FFlyer
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Boeing Has The Price Advantage?

Wed Feb 26, 2003 10:43 pm

I touched this in another topic, but thought that the issue is worth mentioning on its own:

The US dollar has devaluated remarkably against the Euro lately. Must be several % units. Actually the dollar was overvalued for many years (and still is, but less so).

This gives Boeing an advantage in pricing. They had really suffered from the high dollar rate and this might mean that the orders start to come and the profits improve. That's how it is; in poor economy the currency rates go down, but that is good for export businesses.

Anyone has the time to look for the rate figures? If it is 5% (in a year) it is a lot of $$'s and if even more....
 
manni
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RE: Boeing Has The Price Advantage?

Wed Feb 26, 2003 10:51 pm

The dollar lost about 0.25€ in value, compared to it's last year height. About a year ago a dollar would have cost 1.17€, now a dollar cost 0.93€ So that's roughly 20%.
SUPPORT THE LEBANESE CIVILIANS
 
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keesje
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 12:14 am

Thai is today buying seven max 5 yr old 747-400's for $50 mln from United (new : $150 mln)

Forget the 5%... this is about survival ..
"Never mistake motion for action." Ernest Hemingway
 
N79969
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 12:20 am

Interesting points. Perhaps without devaluation this would not have been possible:

http://biz.yahoo.com/rc/030226/airlines_uzbekistan_boeing_1.html
 
FFlyer
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 12:38 am

I should have used another expression. Actually the situation means that Airbus is loosing its advantage in pricing (Boeing not getting it), when the dollar rate is normalizing. The playing field is becoming more even in that respect.
 
saintsman
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 12:49 am

I thought that Airbus sold a/c in Dollars. Is that not true?
 
N79969
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 12:56 am

Even if Airbus sold in dollars (which I don't think they do anymore), their expenses are in Euros.
 
Spacepope
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 1:10 am

In agreement with Saintsman (what's up with the religious thing here? hehe) I have read recently that Airbus does indeed sell in dollars, but much of its expenses are in euros. If this is the case, then every time the dollar drops, so do their profits. Boeing deals strictly with dollars, so this fluctuation is not felt. Now, this is overly simplistic, since many components for both manufacturers are sourced from overseas. The only place that I can see Boeing having too much of an advantage is in labour costs.

T.J.
The last of the famous international playboys
 
FFlyer
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 1:38 am

Even though you sell in dollars you have to sell those dollars to get your local currency. With the same $ amount you get less of Euros. Boeing on the other hand gets more dollars if they sell in Euros or in any other client's currency. But when they obviosly sell in dollars, the same plane is cheaper for an overseas client - or Boeing might be able to raise the price tags (in principle).

If Airbus sells in dollars, they might want to keep that money in dollar accounts, but not for ever.
 
Greg
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 2:03 am

The exchange rate reversal goes hand in hand with Boeing's initiative in strengthening their financing arm. It's been a much neglected area--relying primarily on the EX/IM Bank, World Bank (or such) to hedge any big currency differences.

To me this means they intend to be very competitive in both prices AND financing.

Airbus has been brilliant in this area in the last five years. Their financial folks are far more astute than Boeings. It appears that the field will be leveled a bit more with this initiative.

Good Luck to Both.
 
Spacepope
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 3:28 am

I found an article that sheds some light on this. The last couple sentences state that Airbus sells aircraft in dollars, but about 50% of its costs are in euros, giving Boeing a comparative advantage in areas where they compete (commercial aircraft manufacture).

http://www.avweb.com/newswire/9_09a/briefs/182950-1.html

T.J.
The last of the famous international playboys
 
prebennorholm
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 3:59 am

It is not that simple, that Boeing costs are in dollars and Airbus costs are in Euro.

There is plenty of US stuff in any Airbus, of course mostly in those with US produced engines. Remember that just one large GE engine on a 330 costs around $10 million.

Same way a lot of foreign stuff goes into any Boeing plane and has to be paid with Yen, Euro or whatever, of course mostly those Boing planes with RR engines.

All 737s except the vintage -100 and -200s have half French engines. Etc. etc.

It evens out the situation considerably.

But of course Boeing planes on avarage have a greater part of US production than the avarage Airbus plane and visa versa.
Always keep your number of landings equal to your number of take-offs
 
LJ
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 4:09 am

Even though you sell in dollars you have to sell those dollars to get your local currency. With the same $ amount you get less of Euros.

I'm 100% sure that Airbus has hedged the possibilty of a drop in the USD. However should the EUR/USD remain at present levels they will see their margin go down.

Same way a lot of foreign stuff goes into any Boeing plane and has to be paid with Yen, Euro or whatever, of course mostly those Boing planes with RR engines.

Sorry, i don't agree. The trading currency in aviation is still the USD and European / Japanese suppliers will probably quote prices in USD and not in EUR.
 
prebennorholm
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 4:40 am

LJ: The trading currency in aviation is still the USD and European / Japanese suppliers will probably quote prices in USD and not in EUR.

Oh yes, that's right. But it doesn't matter at all. Any European company producing stuff for for instance Boeing, they may write the invoice in $$, but they will either:
- write a $$ invoice amount big enough to cover Euro costs and profit
- or switch to other customers/products who are willing to pay that amount
- or go bust.

But these currency fluctuations are quite trivial. Those of us, who can remember five years back, will know that at that time the Euro cost 1,18 dollar. We didn't have the Euro coins yet, but that doesn't matter at all. Then it dropped to less than 0,90, while it is now back to roughly 1,10.
Always keep your number of landings equal to your number of take-offs
 
FFlyer
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RE: Boeing Has The Price Advantage?

Thu Feb 27, 2003 8:16 am

Five years ago the European businesses invoiced in Deutschmarks, Francs etc. - not in Euros. Euro was at that time only a kind of virtual currency.

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