wednesday.
Airbus is implementing a radical restructuring plan at the moment and plans to cut 10,000 jobs in the next four years to stay competitive with US rival Boeing, with which the group shares the market for large commercial planes.
The plan "should ensure that Airbus is competitive at a rate of one euro for 1.35 dollars," chief executive Louis Gallois told French magazine Challenges.
However, "if the dollar slides durably far beyond this, we will have to ask ourselves whether we can still make planes in Europe," he added.



"When all is said and done, more will be said than done".
User currently offlineSWISSER From , joined Dec 1969, posts, RR:
Reply 4, posted (7 years 3 months 2 weeks 1 day 2 hours ago) and read 2266 times:

If the Dollar keeps on going like this, maybe in a few years Airbus can buy Boeing for a Bargain!
problem solved!

 bigthumbsup 


User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9666 posts, RR: 52
Reply 5, posted (7 years 3 months 2 weeks 1 day ago) and read 2229 times:

Quoting Scouseflyer (Reply 1):
It becoems harder and harder for A to remain competative - one thing that they might do is to start to price their supplier contracts in $s to take away the problem - but I'm guessing they'd like the rate to go down first!

From what I understand, prices are actually mostly negotiated in Dollars. Planes are often priced and sold in dollars and components are sold in dollars. It is almost the official currency of aviation. Airbus however has to pay out many costs in Euros. However they do hedge against currency fluctuations. Airplanes purchased now, but built in 3 years will have a hedge on the value of currency today, so that Airbus won't see any flutuation in prie. It allows them to negotiate prices and not be hit by an exchange rate fluctuation.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineIkramerica From United States of America, joined May 2005, 21544 posts, RR: 59
Reply 6, posted (7 years 3 months 2 weeks 1 day ago) and read 2221 times:

Quoting SWISSER (Reply 4):
If the Dollar keeps on going like this, maybe in a few years Airbus can buy Boeing for a Bargain!
problem solved!

no free cash and bad credit...

it's actually the other way around. despite the poor exchange, over time Boeing will become stronger, and could leverage that strength. but of course, no way that would be allowed, since it would be uber anti-competitive.



Of all the things to worry about... the Wookie has no pants.
User currently offlineBaron52ta From United Kingdom, joined Apr 2005, 211 posts, RR: 0
Reply 7, posted (7 years 3 months 2 weeks 1 day ago) and read 2213 times:

Quoting RoseFlyer (Reply 5):
Planes are often priced and sold in dollars and components are sold in dollars

Commercial airliners are all marketed in US currency,not that they always get paid in US$, however Airbus is paying for 90% of its component parts in EU and the remainder in GB pounds(which is even more expensive to them).


User currently offlineWAH64D From United Kingdom, joined Jan 2005, 966 posts, RR: 14
Reply 8, posted (7 years 3 months 2 weeks 1 day ago) and read 2199 times:

Quoting Flighty (Reply 2):
This currency issue has been a sledgehammer for B vs A.

For one thing, it makes Euro zone customers better able to afford Boeing jets priced in dollars, which have grown cheaper in euros.

For another, it chokes the life out of Airbus when it continually has to raise the dollar price of _its_ jets. Or, it can choose to just eat the massive costs from this, or underprice in Euros.

Airbus will apparently try to get more suppliers in the dollar zone (including Asian peggers) to diversify against this. And furthermore, Boeing diversifies its suppliers geographically in part for similar reasons.

The world doesn't have a main currency anymore, so the norm is some basket between yen, dollars and euros. Airbus and Boeing are each trying to eliminate this annoying risk, but in the meantime... advantage Boeing.

Purchase price is very rarely the primary concern for airlines. For small startups maybe it is but they generally don't buy new aircraft. The cost of operating a B777 sized aircraft over a period of 10-15 years makes a even a 50% difference in purchase price a non-issue.

The dollar that has slumped, the Euro that has remained pretty stable against the other major currencies. With Boeing sourcing a high percentage of parts and services from outside the US, this has got to be hurting them as much as anybody else.



I AM the No-spotalotacus.
User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 37
Reply 9, posted (7 years 3 months 2 weeks 23 hours ago) and read 2173 times:

Quoting SWISSER (Reply 4):
If the Dollar keeps on going like this, maybe in a few years Airbus can buy Boeing for a Bargain!
problem solved!

Currently Boeing's market cap is ~$78 billion while EADS market cap is ~$26-27 billion. As the dollar weakens, EADS/Airbus will have greater profit difficulties or losses, and market cap could go down further as net assets decrease. Boeing will see the opposite effect. The Euro would have to appreciate multiple fold for them to be even afford Boeing.

Quoting WAH64D (Reply 8):
The dollar that has slumped, the Euro that has remained pretty stable against the other major currencies. With Boeing sourcing a high percentage of parts and services from outside the US, this has got to be hurting them as much as anybody else.

Huh? You haven't noticed that the Euro is hitting record highs against the yen and many Asian currencies. The Euro has remained relatively stable in relation to other European currencies and the currencies of countries that don't have a policy of manipulating the value of their currency in relation to the dollar.

Quoting WAH64D (Reply 8):
Purchase price is very rarely the primary concern for airlines.

Ha, ha, ha!

Quote:
The cost of operating a B777 sized aircraft over a period of 10-15 years makes a even a 50% difference in purchase price a non-issue.

Right, airlines are willing to leave $75 to $150 million dollars in the hands of the manufacture per aircraft.  sarcastic 

Purchase price was a major reason airlines were choosing the A340NG before the dollar went down and oil went up. The higher cost of the 777 wasn't offset by savings from operations as long as oil was cheap and Airbus could afford to sell the A340NG for less in dollars.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9666 posts, RR: 52
Reply 10, posted (7 years 3 months 2 weeks 21 hours ago) and read 2132 times:

Quoting WAH64D (Reply 8):
Purchase price is very rarely the primary concern for airlines. For small startups maybe it is but they generally don't buy new aircraft. The cost of operating a B777 sized aircraft over a period of 10-15 years makes a even a 50% difference in purchase price a non-issue.

I have no idea why you think that. Airlines often operate on razor thin margins and will save any money where they can. Lower lease or puchasing costs can be a huge factor. When you are in the United States for example when airlines are expected to maybe make an overall collective profit of about 2% this year, then your statement just doesn't make sense. When you are in the Middle East or India where airlines can't get planes fast enough, then acquisition costs might not be as important as speedy delivery, then it might work, but commercial aviation margins as a whole are small.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 11, posted (7 years 3 months 2 weeks 15 hours ago) and read 2074 times:

Quoting RoseFlyer (Reply 5):
However they do hedge against currency fluctuations.

Hedging isn't something they like to do; it's expensive.

Quoting WAH64D (Reply 8):
With Boeing sourcing a high percentage of parts and services from outside the US, this has got to be hurting them as much as anybody else.

Unless they were smart enough to negotiate all costs up front in USD?  Yeah sure



"When all is said and done, more will be said than done".
User currently offlineOlle From Sweden, joined Feb 2007, 305 posts, RR: 0
Reply 12, posted (7 years 3 months 2 weeks 15 hours ago) and read 2039 times:

How long will the airplanes be prised in USD?

The Oil producing countries getting more and more tired of loosing value with the weak USD and is looking for moving closer to a prising against a basket of currencies.

One reason why USD has been the currency for handling prices in is because most national banks have got a lot of USD deposited mostly because of the oil imports.

If this change to a basket of currencies we might see a change. The question now is when.

In 1920s the Sterling had the USD position and it took until after WWII to change that even if the economic figures spoke for it before.

So will for example Emirates, Dubai start to request prices against one basket to make the investment more secure for the future and more easy to plan?

Right now they gain from the weak USD but if the USD comes back to 0,82 what will they say?


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 13, posted (7 years 3 months 2 weeks 15 hours ago) and read 2038 times:

Quoting Olle (Reply 12):
How long will the airplanes be prised in USD?

Probably for the foreseeable future. I can't see EADS going to Euros and Boeing sticking with USD. Judging my M. Gallois' comments in the article I quoted earlier, he doesn't seem to imply that EADS will opt for Euro-pricing either.

Quoting Lumberton (Reply 3):
However, "if the dollar slides durably far beyond this, we will have to ask ourselves whether we can still make planes in Europe," he added.



"When all is said and done, more will be said than done".
User currently offlineRobffm2 From Germany, joined Dec 2006, 1117 posts, RR: 0
Reply 14, posted (7 years 3 months 2 weeks 15 hours ago) and read 2022 times:

Quoting Olle (Reply 12):
How long will the airplanes be prised in USD?

The Oil producing countries getting more and more tired of loosing value with the weak USD and is looking for moving closer to a prising against a basket of currencies.



Quoting Lumberton (Reply 13):
Probably for the foreseeable future.

Presuming exchange rate remain stable I think we will see a change within the next five years.
Should the USD continue to fall, this might be even sooner.

But in the end this is difficult to predict, there is a lot of politics involved, not only in Europe and the U.S.

Rob


User currently offlineFlyingAY From Finland, joined Jun 2007, 706 posts, RR: 0
Reply 15, posted (7 years 3 months 2 weeks 14 hours ago) and read 2016 times:

Since 787 is very much produced outside of US and many of the companies working on 787 parts are supposedly paid in USD, isn't this bad for those companies, although good for Boeing? Just like it is bad for Airbus, since they sell their planes in USD.

By the way, do they (Airbus) actually do that, when dealing with European customers? It's hard to imagine that Finnair, for example, would make the payment in USD to another European company...


User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9666 posts, RR: 52
Reply 16, posted (7 years 3 months 2 weeks 12 hours ago) and read 1932 times:

Quoting Olle (Reply 12):
How long will the airplanes be prised in USD?...

One reason why USD has been the currency for handling prices in is because most national banks have got a lot of USD deposited mostly because of the oil imports.

Not only is it because USD is a popular worldwide currency, but also because of the aviation industry in the United States. Everyone thinks of Boeing, but there are many other comapanies such as GE, Pratt & Whitney, Rockwell Collins, Honeywell, Hamilton Sundstrand and so many more. These companies are American and have the luxury of negotiating in their home currency and they make some of the most expensive components found on aircraft.



If you have never designed an airplane part before, let the real designers do the work!
User currently onlineFlighty From United States of America, joined Apr 2007, 8634 posts, RR: 2
Reply 17, posted (7 years 3 months 2 weeks 10 hours ago) and read 1898 times:

Quoting RoseFlyer (Reply 16):
Not only is it because USD is a popular worldwide currency, but also because of the aviation industry in the United States. Everyone thinks of Boeing, but there are many other comapanies such as GE, Pratt & Whitney, Rockwell Collins, Honeywell, Hamilton Sundstrand and so many more. These companies are American and have the luxury of negotiating in their home currency and they make some of the most expensive components found on aircraft.

Well those American components have become cheaper for Airbus. So that is great for them. Their costs have gone down.

But selling jets to US dollar customers must stink now for Airbus.

Meanwhile, Boeing is happy to sell you a jet for 100 million US dollars, which is what... only 72 million Euro now!! My god, what a huge discount Airbus has to give now! The 2 currencies were equal (or the Euro greater) just a few years ago.


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 18, posted (7 years 3 months 2 weeks 7 hours ago) and read 1859 times:

Quoting FlyingAY (Reply 15):
Since 787 is very much produced outside of US and many of the companies working on 787 parts are supposedly paid in USD, isn't this bad for those companies, although good for Boeing? Just like it is bad for Airbus, since they sell their planes in USD.

The Japanese yen has fallen to a record low against the euro. As you are no doubt aware, the Japanese produce a significant portion of the 787.
http://www.bloomberg.com/apps/news?p...1085&sid=aqtyemxBjm4o&refer=europe
Perhaps Gallois was hinting at plans to produce in the U.S. and Japan?

[Edited 2007-07-12 20:11:10]


"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 19, posted (7 years 3 months 1 week 6 days 7 hours ago) and read 1790 times:

Yesterday the yen; today the dollar.
Dollar Hits All-Time Low Vs. Euro



"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 20, posted (7 years 3 months 6 days 10 hours ago) and read 1716 times:

Update. Mr. Enders says that Airbus can cope with the high euro.
German says Airbus can cope with euro

Quote:
"I'm not a politician. I'm a businessman," Enders said. "I will not speculate about what politicians should do or would like to do. I know one thing: We need to act in this company and we need to act decisively."
. . .
"The Power 8 program is not only, or foremost, about the weak dollar. It's one of the reasons," Enders said, noting that the program also involves a major reorganization of Airbus's industrial organization, the centralization of numerous administrative functions and a streamlining of the company's procurement activities. "It's a very comprehensive program."



"When all is said and done, more will be said than done".
User currently offlineJfidler From United States of America, joined Aug 2000, 368 posts, RR: 0
Reply 21, posted (7 years 3 months 6 days 10 hours ago) and read 1686 times:

The foreign exchange market is well-developed and can handle risk mitigation. It's possible to buy forward contracts to hedge against future currency risk. Forex options are available as well.

In fact, in the example given of Finnair not wanting to pay an EU supplier (Airbus) in USD, it's possible to buy an item in USD but take the loan in a different currency. The USD purchase has an equivalent value in EUR at the time of taking the loan, so it's possible to just get a loan for that amount in EUR.

Justin


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 22, posted (7 years 3 months 6 days 8 hours ago) and read 1655 times:

Quoting Jfidler (Reply 21):
The foreign exchange market is well-developed and can handle risk mitigation. It's possible to buy forward contracts to hedge against future currency risk. Forex options are available as well.

Hedging is an option, but it's expensive. There is also a downside--you can bet wrong. Risk mitigation is one thing, but if it looks like the U.S. Dollar will continue to weaken vis a vis the euro, then EADS will need to adapt, and not just with hedging.



"When all is said and done, more will be said than done".
User currently offlinePar13del From Bahamas, joined Dec 2005, 7380 posts, RR: 8
Reply 23, posted (7 years 3 months 6 days 7 hours ago) and read 1621 times:

I never understood why for political reasons Airbus was not "encouraged" to switch to the Euro, you have the largest a/c maker in the world, so why not have them use the currency of their makers?

National pride usually trumps economics.


User currently onlineFlighty From United States of America, joined Apr 2007, 8634 posts, RR: 2
Reply 24, posted (7 years 3 months 6 days 7 hours ago) and read 1614 times:

Quoting Lumberton (Reply 22):

Hedging is an option, but it's expensive. There is also a downside--you can bet wrong.

When you negotiate a price for aircraft 3 years from now, you don't want to deal with 30% fluctuations in currencies between those times. Airbus cannot withstand that type of risk. So they convert their future dollars into future Euros according to the contemporary exchange market. Since the deal is already signed, Airbus' inability to re-price their product at delivery time (unlike airlines) means it is imperative they eliminate the currency risk, which is easy to do.

This is pretty far different from airline fuel hedging scenarios. Fuel prices are a risk that can be eliminated by simply charging more money for tickets in the future. Fuel hedging is usually unnecessary (and many successful airlines do very little of it).

When you sell airplanes, you already agreed on the price. If their currency dives, you are just screwed. Currency conversion is imperative for Airbus.

But, that's just going deal by deal. In the long run future, Airbus can't hedge its way out of expensive labor and parts. Now that the currencies are out of whack, the currency futures are also out of whack. So, Airbus is indeed screwed unless the currency moderates, or Airbus adjusts its business to be more global.


25 Post contains links Lumberton : Exactly what Herr Enders was talking about in the comments I referenced here, post #106: Eads +Summit 7/16 Sarkozy-Merkel-Daimler-Lagardere (by Amino
26 WAH64D : I am still surprised by the attitude that its a good thing to have a weak currency. In the short term there are definitely benefits but in the long te
27 Flighty : In the USA you can. Being the world's largest market has its perks. Japan has also pegged their currency to the US Dollar. So has China. So, Europe h
28 Olle : The USD also will mean that the US people get higher prices -> less for their salaries. Also the interests will go up more then the rest of the world
29 RIXrat : At the time of the order/contract you can lock in the dollar-euro exchange rate with your bank and the customer pays that rate six months down the ro
30 WAH64D : If we are talking single nation markets, the worlds largest would undoubtedly be China and a self fulfilling market at that. This is not something to
31 EmmenezMoi : The currency in which airplanes are priced is not so much the issue. I believe the important thing is rather: to what extend are your costs based on
32 Poitin : Take a hard look at the Swiss Franc, still about $1.20 each, much as it has been for years. A while ago it got o $1.50 a franc, but the Swiss correct
33 Rwessel : Even on a PPP basis, China's GDP is about half that of the United States. On a straight exchange basis, it's about an eighth. Practical reality is so
34 RoseFlyer : For international European Union companies like Airbus, the depreciated value of the dollar hurts their profits. Costs remain the same within the EU f
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