ktliem@YVR
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Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 10:59 am

Yes, very likely, according to the Seatlle PI. Here's the excerpt from Tuesday Seattle Post-Intelligencer:

LONDON -- The Boeing Co.'s top airplane salesman said rival Airbus has sliced prices on its planes so much to win market share that Boeing has lost some key sales rather than match the hefty and unreasonable discounts during the industry's worstslump.

Toby Bright, leader of Boeing's commercial airplane sales, said Boeing could lose the year's biggest airplane order from low-fare carrier EasyJet for more than 100 planes if it comes down to price alone.

Boeing already has lost at least one key sales campaign this year because of pricing, Bright said.

Airbus won the recent hard-fought competition to supply new jets to Air New Zealand, previously an all-Boeing customer, because it went further on pricing than Boeing was willing to go, he said. But we went as far as we could.

Click here for the full article: http://seattlepi.nwsource.com/business/79606_airshow23.shtml

I just want to know what Boeing means by "it (i.e. Airbus) went further on pricing than Boeing was willing to go...". I think emphasizing price as the sole issue way to simplistic.

But on the other hand, read this...

Deutsche Lufthansa AG is on the verge of placing a major order for 10 A330-200 jets. Based on the list price, the order will be worth $1.35 billion. But because of the slump in demand on the global aviation market after Sept. 11, industry observes believe that Airbus will offer a generous discount that is likely to reduce the purchase price to around $1 billion.

Source: http://www.handelsblatt.com/hbiwwwangebot/fn/relhbi/sfn/buildhbee/cn/GoArt!201095,201095,549330/SH/0/depot/0/index.html

$0.35 billion or 26% discount on an order of $1.35 Billion? Not bad, but I think 25-30% is not out of the line for today's economy. I don't know how much discount Boeing gave to KLM for its 777 order, but it must also have been quite substantial. Anybody knows?

I guess all is fair in Love & selling airplanes.

Please no Airbus or Boeing bashing.
 
AvObserver
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 11:54 am

The whole issue comes down to the fact that with a third of the cost of new transport development funded by government loans, Airbus can be more aggressive than Boeing on pricing. As long as this continues, Boeing is fighting a losing battle. The 1992 pact with the E.U. should be renegotiated now that Airbus is beyond market parity with Boeing. The Europeans are determined to dominate this industry and the prevailing situation ensures that they will soon, if not already. Competition is good but the playing field should be level-it isn't. Though Airbus claims Boeing's lucrative defense contracts comprise a subsidization of its' own, Boeing's commercial transports are not funded from these earnings, that division must stand on its' own. I admire Airbus's technical prowess and good products but this funding situation is unfair and should be stopped.
 
Squigee
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 12:50 pm

AvObserver- you are 100% right. I have read some analysis of the economics of Airbus vs. Boeing, and one of the points raised was the one you mentioned- a level technical playing field, but subsidies that always tip the scales in Airbuses' favor
Someday, we'll look back at this, laugh nervously, and then change the subject.
 
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RayChuang
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 1:14 pm

However, I'm not sure if U2 choosing the A319 is a good deal for everyone involved.

First, there is the pretty expensive issue of retraining EVERYONE to use the A319, from flight crews to mechanics.

Second, Airbus making a huge discount to sell 100 A319's to U2 means that Airbus will have to foot the bill for constructing 100 planes and retraining U2 personnel to operate the plane. Given that Airbus does have partial governmental funding that means the difference between the cost charged to U2 by Airbus for 100 A319's plus training and the true cost of converting to the A319 could end up being footed by French, German and to a lesser extent Spanish taxpayers.
 
B-HOP
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 2:13 pm

Boeing does get susbides from US government and that sum is growing
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jwenting
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 4:07 pm

B-HOP, Boeing gets no subsidies at all.
They may get more than market value on some military contracts, but that's the way the US military procurement system works.
Maybe there are subsidised jobs for partially disabled people etc., but those exist everywhere and such subsidies are just enough to buy the extra equipment (modified desk, chair, computer stuff) these people need.

Boeing might also get government contracts to participate in development projects of space and military hardware. Nothing wrong with that, that's normal practice all over the world.
I wish I were flying
 
brons2
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 4:40 pm

Typical European spin.

Boeing has never received subsidies for commerical airplane production. People point to military production as "subsidies" but this is to develop highly specialized airplanes for a very demanding customer. The government pays this because otherwise the manufacturers would never develop them on their own.

Now, the US Government does order Boeing airplanes from time to time but the level of these orders as compared to the general sales census pales. With the possible exception of the 707/KC135....although the government would have considered other jet powered tankers but there were none available at that time. The DC-8 was not offered as a tanker that I am aware of.

Speaking of the 707, lets not forget that Boeing plowed all of their postwar profits into designing the prototype passenger jetliner and military tanker. $16 million to be exact, a huge sum at that time. I'd like to see Airbus do this with the A380(!)

It's also noteworthy to realize that the USAF actually entertained offers from Airbus on the tanker renewal program. They rejected the A332 tanker on the basis that it did not carry much more fuel than the 767 tanker, yet it took up a LOT more space on the ground. (which in the case of a passenger airliner would be the desired feature set...lol).
Firings, if well done, are good for employee morale.
 
L-188
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 4:54 pm

Actually the KC-135 lost the original tanker contract.

Lockheed won with their design, but Curtiss LeMay pushed an interm buy of the KC-135 through. I think it was for 37 airframes. This was because the Boeings could be delivered faster. 750 odd frames later, the USAF nor Lockheed still hasn't flown the winning jet tanker design.
OBAMA-WORST PRESIDENT EVER....Even SKOORB would be better.
 
BestWestern
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 5:53 pm

Bah Humbug from Boeing... Look at how much they reduced the Ryanair Order Price.. So much so that O'Leary stated that Ryanair had 'Raped' Boeing.

You are 100 times more likely to catch a cold on a flight than an average person!
 
gkirk
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 7:28 pm

I believe Airbus offered to throw in Pilot re-training for free if easyJet ordered Airbus  Smile
When you hear the noise of the Tartan Army Boys, we'll be coming down the road!
 
RickB
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 7:58 pm

I am absolutely fed up with this Airbus are cheating idea from the American members on here..

The government loans for airbus are much like any other loans - they have to be repaid with interest - okay its a low rate of interest but its not free money. If it was free - it would be illegal under competition regulations so get a grip.

Besides as for pricing - didn't Ryanair get a 40%+ discount of 73NG's ???

Its a competitive world out there, sometimes Boeing win, sometimes Airbus win, stop complaining, US products are not automatically the best, neither are European products.

I may be European but im a huge Boeing fan, but all I hear is Americans complaining about anti Boeing sentiment on here, whereas from the threads I read - the vast majority of it is the other way round...how many A340 is cr*p threads do we have to wade through ????

Rant over !!

I would like to see Airbus win this because Im fed up looking at 737's all day flying over my house on their way into Liverpool !!

RickB





 
Joni
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 8:10 pm


The r&d loans given to Airbus have precious little to do with Easyjet's putative 319s.

The idea that Boeing doesn't receive state aid is ludicrous. According to a recent EU panel, the EU should level the playing field and triple its aerospace subsidies to EUR3B, since presently the EU gives 1B annually and the US gives 3B to its own aerospace industry.

With regard to direct production subsidies, so far Airbus hasn't been nailed for receiving them. This is unlike Boeing, which receives production subsidies that violate WTO rules in the form of Ex-Im bank loans to finance its sales.

Boeing is complaining about prices, and there they have a point. Boeing, like many other US exporters, is not a very efficient producer. In the US, salaries across the board are higher - from the factory floor all the way (and particularly) to top executives. Also the production technology used by Boeing is older and less efficient than Airbus'. This means that they have to charge a higher price for their products in order to match Airbus' margins. EADS publishes its financials quarterly and it is a known fact that Airbus doesn't sell at, or even near, a loss.

So, to sum the issue up Boeing is hurting in market share because, despite receiving more subsidies than Airbus (and specifically, despite receiving internationally condemned production subsidies), Airbus is still able to outsell them because of its leaner cost structure and strong product portfolio.

 
rabenschlag
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 8:16 pm

the point is that when one identifies oneself with a company, football team, nation, or whatever, one may start to see things how one want them to be, not how they are. also, eventually one may become a bad loser. this is true for european and american people.

the subsidies topic has been discussed to death, leading to the insight that both companies get taxpayers money injected by their governments.

the argument "airbus wins on price and thats because of subsidies" is one sided. has anyone thought of production efficiency as an alternative cause for airbus ability to give higher discounts?

r.
 
voodoo
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 8:25 pm

BestWestern's point about Ryanair's rape of Boeing on discount price is quite important. No doubt Easy is demanding that Boeing bend over once more, and Boeing now wants its price virginity back. Airbus has a good chance depending on how it sees its cash flow in the next few years.
` Yeaah! Baade 152! Trabi of the Sky! '
 
LJ
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 9:02 pm

Please no Airbus or Boeing bashing.

Wishfull thinking!!


 
Republic
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 9:10 pm

It all seems fairly asinine to me.

If there are only two major suppliers, there should be some semblance of price integrity. What are the airlines going to do, not order any new planes if the prices are more rational?

The point of business is to turn a profit. Not to garner national prestige. (It seems many of these deals are made just to keep the production lines, ie: jobs, going.

The ultimate losers in a situation as it is now is the stockholders/taxpayers.

Joe
 
eugdog
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 9:19 pm

Regarding subsidies - until the merger with McDonald Boeing had less military business in value terms then Aerospatiale and BAE did - Boeing was almost a wholly civilian operation.

I find it very hard to believe that Airbus can assemble aircraft cheaper then Boeing! Boeing planes are simpler and lower tech.

But airbus is now a private company - so I cannot believe its owner will sell plane at a loss

I do think it is time for no more subsidies - Airbus is a fully mature company and must survive on it own!

I think it is terrible mistake for airlines manufacturers to go for market share and not overall profit - that is a recipe for disaster esp if markets go into a downturn.

I also think that in 50 years time aircraft will be made in India and Asian and not in high cost Western countries.
 
ussherd
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 9:36 pm

I find it annoying when people complain about the rights and wrongs of sbusidies received or not received by major US and European aerospace companies. Is it only unfair when one developed nation "discriminates" against one of their fellow developed nations? I don't hear anyone complaining about the way the rich nations protect certain of their industries against imports from poorer nations, in effect curtailing those countries chances of inproving their economies and directly affecting the quality of life of millions in the developing world. The fact is that a worldwide level playing field does NOT exist.
Cada loco con su tema...
 
gkirk
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 9:40 pm

Didnt a Go study prove that in terms of trchnical side of things, the Airbus was more advanced than the 737NG?? So, I think it will come down to cost....
BTW, Why do a large majority of Yanks bash the Airbus?
When you hear the noise of the Tartan Army Boys, we'll be coming down the road!
 
Greg
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 9:48 pm

I think going Airbus was a foregone conclusion particularly with Easyjet being European.

You can argue all you want about technology...but the 73G and 319 are identical birds when it comes to operating costs. Clearly they are going for the purchase price, spares prices...and training costs.

It will be interesting since Eastsjet just took delivery of their 25th 73G last month and have three more on the ground in Seattle awaiting delivery.

EADS is in a good period to go for market share. European shareholder do not demand anywhere near the same returns or growth in equity as US companies.

Secretly, I do hope that Boeing can pull it off.
 
RickB
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 10:08 pm

Greg,

Ryanair are in Europe and they chose the 737, Easyjet are not interested in buying European for the sake of it - they want the best deal, they want to buy the aircraft which will make them the most money on their investment be it 737NG or A319.

If European airlines automatically bought Airbus just to avoid buying American products, how come BA have such a large Boeing fleet, what about AF, LH, KLM, Iberia, all with substantial Boeing fleets not to mention a whole host of other airlines with smaller Boeing fleets (CSA, LOT, etc). Okay most of them also have Airbus in the fleet, but then again I think this is more down to economics of a particular aircraft rather than just politics.

Europeans are not anti US - quite the opposite, we are just fed up of the minority of Americans who believe everything non-American is cr*p. Patriotism is all well and good, Europeans generally just aren't as 'rabid' about it as some Americans.

RickB
 
Joni
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 10:28 pm


Eugdog,

Businessweek magazine did a comparative study on Airbus and Boeing some time back and came to the conclusion that Airbus spent fewer hours, and less expensive hours, assembling planes than Boeing did. This is in part because Airbus is overall a newer and leaner organization, but also because they had adopted more progressive production methods.

The cost of the work hours was cheaper in Airbus because Airbus uses more lower-level workers and salaries across the board are lower in Europe.

Cost of production and overall sophistication of the product don't necessarily correlate. Modern planes are "designed to be produced", so the production efficiency is in the equation from the start of product development.
 
hoons90
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 10:36 pm

Easyjet should get Airbus! They will look FANTASTIC! Airlines with a mix of Airbus and Boeing have great fleet  Smile jetBlue should also order some B737-800s  Big grin
The biggest mistake made by most human beings: Listening to only half, understanding just a quarter and telling double.
 
Joni
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 11:22 pm

M27,

Fresh off the wires we have EADS' H1/02 report, according to which:

"Airbus contributed an operating profit of 874 million euros in the first six months of 2002, up 10 percent. "

This is consistent with my earlier statement that Airbus doesn't sell at a loss.

 
RickB
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RE: Is Airbus Winning The Easyjet Order?

Thu Jul 25, 2002 11:39 pm

M27,

Which bit?

Thank you for your very constructive contribution to the conversation.

RickB
 
EGGD
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 12:00 am

.........and are you sure that any discount is doing a favour for the industry, in such a downturn (as Boeing keep saying) in buisness in the aviation industry, how the hell are airlines going to find the money to pay full whack for new aircraft? But of course, Airbus are cheating, no fair!! They should let Boeing win the orders, that would be more fair!
 
Klaus
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Eugdog

Fri Jul 26, 2002 4:48 am

Eugdog: I find it very hard to believe that Airbus can assemble aircraft cheaper then Boeing! Boeing planes are simpler and lower tech.

That´s a misconception.

Let´s, for instance, look at Airbus´ "Fly by Wire" technology vs. cables and hydraulics.

Electronic redundancy is very cheap to achieve when compared to multiple strands of mechanical wires or hydraulic lines with all the associated mechanical complications.

Airbus put much of the complexity that Boeings are carrying around in steel and aluminum into software - which creates a massive one-off effort in developing it, but again is very cheap and simple to produce.

And what is more - Airbus has developed this technology once and deploys it across their product range, very probably with a large percentage of identical parts.

A little long-term thinking can save tons of money.

This kind of thinking pervades all of modern technology. Maybe a bit more so in Europe than in the USA. And it does make a difference.
 
N79969
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 5:15 am

Airbus really, really wants in to the low cost market. No telling what they will offer EasyJet.

Boeing gets tax breaks along with GE and few other (including non-aerospace companies) that have been declared illegal by the WTO. Airbus receives cash to develop specific aircraft types. The fact that they get 'loans' from governments rather than capital markets implies that the projects are not the best use of economic resources. Boeing sells aircraft to the military. That is a sale and not a subsidy. Boeing is attempting to lease 767 tankers to the USAF at outrageous prices. That is a subsidy and I hope it does not happen.

If an Airbus project flops, they simply don't pay back the 'loan.' As I said in another thread, these are the kind of 'loans' that parents give their grown adult children that cannot find jobs. Airbus will not exit the market if their airplanes are uneconomical like Lockheed, McDonnell Douglas, Convair, and so on.

Boeing and Airbus are both beneficiaries of EXIM financing especially if the aircraft have PW or GE engines.

Except for the 319/320 aircraft, it is hard to say if the other Airbus aircraft are profitable. All the R&D costs were off the books for 300/310/330/340. Airbus does not have to amortize those R&D costs on sales so it is not clear.
 
Guest

RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 5:41 am

My understanding is that Airbus does NOT have the market cornered in terms of efficency & market superiority. The 320 is a good start & arguably be better than the 737, but then the truth comes in. They say its cabin is wider than a 73g's. It's not, they just measure it lower in the cross-section to make it look that way, & as well typically have narrow seats anyways. There are a lot of things like this (I am very sure boeing does this too) that makes the whole affair seem like shopping for a used car. It's really sad. Both ACs are mediocre compared to what they could be if Boeing & Airbus weren't bent on replacing them -selling new ones- every so many hours. Just like any other manufactorer. anyways, good night.
 
wingman
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 5:46 am

If Airbus beats out a 40% discount from Boeing on the 737, then that would be 100% all natural product dumping. I don't care what the arguments are from either side. Airbus cannot be selling even at cost if they beat the 40% discount AND add the door (millions of $$$) AND re-certify with the JAA...AND throw in 100% of pilot training. It is simply impossible not to understand that this is downright dumping. Some may call this buying marketshare. I wonder when Airbus stops buying marketshare at Boeing's expense...is it 60, 70, 80, 90 or 100%? The whole thing is a joke and we have no one to blame but ourselves for selling out Boeing to Airbus back in 1992. EADS not only gets more military subsidies than Boeing, it also fails to provide proof to anyone that that either the 330 or 340 series (incluing the new NGs) loans were ever repaid. I wonder how they intend to repay those "loans" as well as the 380 loans. Great planes but 50% marketshare and still getting pushed along in the EU taxpayer baby stroller. Why don't SAP, VW, Vodafone, Ericcson, Vivendi and other major EU companies get this same support? They provide more jobs overall and don't have to suckle either. I simply don't understand how we or the EU taxpayers let this go on.

And now EADS has the shocking gaul to claim that they need even more money in this complete scam of a study showing that US companies get triple the subsisdies, a study led by EADS itslef. Sweet Jesus man, the US actually buys product and has to fund the R&D to get the products it wants. Furthermore, the US spends triple what the EU does on defense...hence more expenditures. They scream for more handouts even as the taxpayer milk runs down their fat chin. Absolutely stunning display of hypocrisy.
 
Joni
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 5:48 am


N79969,

The fact that the money is borrowed from governments doesn't imply it isn't "the best use of economic resources". Markets often prefer investments that pay back faster than commercial a/c, and you must keep in mind that governments don't just want returns on their money, they also benefit from the jobs, business, taxes and know-how created.

Comparing these loans (which are not illicit or "subsidies") to loans given to children by parents is completely unsubstantiated.

 
N79969
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 6:04 am

Joni,

Actually the fact that governments rather than the capital markets are lending is a subsidy in and of itself. Governments are not banks and banks are not governments. Boeing raises money on the capital markets for products that have essentially the time horizon as EADS products. Investors lend money to Boeing buy purchasing bonds or their stocks. A government loan indicates that the markets do not believe the debtor can provide at least a normal rate of return on the money. Simply stated, it indicates an inefficient use of economic resources. VW and other excellent European companies do not need this sort of backing because their enterprises are net wealth creators and can grow organically.

Your point about government objectives goes to prove my point. They providing outside-of-market loans for politicial reasons: jobs, business, recycled tax money, and know-how?? (I'll choose an aluminum Boeing electric shaver over a composite Airbus anyday). If it was economically efficient, Airbus would be self-financing.

Finally, my loan analogy is pretty on point. If Airbus does not pay back any of the A345/346/380 loans to the Euro governments, no one is going to seize a factory or aircraft. Similarly, parents would start seizing their kids clothes or impound their kid's car if he/she did not pay it back. If Boeing defaulted on a bond payment, bad things happen to Boeing.

I agree with Wingman.
 
donder10
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 8:09 am

I don't hear anyone complaining about the way the rich nations protect certain of their industries against imports from poorer nations, in effect curtailing those countries chances of inproving their economies and directly affecting the quality of life of millions in the developing world.
That's completely off-topic but a lot of people,mainly free-market supporters,do not support such subsidies as farm subsidies etc.To continue a completely off-topic debate we could criticise the US' recent decision to increase farm subsidies while the EU is attempting to reduce its own(read:Poland entry to EU.)

I doubt Boeing signed the Ryanair deal at a profit as MOL 'raped them'.Both airlines are signing undercut deals to get repeat deals in the future.It's easier to refleet with 40 aircraft instead of 140.

. I wonder when Airbus stops buying marketshare at Boeing's expense...is it 60, 70, 80, 90 or 100%?
Yet Airbus is profitable.A good way of gaining market share.

 
wingman
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 8:28 am

If they're profitable, why don't they repay the "loans"? Or is a large part of their "profitability" due to the fact that they don't? Surely the compounded "interest" from the "commerically-based government """loans""" " must be in the billions by now. When all was said and done, EADS's net income for H1 was $91M off of revenue of nearly $14B. They don't seem to be in a position to repay any "loans" and none of their government "lenders" seem to press them very hard on actually doing so. It is crystal clear to me that once the 380 repayments begin in earnest, all of the outstandings "loans" from the multi-billion dollar 330/340 program will be brushed under the table and become nothing more than a buried footnote in the books. That's a subsidy pure and simple, and considering the 50/50 marketshare they've achieved, totally inexcusable and indefensible. Yet they ask for a tripling of funds. I want to come back as Airbus in the next life, no one ever had it so easy or so good.
 
dutchjet
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 8:52 am

The Easyjet order is all about price, Easyjet could care less if the aircraft are made in Seattle or Toulouse. Look for Boeing to get this order in the end, simply because of the retraining issue.....and the potential loss on disposing the existing 737s. Airbus is going to discount as much as it can, and Boeing will offer a last minute price cut. Since the total acquisition cost of 737s, including associated costs, will be less than going Airbus, Boeing will get the order.

I am not going to get into the comments above concerning subsidies and loans, and return on investment expectations in the US compared to Europe. However, Boeing did make a business decision a few years back and decided that they were willing to lose orders when the deals made no sense...in other words, Boeing is unwilling to sell planes at a loss. This approach has cost Boeing market share, but allows them to make more money per plane. In our global village, Airbus, at some point, will also come to the same conclusion since EADS' profits, or lack thereof, will become an issue with investors including the European governments that have assisted in financing the venture.
 
qatarairways
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 8:56 am

DutchJet
"Easyjet could care less if the aircraft are made in Seattle or Toulouse. Look for Boeing to get this order in the end, simply because of the retraining issue.....and"

As part of the package Airbus will take care of all the pilot retraining costs.
 
AvObserver
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 9:04 am

I'm glad to see that most here see the loans to Airbus in an unfavorable light. Our government should get tough with the E.U., even to the point of sanctions if this Airbus product dumping continues. There's evidence to indicate European collusion to undermine Boeing and the U.S. aerospace industry, a congressional hearing on it was held about a year ago. The 1992 accord with the E.U. allowing Airbus the 33 1/3% government loan funding should be torn up. To RickB: Airbus does have better efficiency, an area Boeing must work on but the loans give them greater latitude in discounting. I'm afraid to say that Airbus is gradually taking over the market because Boeing can't match its' generous terms. It's NOT an equitable situation-the loans were justified when Airbus was starting up but not anymore! Let them stand on their own feet completely, I'm sure they'll manage.
 
Joni
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RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 10:12 pm


N79969,

If Boeing defaulted on bond payments, the US government would bail it out just like it bailed out the major airlines. In fact the government would likely bail Boeing out with even more gusto, since Boeing is more critical to the US economy than the airlines.

We've been through the r&d loans on this forum several times already so there is hardly a point in doing it again. That same 1992 agreement permits the US to provide exactly the same kind of loans to Boeing. If they don't do that, then that is hardly Airbus' fault. Of course, you could call free university education "subsidies" to industry if you like. However, you cannot bring that to the WTO as subsidies, just like you can't bring the r&d loans to the WTO. Boeing receives many kinds of support from the government, not only purchase of unnecessary weapons but also research conducted in public institutions (NASA, the "national laboratories"), financing for sales, political support, tax breaks etc.

All in all, since aerospace is a critically important export industry for the US and if there was a true case of unfair subsidies in the EU, there is a 100% certainty the US would be crying bloody murder and raising issue in the WTO. Since this is not hapening, we can conclude that there is no unfair subsidizing going on. The US government merely chooses to allow a general sense of unfairness continue in the US as a putative explanation for Boeing's loss of market share. If Airbus is unfairly subsidized, then the issue should be, and would be, brought up. So far however, there have been no official complaints which indicates that the US government hasn't found evidence of foul play. And this is not for lack of searching.

AFAIK Wingman, loan payments are already sustracted from EADS' reported net income. They may already be substracted from the 872MEUR Airbus division contribution, although I haven't perused their report in such detail.

 
N79969
Posts: 6605
Joined: Tue Jan 29, 2002 1:43 am

RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 10:54 pm

This discussion is endless because we acknowledge a subsidy when it occurs. See my 767 tanker lease example. Most Europeans will not call a subsidy by its name. Lockheed or McD could have been America's leading airplane builder and Boeing could have faded into history. It's survival has not been guaranteed. Even now, if they mess up and miss a bond payment, the gov't may not let them bankrupt, but they will let creditors seize assets and get their money. No such fears for Airbus.

The US gave airlines payments post 9/11. The Europeans gave airlines payments post 9/11. The US gov't is providing loan guarantees and not loans to airlines.

The A310 wing is the product of NASA research. Airbus public financing is unfair but we cannot bring it up because we are pursuing an incredibly bad policy of steel and ag product tariffs. We shot ourselves in the foot.
 
M27
Posts: 409
Joined: Mon Oct 04, 2004 11:25 am

RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 11:12 pm

At the risk of having another post deleted in this topic due to it being a "personal message" and it being the only one I suppose that was, I will ask you this Joni, do you think that Airbus is at a disadvantage as far as support from its respective governments go? Does Airbus get any political support, financing help for its customers, purchase of unnecessary weapons from its governments? Do you feel the A400M is a necessary weapon? Who would benefit from the US government covering up the "real reason" Boeing is loosing market share, and finally, would you object if the US government did provide "loans" to Boeing to finance the Sonic Cruiser, the BWB and so on?
 
Joni
Posts: 2613
Joined: Thu Aug 10, 2000 11:05 pm

RE: Is Airbus Winning The Easyjet Order?

Fri Jul 26, 2002 11:49 pm


N76679,

I wonder how you are privy to how the US government would bail Boeing out. Under no circumstances would they let Boeing lose any key part of its operation, because doing so would be counterproductive.

The steel tariffs are an entirely separate matter and in no way would impede bringing Airbus' financing to the WTO, if there was a legitimate case there.

M27,

Assessing the whole effect of different kinds of government support for Airbus and Boeing would be an enornous task that is quite beyond me, since I already have a day job. The item I've taken issue with in this thread is that many people seem to think that _because of government support_ Airbus would be able to undersell Boeing and the playing field would thus, because of subsidies, be slanted against Boeing.

The point I've been making is that both manufactuters receive support and that a more credible reason for Airbus's success is that they have a strong product portfolio and a lean cost structure.

Now that you mention it, the recent EU panel that _had_ looked into aerospace subsidies had estimated that annually they amount to 1BEUR in the EU and 3BEUR in the US (for the whole aerospace sector, not just Airbus and Boeing). I've not read the study in detail, but you may find some of the data you're looking for there.
 
RickB
Posts: 807
Joined: Mon May 19, 2003 3:11 am

RE: Is Airbus Winning The Easyjet Order?

Sat Jul 27, 2002 12:08 am

Airbus DO pay off their loans :- http://www.defense-aerospace.com/data/communiques/archives/1999Dec/data/1999Dec1220/ for example and you can see that the UK government made a profit on the deal and even receives royalties for each aircraft !!!

The agreement in 1992 allows for the US government to provide the same kind of development loans as the European governments do to Airbus, your government choses not to do so, dont whine at Europe - speak to your own government. The reason they dont give these development loans is because of the large sums of money given to companies to develop technologies for the government (i.e. military and space programs) which in turn aid the development of commercial products (i.e. CX-HLS program spawning the 747).

RickB



 
BestWestern
Posts: 7000
Joined: Fri Sep 08, 2000 8:46 pm

RE: Is Airbus Winning The Easyjet Order?

Sat Jul 27, 2002 12:20 am

Guys, This topic is getting really longwinded.

Lets face facts:

Both aircraft makers get grants and discounted loans.

Both airlines discount aircraft to get that deal.
Remember that .01% of 1000m is better than 0% of 1000m. and hoping to make $$$$'s or €€€€'s from parts and consultancy work.

For either to complain about the other is unprofessional. Im really surprised that boeing is bad mouthing Airbus because Airbus are ahead on this one. You never heard any complaints from Airbus when Boeing won the Ryanair deal. (or was it Ryanair that one that deal, just like easyJet this time!)
You are 100 times more likely to catch a cold on a flight than an average person!
 
englandair
Posts: 2193
Joined: Tue Oct 10, 2000 4:34 am

RE: Is Airbus Winning The Easyjet Order?

Sat Jul 27, 2002 12:47 am

Hi guys,

I've only had time to skim-read this post, so I apologise if this has already come up, but I have a question:
I thought that before the EZY takeover became more of a reality, GO were planning on replacing their B737s with a mixture of A319s, A320s and A321s. Is EZY's decision for the future of the combined fleet just between the B737-700 and the A319 or are they considering a mixed fleet of B738s & B737-700s Vs. A139s, A320s & A321s?

Cheers.  Smile/happy/getting dizzy
 
englandair
Posts: 2193
Joined: Tue Oct 10, 2000 4:34 am

RE: Is Airbus Winning The Easyjet Order?

Sat Jul 27, 2002 5:59 am

.........anyone?


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