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Eads Is Worth Less Then Half Of Boeing  
User currently offlineEugdog From United Kingdom, joined Apr 2001, 518 posts, RR: 0
Posted (6 years 2 months 3 weeks 5 days 7 hours ago) and read 6423 times:

According to the Financial Times Airbus (EADS) market capitalization is just half that of Boeing (£20 billion compared to £56billion for Boeing). Actual revenues for both companies were about the same! According to Bloomberg the market capitalization of the civil aviation alone is zero. It is only the military that is propping the value

How come this is so?

- the A330 and A320 are doing very well. Airbus claim that all development costs on these planes were paid off years ago. So any contribution made on additonal sales (selling price less ONLY variable costs) are 100% profit to the company. They must be printing money on each sale! Only the A380 is selling poorly. The A340 was a relatively inexpensive derivative of the the A330 and it did sell well for a time. The A350 is now the fastest selling widebody plane. Surely the A380 could not be a total disaster that it has caused such a fall in share value.

The source for the market capitalization was Saturdays Financial Times - it ranked the 500 most valuable companies in the world based on market capitalization. Number was Exxon, Boeing was 130ish and EADS was 500!

[Edited 2008-06-29 01:10:09]

45 replies: All unread, showing first 25:
 
User currently offlineConcordeBoy From , joined Dec 1969, posts, RR:
Reply 1, posted (6 years 2 months 3 weeks 5 days 7 hours ago) and read 6363 times:

What was the breakdown? Commercial only?

...while Airbus has surpassed BCA, keep in mind that Boeing is also still an overall larger aerospace company than is Airbus.

Throw in EADS, and it gets trickier-- as the "where does Boeing Defense end, and governmental agencies begin" comes into question.


User currently offlineBill142 From Australia, joined Aug 2004, 8451 posts, RR: 8
Reply 2, posted (6 years 2 months 3 weeks 5 days 6 hours ago) and read 6332 times:



Quoting Eugdog (Thread starter):

How come this is so?

Market capitalisation is one way to compare the companies, and there are various factors which could affect it, such as shares on offer. But it's also like saying Airbus is the biggest commercial aircraft manufacturer by deliveries or that AA is the worlds biggest airline by fleet size. It also seems that Boeing is a bit more diverse then EADS which would affect it's market cap.


User currently offlineZvezda From Lithuania, joined Aug 2004, 10511 posts, RR: 64
Reply 3, posted (6 years 2 months 3 weeks 5 days 6 hours ago) and read 6313 times:



Quoting Eugdog (Thread starter):
Only the A380 is selling poorly.

The 747-8I is also selling poorly. The market has demonstrated that there is negligible demand for airliners above about 400 seats.

Quoting Eugdog (Thread starter):
Surely the A380 could not be a total disaster that it has caused such a fall in share value.

It looks like the WhaleJet program will incur net losses over the life of the program on the order of 10 billion euro. That could change if a substantial market for VLAs were to develop in the future.


User currently offlineAA737-823 From United States of America, joined Mar 2000, 5831 posts, RR: 11
Reply 4, posted (6 years 2 months 3 weeks 5 days 6 hours ago) and read 6301 times:

Well, not only is the A380 selling poorly (though I wouldn't say 'poorly'- I might say 'below expectations') the A345/6 is selling HORRIBLY. Carriers that have only recently acquired them are ditching them (Cathay, Thai, Air Canadia), and USAir can't afford to pick them up.

Meanwhile, pretty much everything Boeing offers (except the 767) sells well- they've got a 2000+ backlog for 737-NG, which Airbus still insists is 40-year old technology. The 777 still holds its own (see above verbiage on A345/6 doing poorly), and the 787 is obviously going gangbusters, if Boeing can ever actually manage to put one together.
The 747-800 is doing fine, even if most sales are of freighters. I suspect the numbers there were fully expected by Boeing, with the possible exception of 747 stalwarts, like BA and CX and SQ.

I don't really feel like putting much more effort into this post, as it's certainly going to turn into a flame war within the next 6 hours.
So suffice it to say that this news doesn't really surprise me.


User currently offlineOHLHD From Finland, joined Dec 2004, 3962 posts, RR: 25
Reply 5, posted (6 years 2 months 3 weeks 5 days 5 hours ago) and read 6152 times:

In the end it does not matter who is bigger and who is much more worth!

Both need to get their job done and avoid delays in producing and delivering aircrafts!  Smile


User currently offlineSlz396 From , joined Dec 1969, posts, RR:
Reply 6, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 6096 times:

It might be worth looking back at history to see that EADS has always been worth much less than Boeing and the reason has always been the disproportion in military contracts.

Whereas EADS and BCA are roughly each others equals in the civilian sector, Boeing has a far far larger military branche than EADS. Military contracts are known to come with much higher margins, much less competition and much longer contract periods, hence offering more long term financial security, something the market obviously likes.

One of those guaranteed controversial topics which contains no news really, yet are ideal for an animated Sunday afternoon on A.net.  Wink


User currently offlineLJ From Netherlands, joined Nov 1999, 4430 posts, RR: 0
Reply 7, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 6096 times:



Quoting Eugdog (Thread starter):
According to the Financial Times Airbus (EADS) market capitalization is just half that of Boeing (£20 billion compared to £56billion for Boeing). Actual revenues for both companies were about the same! According to Bloomberg the market capitalization of the civil aviation alone is zero. It is only the military that is propping the value

How come this is so?

Very easy explanation. Irregularities in the past and the claims resulting from the delayed A380 and therefore uncertainty.Given the fact that investors don´t like uncertainty you´ll see why Boeings market cap is higher


User currently offlineWorldrider From Switzerland, joined Nov 2007, 302 posts, RR: 0
Reply 8, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 6091 times:

41.63% of EADS stock is publicly traded on six European stock exchanges, while the remaining 58.37% is owned by a "Contractural Partnership".

User currently offlineBaroque From Australia, joined Apr 2006, 15380 posts, RR: 59
Reply 9, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 6075 times:



Quoting OHLHD (Reply 5):
In the end it does not matter who is bigger and who is much more worth!

And in theory you could buy GM for $6.54 billion and throw in Ford for about the cost of the A380 program. Mind you Toyota would set you back more like $170 billion.

This means that Boeing plus Airbus, plus GM and Ford are worth less than BHP Billiton ($233 billion).

Did someone mention hills of beans?


User currently offlineAstuteman From United Kingdom, joined Jan 2005, 10039 posts, RR: 96
Reply 10, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 6034 times:
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Quoting Zvezda (Reply 3):
It looks like the WhaleJet program will incur net losses over the life of the program on the order of 10 billion euro. That could change if a substantial market for VLAs were to develop in the future.

Although the bulk of the cost outflows should be behind Airbus now, hence I wouldn't expect this to impact in a significantly negative way on the market caoitalisation.

Quoting Baroque (Reply 9):
Did someone mention hills of beans?

 rotfl   rotfl 
Someone needed to......
Had to be you of course..  thumbsup   Smile

Rgds


User currently offlinePM From Germany, joined Feb 2005, 6923 posts, RR: 63
Reply 11, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 6019 times:



Quoting AA737-823 (Reply 4):
the A345/6 is selling HORRIBLY. Carriers that have only recently acquired them are ditching them (Cathay, Thai, Air Canadia), and USAir can't afford to pick them up.

I shouldn't rise to this, I know, but I can't help myself...  Silly

The A345/346 are not selling well - wouldn't try to argue that point. But of the three examples you give, Cathay acquired their three leased A346s in 2002/2003 (hardly "recently") and Air Canadia (sic) got rid of their two 2003-vintage planes some time ago. These examples account for exactly five of the 113 A345/A346s so far built and flown. Only Thai has recently put their four A345s on he market (but they're keeping the A346s). (Though you could add Qatar who are apparently pasing on their four A346s.) Still, there's no obvious evidence of airlines en masse dumping their A340s.

As for "USAir can't afford to pick them up", (a) they couldn't 'cause there were no used planes on the market (!) and (b) surely if they are such rubbish planes the cost of acquiring them would be very low? If "USAir can't afford to pick them up" might that imply that they are in demand and the cost of leasing or owning them is holding up? Just a thought...


User currently offlineAustrianZRH From Austria, joined Aug 2007, 1385 posts, RR: 0
Reply 12, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 5990 times:



Quoting AA737-823 (Reply 4):
the A345/6 is selling HORRIBLY



Quoting AA737-823 (Reply 4):
The 747-800 is doing fine, even if most sales are of freighters.

A340NG has total orders of 143 frames.

B747-8 has total orders of 88 frames.

Now a genuine question: some people on that forum here insist that Airbus was never able to cover the cost of developing the A345/6 with their sales.
The same people claim that the development of the B748 would even be covered if LH cancelled their order of 20 -8i's.
How's that possible? I cannot imagine that the -500/-600 development was that much more expensive than the -800F/i development.
Or is this just because Airbus gives out planes for free?  sarcastic 



WARNING! The post above should be taken with a grain of salt! Furthermore, it may be slightly biased towards A.
User currently offlineEugdog From United Kingdom, joined Apr 2001, 518 posts, RR: 0
Reply 13, posted (6 years 2 months 3 weeks 5 days 4 hours ago) and read 5967 times:

I was comparing Boeing with EADS so it includes both civil and commercial arms. moreover the turnover of both companies was also very similar (around about 60billion) So it is a like with like comparison.

The argument that such comparisons are meaninglless is not valid. Both companies seem to be very similar in size and industry.


User currently offlineAirbusA6 From United Kingdom, joined Apr 2005, 2013 posts, RR: 0
Reply 14, posted (6 years 2 months 3 weeks 5 days 3 hours ago) and read 5893 times:

Well, historically Boeing has been more efficient than EADS - most European areospace projects have a political element to them, which invariably adds to the cost.

Also, US military spending is much higher than European spending.



it's the bus to stansted (now renamed national express a4 to ruin my username)
User currently offlineZvezda From Lithuania, joined Aug 2004, 10511 posts, RR: 64
Reply 15, posted (6 years 2 months 3 weeks 5 days 3 hours ago) and read 5887 times:



Quoting AustrianZRH (Reply 12):
Now a genuine question: some people on that forum here insist that Airbus was never able to cover the cost of developing the A345/6 with their sales.
The same people claim that the development of the B748 would even be covered if LH cancelled their order of 20 -8i's.
How's that possible? I cannot imagine that the -500/-600 development was that much more expensive than the -800F/i development.

Some other factors are:
- 747-8s sell for more than A340s,
- because the 747-8F has no competitor (other than the 777F) and the 747-8I has less direct competitors, the 747-8 has much higher profit margins than the A340 which must be discounted to compete with the 777, and
- the structural challenges in extending the length of the A340 to 74 meters, including development of a CFRP keel, were expensive.


User currently offlineNAV20 From Australia, joined Nov 2003, 9909 posts, RR: 35
Reply 16, posted (6 years 2 months 3 weeks 5 days 2 hours ago) and read 5797 times:

Quoting Eugdog (Reply 13):
I was comparing Boeing with EADS so it includes both civil and commercial arms. moreover the turnover of both companies was also very similar (around about 60billion) So it is a like with like comparison.

Dead right. In fact, neither company is doing at all well in terms of market capitalisation.

Boeing is down about 28% on a year ago, EADS is down almost 50% in the same period. In EADS' case that is a 'second hit,' on top of the 25% or so that it lost after the Forgeard insider trading fiasco.

http://www.digitallook.com/companyre...earch/25163/Eads/share_prices.html

In money terms that means that the whole of EADS (military and civil) was only worth E9.978M. (say $US15.45B.) at close of business Friday. Or, to put it another way, anyone who bought EADS shares at their 'pre-A380 problems' peak (around Euro35.00) has now lost rather more than two-thirds of the value of their investment (Friday's closing share price E12.16). Boeing investors who bought at Boeing's 'pre-787 problems/tanker deal' share price peak of about $US100 have lost close to one-third of the value of THEIR investment (Boeing cap. value Friday $US49.299B.)

[Edited 2008-06-29 06:07:09]


"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
User currently offlineRevelation From United States of America, joined Feb 2005, 12564 posts, RR: 25
Reply 17, posted (6 years 2 months 3 weeks 5 days ago) and read 5591 times:



Quoting AA737-823 (Reply 4):
Carriers that have only recently acquired them are ditching them (Cathay, Thai, Air Canadia), and USAir can't afford to pick them up.

And Emirates cancelled rights to 18 A340-600s prior to delivery.

Quoting AA737-823 (Reply 4):
I suspect the numbers there were fully expected by Boeing, with the possible exception of 747 stalwarts, like BA and CX and SQ.

BA seemed to have revised their 747-8 market size estimates downwards after BA ordered A380s, so it's clear Boeing thought BA would be a 747-8 customer.

Quoting LJ (Reply 7):
Very easy explanation. Irregularities in the past and the claims resulting from the delayed A380 and therefore uncertainty.Given the fact that investors don´t like uncertainty you´ll see why Boeings market cap is higher

Yes, market cap is subject to the whims of speculators. It'd be nice if there were better estimates of a company's value, but it's hard to beat the one that says, "how much will you pay to own a piece of this company?".

I think EADS may have better valuation once the the next set of hurdles, mainly relating to the A350 project startup, the selling off of Airbus factories, the insider stock trading scandal, and Gallois's rumoured resignation are cleared. Clearly EADS has some wonderful products and there's no sign of that ending soon.



Inspiration, move me brightly!
User currently offlineFlydreamliner From United States of America, joined Jan 2006, 2759 posts, RR: 15
Reply 18, posted (6 years 2 months 3 weeks 4 days 22 hours ago) and read 5467 times:



Quoting Baroque (Reply 9):

Quoting OHLHD (Reply 5):
In the end it does not matter who is bigger and who is much more worth!

And in theory you could buy GM for $6.54 billion and throw in Ford for about the cost of the A380 program. Mind you Toyota would set you back more like $170 billion.

This means that Boeing plus Airbus, plus GM and Ford are worth less than BHP Billiton ($233 billion).

If you bought GM and Ford, you would have to assume all of their debt, which is worth several times what their market cap is.... not even Toyota could swallow that without it shooting their financials to hell. Those have such low market valuations because they are financially ill and heavily in debt.

Boeing a few months ago was worth substantially more, when share price was near 100, not near 70.

Of late, the US has been spending more money on defense than the entire rest of the world combined, so it is no surprise that US defense contractors have been doing well. It's raining money for them.

As for the Airbus division of EADS being of zero value, that makes pretty good sense. With substantial government support and holdings, EADS is more than just a corporation, it is an extension of European states. Airbus is an issue of immense pride, and will probably be funded to operate at a loss for some time. Airbus's inability to make money isn't an issue of its products being inferior or its management being incapable as much as it is an issue of the dollar and the euro. If Airbus charges in euros, their prices become substantially higher than Boeing's, and they can't sell aircraft. So they continue to charge in dollars, offer prices competitive with Boeing, but then have to pay a majority of their costs in euros, making it very difficult for them to make money. Even though a good deal of Boeing production on 777 an 787 are outsourced out of the US, it is largely to Japan, and the yen has not risen against the dollar nearly the way that the euro has.

In short, Airbus has a hard time making money in a strong euro - weak dollar environment. Simple as that.



"Let the world change you, and you can change the world"
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9645 posts, RR: 52
Reply 19, posted (6 years 2 months 3 weeks 4 days 22 hours ago) and read 5455 times:

Boeing strives for about a 50-50 ratio between commercial airplanes and defense systems. If you throw in shared services and phantom works, then that does make Boeing a large company.

However, revenue number wise, the companies earn:

Boeing: $66 Billion
EADS: $62 Billion



If you have never designed an airplane part before, let the real designers do the work!
User currently offlinePanAm1971 From United States of America, joined Aug 2007, 397 posts, RR: 0
Reply 20, posted (6 years 2 months 3 weeks 4 days 22 hours ago) and read 5396 times:

Quoting AA737-823 (Reply 4):
Well, not only is the A380 selling poorly (though I wouldn't say 'poorly'- I might say 'below expectations') the A345/6 is selling HORRIBLY.

"Below expectations," is spot on. "Poorly" is an overstatment. AB's future really is in A-350 development IMHO. However, it has been debated here-and will be-what AB's actual expectations of A-380 sales were and are. My impression was that the A-380 was as much about attempting to establish a full and superior fleet to B in all categories + VLA as it was about racking up huge orders. Whether or not that was a wise use of money is debatable. We'll see. Only time will tell.

[Edited 2008-06-29 10:48:46]

User currently offlineGsosbee From United States of America, joined Jan 2005, 825 posts, RR: 0
Reply 21, posted (6 years 2 months 3 weeks 4 days 22 hours ago) and read 5372 times:

Market capitalization is simply current share price times number of shares outstanding. Unless you are attempting to buy a company, on its own it really means nothing.

Better comparisons are net worth (assets less liabilities) and free cash flow.


User currently offlineAstuteman From United Kingdom, joined Jan 2005, 10039 posts, RR: 96
Reply 22, posted (6 years 2 months 3 weeks 4 days 22 hours ago) and read 5369 times:
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Quoting Flydreamliner (Reply 18):
Airbus is an issue of immense pride, and will probably be funded to operate at a loss for some time

That will be a trick well worth watching when it isn't actually making a loss....  scratchchin 

Until the A380 losses hit it, Airbus wasn't an issue of immense pride, it was an issue of substantial financial performance. Airbus was making a LOT of money until 2006.

Whilst the current exchange rate may limit the ability to return to those levels for a while, current indications are that Airbus are returning to profitability this year, and will continue to do so.

Quoting Flydreamliner (Reply 18):
EADS is more than just a corporation, it is an extension of European states

EADS may be so, but Airbus is pretty much a commercial venture, run on a commercial basis.

Quoting Eugdog (Thread starter):
According to Bloomberg the market capitalization of the civil aviation alone is zero. It is only the military that is propping the value

Which is complete hogwash, really, because neither the "military" section of EADS, nor Airbus are actually capitalised.
It's a cheap headline, and that's all.  yes 
You think that if Airbus changed hands it would do so free of charge?  no 

Quoting RoseFlyer (Reply 19):
Boeing strives for about a 50-50 ratio between commercial airplanes and defense systems

I guess one outcome of the A380 charges is that EADS are now seeking to do this too. EADS military lived off the back of Airbus for too long, IMO

Rgds


User currently offlineDavid L From United Kingdom, joined May 1999, 9524 posts, RR: 41
Reply 23, posted (6 years 2 months 3 weeks 4 days 22 hours ago) and read 5337 times:

Two "similarly sized" companies in different economic zones can have different start-up and running costs, for example, and thus have different requirements for the value of cash raised when they issue shares.

Quoting Gsosbee (Reply 21):
Market capitalization is simply current share price times number of shares outstanding. Unless you are attempting to buy a company, on its own it really means nothing.

 checkmark  You can compare relative change in market capitalisations, of course, but, as you say, that is only an indication of investor confidence.

Quoting Gsosbee (Reply 21):
Better comparisons are net worth (assets less liabilities) and free cash flow.

And perceived future prospects, of course.  Smile


User currently offlineAtmx2000 From United States of America, joined Oct 2004, 4576 posts, RR: 37
Reply 24, posted (6 years 2 months 3 weeks 4 days 20 hours ago) and read 5216 times:



Quoting Slz396 (Reply 6):
Whereas EADS and BCA are roughly each others equals in the civilian sector, Boeing has a far far larger military branche than EADS. Military contracts are known to come with much higher margins, much less competition and much longer contract periods, hence offering more long term financial security, something the market obviously likes.

Boeing's commercial aircraft and defense aircraft operating margins were the same in 2007 at 10.7%. Historically, Boeing had higher margins from commercial aircraft, particularly during booms. The reason why commercial sales can come with higher margins is obvious. Commercial customers don't care specifically about the margins of their suppliers, while governmental customers won't accept suppliers receiving high margins on large contracts for political reasons. Lockheed, the largest defence contractor in the US and in the world, has comparable margins at 11.2% to Boeing IDS. The real advantage with military sales is not higher margins, but consistent, predictable margins.



ConcordeBoy is a twin supremacist!! He supports quadicide!!
25 PPVRA : When it comes to that, I think political meddling in Airbus's strategic planning and management is more serious than any added costs.[Edited 2008-06-
26 Atmx2000 : I don't see how you can say that with a straight face. It's clear that significant noncommercial considerations are involved in running Airbus.
27 Post contains links and images Jacobin777 : IIRC, the A345/A346 program was to the tune of $4.5 billion dollars....AFAIK, it hasn't recovered that cost yet. Debatable against the B787. For argu
28 Astuteman : The same way that people on here label it a Government run Jobs programme on here with a straight face...... Should I number you amongst them? You do
29 Jacobin777 : That's what I get for not reading your comments clearly...My bad...
30 Astuteman : Either way, It didn't last long, did it? And apologies, Atmx2000 - you don't deserve this....... A step too far. Rgds
31 Jacobin777 : ..no it didn't...
32 Post contains links PanAm1971 : Quoting Astuteman (Reply 28): There are "political" considerations in the operation of any major multinational, even fully privately owned. That is th
33 Thebry : And look at little Apple -- #39 on the list of the top 500 Companies (by market cap) Worldwide! Besting IBM, Intel, HP, Google, Oracle, etc. At $126 B
34 PanAm1971 : That really puts things in perspective, doesn't it? Wow.
35 Astuteman : I think that's the key for Me PanAm1971. I've watched subsidisation kill huge swathes of UK industry in the 1970's and early '80's. And all it showed
36 Zkpilot : Boeing does not just make commercial planes as the main part of its business, it is a huge aerospace company that is involved in everything from milit
37 707lvr : Market Cap for BA was $50.29 Billion on Friday. Dollars, not Pounds.
38 Ikramerica : Did the other thread on this get archived because it's such old news? Seriously, we've had this discussion.
39 Babybus : I think it got archived because it was completely boring and thoroughly inaccurate.
40 Slz396 : Then I wonder in which way this one is any different really?
41 Iwok : I think this is the crux of the issue. Even if someone wanted to pony up and buy 25% of EADS, the gov't would probably prevent it. I do agree with yo
42 Ikramerica : Lack of marketability is a major factor when discounting the value of a company/security. But because EADS is available on the open market, even in l
43 Burkhard : I think the strong Euro versus weak $ has a lot to do with this, with this $ expected profits of a mainly European company must be smaller, and market
44 Baroque : Glad I was busy, you answered it so much better A. While I agree with Flydreamliner that the high Euro is a problem for EADS, a report on the problem
45 Eugdog : as the original poster I enjoyed reading everyones comments. one arguements is not valid is the arguement about Boeing having alot more defence which
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