mham001
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A380 Break-even: 300+

Thu Mar 10, 2005 1:45 am

Airbus parent EADS hits 04 targets, ups 05 outlook

James Regan (Reuters)

Munich, March 9, 2005|16:14 IST

.........This year, Airbus is on course for the first flight of its mammoth A380 double-decker, which is set for deliveries in 2006, though current EADS co-CEO Philippe Camus told France's Radio Classique on Wednesday that continued dollar weakness would make it harder to break even on the programme.

"When we launched the A380 programme, the break-even was at 250 planes. With a dollar at 1.30 euros, we are now above 300 planes," he said.

http://www.hindustantimes.com/news/181_1272524,0002.htm

Had another good article at AFX, can't find it now.
 
DAYflyer
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:01 am

Not to worry, the subsidies require they don't have to pay anything back for some time. It's not like it's investors money after all.  duck 
One Nation Under God
 
PyroGX41487
Posts: 246
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:11 am

Oy. Why does everyone expect them to break even so soon? -__-;
 
khenleydia
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:25 am

I figure that once the A380 gets some flights under its belt and Airbus can confirm the figures they have been advertising, like range and fuel use, then we will likely see some completely new orders or companies calling in for their options.

I know it is a completely different type of plane, but does anyone know the break even point for Boeing and the 787?

KhenleyDIA
Why sit at home and do nothing when you can travel the world.
 
Boeing7E7
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:26 am

Quoting Mham001 (Thread starter):
"When we launched the A380 programme, the break-even was at 250 planes. With a dollar at 1.30 euros, we are now above 300 planes," he said.


I said this a few months ago. About time they come clean.

I know it is a completely different type of plane, but does anyone know the break even point for Boeing and the 787?

I believe the target was 325-350 birds.

[Edited 2005-03-09 18:28:28]

[Edited 2005-03-09 18:28:46]
 
lehpron
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 3:10 am

Quoting Mham001 (Thread starter):
"When we launched the A380 programme, the break-even was at 250 planes. With a dollar at 1.30 euros, we are now above 300 planes," he said.


Ohh dear, it's going up. That is it, I'm gonna have to throw on some Slayer/Slipknot before I go to class to make me feel better, this news didn't help.  Sad
The meaning of life is curiosity; we were put on this planet to explore opportunities.
 
N312RC
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 3:14 am

Make you feel better?

Its not like somebody died for crying out loud...

Whew.. talk about wayyyyyy to into this stuff.
N/A
 
petazulu
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 3:30 am

Um, Concorde anyone?
Similar to the Concorde program in the 70's with gas prices rising...

A very large bird that may be slightly ahead of its time. It seems to me that the number of airports is rising, point to point is increasing, and competition and open skies are increasing. the A380 is quite a huge gamble unless you are going in and out of a very small handful of airports with little room for growth and poor alternatives.

I personally hope the A380 will be successful- but it seems to be running into some issues...
 
gigneil
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 3:51 am

Quoting DAYflyer (Reply 1):
Not to worry, the subsidies require they don't have to pay anything back for some time. It's not like it's investors money after all.


Yeah its not like you need facts. The *8b the other investors kicked in might need to be paid back.

How's that degree in aviation technology from Northwestern working out for you?

N
 
KL808
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 3:53 am

Quoting Gigneil (Reply 8):
How's that degree in aviation technology from Northwestern working out for you?


ROFL. hahahahahaha

EDIT: Seriously though, people here got to relax about this. The aircraft hasn't flown yet. You cant compare the A380 to the Concorde, they are apples and oranges. IMHO the A380 will do just fine, give it 20 years and ill bet that it WILL break even.

Drew

[Edited 2005-03-09 20:03:34]
AMS-LAX-MNL
 
bennett123
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 3:56 am

I think that some folk are forgetting that the bird has not flown yet.

How many B747 were sold prior to first flight.
 
petazulu
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 4:17 am

I don't think that everything said about the A380 should be seen in an A vs. B light and automatically ignite a flame war. I am an A380 fan. I really hope it does well and am not a promoter of any aircraft maker at all. All of you out here blindly supporting a company like you would a baseball team need to get out more.

I just have my own reservations about the project. I think they will be overcome.
 
jaysit
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 4:47 am

Why does anyone expect them to even break even?

As long as Airbus sells thousands of AC of the A320 family, they can keep all their other big projects viable.
Atheism is Myth Understood.
 
mham001
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 5:14 am

Quoting Jaysit (Reply 12):
As long as Airbus sells thousands of AC of the A320 family, they can keep all their other big projects viable.


You mean the soon-to-be out of date A320 family? The question will be do they have the money to support a (possibly) money-losing development while developing a new family to match Boeings' new composite families? Or will they have realized enough knowledge in weight-saving gains for use in new planes to make it worthwhile? Could be.

Much will depend on what kind of discounts they need to give to sell the A380. Their attempts to build the defense side could help a lot. Either way, they had a good year in 04 and will have good profits this year. We won't really know how the strategies trend until about '08 profit reports.
 
airfrnt
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 5:45 am

Quoting PyroGX41487 (Reply 2):
Oy. Why does everyone expect them to break even so soon? -__-;


Because the B747 (of which the EU proudly proclaims this plane makes obsolete) broke even before the first flight. In fact, Boeing had three times as many orders and made twice as much as it cost to develop before the first plane took off.

Quoting KL808 (Reply 9):
Seriously though, people here got to relax about this. The aircraft hasn't flown yet. You cant compare the A380 to the Concorde, they are apples and oranges. IMHO the A380 will do just fine, give it 20 years and ill bet that it WILL break even.


That's not the point. I have no doubt that the A380 will eventually break even. I do have a doubt that it will generate anywhere near the kind of revenue they tell their investors (including yours truly thanks to some overseas mutual funds) it will make.
 
KL808
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 7:10 am

AirFrnt


Quoting AirFrnt (Reply 14):
I do have a doubt that it will generate anywhere near the kind of revenue they tell their investors (including yours truly thanks to some overseas mutual funds) it will make.


Who cares where the revenue comes from as long as the whole company makes a revenue your shares will go up. For Example If financial news says Airbus EADS made a profit of let say 20 million USD do they tell you what part of the division is not making a profit? They might, but as a whole the stock will go up if they met or exceded expectation. In Airbus case, currently there is no DOUBT that the A320 family is hauling in a lot of money for Airbus, and has widely been discussed here that it has repaid its loan plus royalties, now do investors care if the A318 hasn't gotten much orders? Of course not they know that as a whole its doing great and they are making money on it (ie EADS have a profit).

Same thing with Boeing, we ALL know that most of its profits come from outside the commercial aviation business. With the closure of the B757 where investors worried? With the Airforce scandal where the investors worried? NO because the stock is up from 40 to nearly 60 dollars from prices a year ago.

Therefore certain products don't really affect the business as a whole in Airbus and Boeing's case.

The A380 WILL BREAK EVEN not now but in the next couple of years. Will investors reap the benefits of its success? NOBODY KNOWS. CAN YOU FORETELL THE FUTURE?

Drew
AMS-LAX-MNL
 
Scorpio
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 7:15 am

Quoting Mham001 (Reply 13):
You mean the soon-to-be out of date A320 family?


Please enlighten us as to what exactly will make the A320 out of date 'soon'?
 
COSPN
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 7:45 am

Such a waste of Euro Money They should use the money to Open up Airports Like LHR that Turn Airlines away...CO US NW...and no US Taxpayer money should ever be spent for A380 Upgrades untill Access is Allowed for those Airlines wishing to serv Europe...But at least they are Breaking new ground...like the Space program not everything pays off ...another Spruce Goose ahaed of its Time..

What Routes can use it anyway besides LHR-DEL ??? as suggested bt Gordon Bethune ???

Great freighter  Smile FedEx will put it to good use...
 
Ruscoe
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 8:07 am

I believe the 300+ figure is for Airbus to breakeven, after that they start repaying Govt loans.
Typical breakeven for a project like this would be more like 600. (20 million profit per craft x 600 = 12 billion)

Ruscoe
 
Boeing7E7
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 9:04 am



Quoting Scorpio (Reply 16):
Please enlighten us as to what exactly will make the A320 out of date 'soon'?

The 737 replacement, but I wouldn't call it soon.
 
mham001
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 9:22 am



Quoting Scorpio (Reply 16):
Please enlighten us as to what exactly will make the A320 out of date 'soon'?

"soon" relative to the industry is 5-7 years. Its no secret that Boeing is in the midst of large scale improvements in the way planes are developed and built. They hope to cut the time of conception-to-flying down to 36 months, if not 18 months. It will revolutionize the industry. This should come online about the time Boeing is ready to replace the 737 which they have indicated is their next move. I believe that once the 787 is flying and the kinks worked out of the process, we are going to see rapid movement towards efficient, fuel conscious green planes that airlines cannot ignore. Once Boeing announces solid plans for a 737 using 787 technology, the 320 family will be immediatly obsolete. There goes the cash cow. Remanins to be seen what Airbus will or can do in response. I think a lot is hinging on proving the A380 a success. IMO.
 
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clickhappy
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 9:32 am

Its no secret that Boeing is in the midst of large scale improvements in the way planes are developed and built.

DONT DRINK THE KOOL AID!

Oops. Too Late  Sad
 
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glideslope
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 9:39 am

The Break Even will be 325 aircraft by the time all the design changes are finished. Airbus was WAY too aggressive on the weight savings program. The price will be steep, let alone if the aircraft is even close to performance specs. Which seems unlikely given the current trend.
To know your Enemy, you must become your Enemy.” Sun Tzu
 
mham001
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 10:10 am



Quoting Clickhappy (Reply 21):
DONT DRINK THE KOOL AID!

Oops. Too Late Sad

Do you work there or have some solid information that what I hear from Boeing employees working on the project is not true? If so I'd really like to hear it. Always good to know who's tellin the truth!
 
redflyer
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 10:51 am

Boeing was running around a few years ago claiming that Airbus would have to spit out 450 380s to break even. Given that they have considerable insight into the industry and did some research into the matter before deciding not to jump into that market segment, I will go with their estimate.

Just like at one time not too long ago (c. 2000) Forgeard was claiming that development costs for the 380 would be around $8 billion and now they are up over $12 billion, my guess is that the break even number will also experience a gradual and steady creep upwards to a much higher number.

Anyone want to place bets?
My other home is a Piper Cherokee 180C
 
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clickhappy
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 11:20 am

Mham001 - I have sources and info that would give you wet dreams. On a personal note, I live in Renton, where the 737 is built, and of course I root for Boeing.

That being said, they are in catch-up mode.
 
b752fanatic
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 11:46 am

With the weaker dollar, and high oil prices, nearing 60's, I found impossible to believe that this a/c will succeed.

I really love Aviation, and the A380 its something not seen much, I hope to see it in the sky, but we have to see the facts. 4 Engines, too much costs, not affordable for the airlines nor the pax.

I believe that 4 engine aircraft are being replaced by efficient 2 engine a/c, (787, 777, a330 and A350's) Thats what the future holds for us.
"Truth is more of a stranger than fiction." Mark Twain
 
Ken777
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 1:12 pm

I think that first you need to look at the US$ since "W" has been in office. Like it of not the dollar is way down and old W has 4 more years to get it down more. By the time W leaves office the break even for the 380 might be closer to 500.
 
gigneil
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 1:22 pm

4 engines is irrelevant, despite what you may have read here on this site.

N
 
sllevin
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 1:53 pm

Historically, every aircraft program has ended moving its 'break even' point as it has gone forward. For Airbus to constrain that growth to just 20% of their original number (sans currency changes) will be an outstanding job. I will quite honeslty applaud them if the number stays at 300 (minus currency).

However, it's not at all clear that the Euro will trend downward anytime soon. So 350 could easily be the net break even point.

Steve
 
QFA001
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 1:57 pm

Quoting Ruscoe (Reply 18):
Typical breakeven for a project like this would be more like 600.

IMHO, you set the bar way too high. Let me explain my point...

Quote:
(20 million profit per craft x 600 = 12 billion)

The $20m per aircraft is <7% of A380 list price. In theory, Airbus could expect to at least double that sort of margin. Even if not, a margin >10% is not unthinkable, especially for a widebody airplane (FWIW, Boeing margins on the B744 were said to be >20% during its peak). Furthermore, program success isn't based on just sales alone but also associated after-sales revenue.

I won't go into too much detail but I think if it takes Airbus more than 400 sales to break-even on this airplane then I think something will have gone horribly wrong for them.

An airplane of its size with no size-competition really ought to be able to break-even much less than 400 sales. However, as markets deregulate and more and more smaller airplanes that can match or better A380 range become available I don't think that Airbus can expect >20% margins. That's even though the A380 will have no size competitor. OTOH, as time goes on there should be a growing demand for that size of airplane.

Quoting Gigneil (Reply 8):
Yeah its not like you need facts ... 4 engines is irrelevant, despite what you may have read here on this site.

How is your degree in aviation hypocrisy working out?  box 

Of course the number of engines is relevant. Just because the A380 requires too much thrust (at current technology levels) to be a twin doesn't mean that the number of engines is irrelevant. Three B773ER-type engines could have powered the A380. Yet, Airbus chose a 4-engine planform. So, the number of engines is relevant on that front.

The number of engines is also a driver in fuel use, maintenance cost and under current regulations where you can fly your airplane.

Also, in this particular equation, the fact is that the new generation smaller widebodies such as the A350 and B787 burn less fuel per seat than the A380 despite having less than half the passenger load. I suppose that's irrelevant, too?  Yeah sure

[Edited 2005-03-10 06:07:17]
 
Thrust
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:36 pm

How long did it take for the 747 to break even? I imagine it broke even by the oil crisis of 1974...just wondering to see how initial estimates for the 747's break-even point compare to the A380's initial estimates for its break-even point. AND NO, I AM NOT TRYING TO START AN AIRBUS VS. BOEING WAR  Wink
Fly one thing; Fly it well
 
bill142
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:44 pm



Quoting B752fanatic (Reply 26):
I really love Aviation, and the A380 its something not seen much, I hope to see it in the sky, but we have to see the facts. 4 Engines, too much costs, not affordable for the airlines nor the pax.

I believe that 4 engine aircraft are being replaced by efficient 2 engine a/c, (787, 777, a330 and A350's) Thats what the future holds for us.

The technology for such an aircraft with twin engines dosn't exist yet. It was either a tri jet or a quad.

Quoting QFA001 (Reply 30):
Of course the number of engines is relevant. Just because the A380 requires too much thrust (at current technology levels) to be a twin doesn't mean that the number of engines is irrelevant. Three B773ER-type engines could have powered the A380. Yet, Airbus chose a 4-engine planform. So, the number of engines is relevant on that front.

Do you think the 4 engine config was choosen because its simpler and therefor e most likley cheaper to change an engine which is hanging off a wing rather then one which is sitting atop a twin deck aircraft?

Realistcally the Tri jet is gone and the Quad is probably on its way out don't you think?.
 
DeskPilot
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 2:57 pm



Quoting AirFrnt (Reply 14):
Because the B747 (of which the EU proudly proclaims this plane makes obsolete) broke even before the first flight.

What ? From what I've read, the 747 almost bankrupted Boeing during it's development due to delays in getting the engines working. Boeing was holding off creditors whilst it got the first bird flying.

"..At one point early in 1970, Boeing had some 30 planes parked at its plant that could not be delivered until Pratt & Whitney had corrected the deficiencies of its JT-9D engine. It took a year before the engine problems were solved. In the meantime, too little money was coming in, the country was experiencing an economic recession, and new orders were drying up. The company almost went broke..." Reference is http://www.centennialofflight.gov/es...ay/Aerospace/Boeing_747/Aero21.htm
By the way, is there anyone on board who knows how to fly a plane?
 
leelaw
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 8:29 pm

When did managerial (cost) accountants adopted cost-volume-profit (breakeven) analysis as a meaningful method of evaluating the financial success of a long-term project?
Lex Ancilla Justitiae
 
osteogenesis
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 9:29 pm



Quoting QFA001 (Reply 30):
The number of engines is also a driver in fuel use, maintenance cost and under current regulations where you can fly your airplane.

As long as those kind of Engines (for powering an A380 with two engines) are not available it is in fact irrelevant.

Don't forget that the fact that Boeing has lost its 747 monopoly is a win for Airbus by itself. This could mean that it was a good decision even if they don't sell as much.
 
Jet-lagged
Posts: 818
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RE: A380 Break-even: 300+

Thu Mar 10, 2005 9:40 pm

Breakeven at 300 units. That excludes the money their Sugar Daddies have put in?

Still, I wish I could work in a company like that.
 
Udo
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 12:06 am



Quoting Petazulu (Reply 7):
Um, Concorde anyone?
Similar to the Concorde program in the 70's with gas prices rising...

The Concorde was a brutal fuel guzzler, while the A380 will be one of the most efficient aircraft of its time, expected to offer 20% lower operating costs than the B747-400.

Quoting Petazulu (Reply 7):
It seems to me that the number of airports is rising,

That's true, but it doesn't help FRA, LHR, LAX, NRT and all the other congested ones...

Quoting Petazulu (Reply 7):
point to point is increasing,

Yes, where it is possible. Hubs will always exist.

Quoting Petazulu (Reply 7):
and competition and open skies are increasing.

It depends where this happens.

Quoting Mham001 (Reply 13):
You mean the soon-to-be out of date A320 family?

Good joke!  rotfl 
In almost 18 years, the A320 hasn't even received a major update yet. Airbus could do a "NG" to the family or they could develop a new aircraft family based on latest technology. Boeing's not the only one to deal with composites.

Quoting Mham001 (Reply 13):
Much will depend on what kind of discounts they need to give to sell the A380.

I think discounts for the A380 are gone, delivery slots are sold out for the next years. Airlines who order the aircraft now may find a big fat threatening price tag.  eyepopping 

Quoting AirFrnt (Reply 14):
Because the B747 (of which the EU proudly proclaims this plane makes obsolete)

The whole EU? Every single citizen between Estonia and Malta?  scratchchin  Never take manufacturers' propaganda too seriously.

Quoting COSPN (Reply 17):
Such a waste of Euro Money They should use the money to Open up Airports Like LHR that Turn Airlines away...

Wait, the governments of Germany, France and Spain should pay to open/extend a British airport? Sorry, can't follow that logic...  tired 

Quoting COSPN (Reply 17):
and no US Taxpayer money should ever be spent for A380 Upgrades untill Access is Allowed for those Airlines wishing to serv Europe..

Since when are US airports government owned? If airports upgrade or not are commercial decisions by them. What on earth does it has to do with airlines wishing to serve certain European airports?  scratchchin 

Quoting COSPN (Reply 17):
What Routes can use it anyway besides LHR-DEL ??? as suggested bt Gordon Bethune ???

I don't think that LHR-DEL has been planned as an A380 route yet...but hey, what about checking some A380-airlines' timetables? Could help to answer your question.  eyebrow 
Btw, who cares about Gordon Bethune? We all know that an ex-Boeing executive would always doubt an Airbus products' future...  veryhappy 

Quoting Mham001 (Reply 20):
Once Boeing announces solid plans for a 737 using 787 technology, the 320 family will be immediatly obsolete. There goes the cash cow. Remanins to be seen what Airbus will or can do in response. I think a lot is hinging on proving the A380 a success.

So just after an announcement the A320 family would be obsolete? Dream on. And see above.

Quoting Glideslope (Reply 22):
The price will be steep, let alone if the aircraft is even close to performance specs. Which seems unlikely given the current trend.

Yeah, you are the perfect man to draw such a  censored  conclusion...  yawn 

Quoting B752fanatic (Reply 26):
With the weaker dollar, and high oil prices, nearing 60's, I found impossible to believe that this a/c will succeed.

Strange, then why do all B744s still fly around?  confused 

Quoting B752fanatic (Reply 26):
4 Engines, too much costs, not affordable for the airlines nor the pax.

Time to ground these fuel guzzling and expensive B744s and A345/346!!!  whistleblower 

Quoting B752fanatic (Reply 26):
I believe that 4 engine aircraft are being replaced by efficient 2 engine a/c, (787, 777, a330 and A350's) Thats what the future holds for us.

But the future won't anytime soon provide an engine which could replace two Trent 900s...  wave 

Quoting QFA001 (Reply 30):
Also, in this particular equation, the fact is that the new generation smaller widebodies such as the A350 and B787 burn less fuel per seat than the A380 despite having less than half the passenger load. I suppose that's irrelevant, too?

It's irrelevant when you have one landing slot per day with 400-500 people demanding a seat.  sarcastic 



Regards
Udo
Me & You & a Plane Named Blue...
 
leelaw
Posts: 4520
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 12:49 am



Quoting Udo (Reply 37):
I think discounts for the A380 are gone, delivery slots are sold out for the next years.

A380 Estimated Delivery Schedule (exclusive of China Southern Order):

2006- 11
2007- 26
2008- 35
2009- 36
2010- 12
2011- 27
2012- 02

Total- 149

Production Capacity = 48-50 units per year (2nd half '07)

Source: Airways

Delivery slots are sold out?
Lex Ancilla Justitiae
 
Udo
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 12:55 am



Quoting Leelaw (Reply 38):
Production Capacity = 48-50 units per year (2nd half '07)

Source: Airways

Delivery slots are sold out?

That's really new to me, I thought they wouldn't go up to 48-50 units per year from mid 2007 already. Has Airbus made that official?


Regards
Udo
Me & You & a Plane Named Blue...
 
HEGAN
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 1:17 am

Marvelous Udo!!!!!!!!

Wasn't Airbus the one who started working with composites? If so, they would not be so far from Boeing.
And with the engine part, we have recently seen that big manufacturers can develop very good and efficient ones for both B and A not very different between each others, son the supposed gap wouldn't be so big. Actually nor B nor A can let the other a clear leadership.
HEGAN: Euskadiko Aeronautikako eta Espazioko Clusterra
 
exFATboy
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 1:42 am

I'm not entirely clear on why the drop in the dollar would make the break-even go up so significantly - the only US orders so far are UPS, FedEx, and ILFC, which is a total of 30 birds IIRC. Even with the USD-EUR movement, that isn't that big of a loss of revenue from existing contracts, and I would think that Airbus has some sort of currency-hedging program in place. I can understand that if they're holding the price to prospective US buyers constant in USD, their EUR revenue from prospective orders would drop. But realistically, just the US market couldn't have that much of an impact: the continued losses by US carriers make it unlikely that they'll be ordering A380s anytime soon, FX moves or not.

Is it common for airliner contracts to be denominated in the currency of the buyer, the seller, or in a common currency, such as the way most of the world oil market is in USD?

Looking beyond the US, I can see why Airbus might have to drop the EUR price (and thus increase breakeven point), since EUR has moved against some other currencies fairly dramatically as well. Here's the 2-year movement in interbank rate (3/10/03 to 3/10/05, run on oanda. com today) against a few actual and prospective A380-buying nations:

US dollar down 17.8%
Australian dollar up 6.5%
British pound down 1.3%
Swiss franc down 5.3%
Canadian dollar up 0.4%:
Singapore dollar down 11.8%
Japanese yen down 7.4%
Hong Kong dollar down 17.8%
Indian rupee: down 10.1%
Chinese yuan: down 17.8%
Mexican peso: down 17.0%
Brazilian real: up 6.3%
South Afr. rand: up 13.8%

I can see where Airbus has a problem in the A380's core Asian market. Enough to explain a 20% increase in break-even? Possibly, but I'm not sure I'm entirely buying M. Camus' explanation (that's not an Airbus bash, I take press releases from Boeing with the same scepticism), and I just love the way he went out of his way to state the problem relative to dollars (political subtext: "damn Americans don't know how to manage their economy") instead of admitting that the euro is also strong against currencies in several of their key Asian markets. (Of course, this is presuming the 250-bird estimate was ever realistic in the first place, which I have my doubts about.)

Side question: what percentage of A380 components are imported from the US or from other suppliers whose currencies have fallen relative to EUR? The fall in the dollar would make these components cheaper in EUR terms, which would at least partially offset the impact on the revenue side.
 
leelaw
Posts: 4520
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 2:07 am



Quoting Udo (Reply 39):
I thought they wouldn't go up to 48-50 units per year from mid 2007 already. Has Airbus made that official?

IIRC, the source of these specific estimates of potential production rate and delivery schedule is an analyst at J.P. Morgan, not Airbus.
Lex Ancilla Justitiae
 
lehpron
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 2:19 am



Quoting N312RC (Reply 6):
Its not like somebody died for crying out loud...

Whew.. talk about wayyyyyy to into this stuff.

Funny. Perhaps I went overboard, or perhaps I just replied to the recent Concorde thread before this...(hint hint)

Quoting QFA001 (Reply 30):
won't go into too much detail but I think if it takes Airbus more than 400 sales to break-even on this airplane then I think something will have gone horribly wrong for them.

It is not Airbus' problem if the value between the Euro and the Dollar change, tell me who on Earth can plan for that? Who knows the world economy so well such that we would know the value of currency ahead of time? You can line up all the economists in the world and they still wouldn't come to a conclusion.

Quoting QFA001 (Reply 30):
Just because the A380 requires too much thrust (at current technology levels) to be a twin doesn't mean that the number of engines is irrelevant.

Too much thrust? I think you think that way just because it has 4 engines, huh? Big grin It has the same thrust to weight ratio as a 744, which is lower than a 772.

Planes are designed based on a need, this need is usually associated more than likely with it's payload first and foremost then what it is supposed to do with this playload. Then the costs associated with procurment of technology for research & development, and operations, etc. Enignes are based on what technology is avail now and by the time this plane rolls out, and if it is worth the cost of both appling it to this plane, worth the maintenence, if it's reliable, etc. The jet engine makes the plane, i.e. 787 exists mainly due to research on the Trent 1000 variants, these engines made it possible. Boeing cam dream up any shape they want, without the engines the shit don't fly. All goes back to the point of the project.

If you were senior executive at Airbus and your analysts forcasted a market for one-thousand 500+ pax capacity airplanes but you insisted on twin, all you can do with current technology avail is to make a 773 and stretch it and then some to fill forecasted requirements of more than 500+. But that plane is already stretched; in other words it is not going to work. In conceptual design you never limit yourself, come up with anything and everything then knock off based on cost, need, whatever.

As others have said, the engines required for A380 at its capacity, do not exist. In fact if it were a twin it would need engines rated @ 640kN each! These phantom engines would have had to be in operation last year, where are they?
The meaning of life is curiosity; we were put on this planet to explore opportunities.
 
gigneil
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 2:29 am



Quoting QFA001 (Reply 30):

The number of engines is also a driver in fuel use, maintenance cost and under current regulations where you can fly your airplane.

Clearly, this is where the disagreement lies.

4 engines does not inherently imply increased fuel use or maintenance cost, and that's where the myth is present.

N
 
astuteman
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 3:07 am

Nothing to do with A380 break-even, but isn't the single governing factor of installed thrust on an airliner the ability to maintain climb-out on take-off with one engine out?
Hence a 4 potter will always have a lower thrust/weight ration than a twin, as it only loses 25% of installed thrust, as opposed to 50% on a twin?
 
mham001
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 5:48 am



Quoting Clickhappy (Reply 25):
Mham001 - I have sources and info that would give you wet dreams. On a personal note, I live in Renton, where the 737 is built, and of course I root for Boeing.

That being said, they are in catch-up mode.

Interesting. So when a Boeing engineer tells me (without prompting) that he is working on a project that will result in what I stated, he's lying? I agree about the catch-up mode, thats the point of the new systems.

On my own personal note, I was born at lovely Renton General Hospital, now known as Kmart.
 
QFA001
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 6:43 am



Quoting Bill142 (Reply 32):
Do you think the 4 engine config was choosen because its simpler and therefor e most likley cheaper to change an engine which is hanging off a wing rather then one which is sitting atop a twin deck aircraft?

Sure. A 4-engine planform is simpler than a 3-engine planform. That wasn't a point that I was concerned about. The point is that the number of engines that an airplane has is relevant to the operating costs of the airplane. If it wasn't, then the inherent number of engines on modern airlines wouldn't be --> 2.

Quoting Osteogenesis (Reply 35):
As long as those kind of Engines (for powering an A380 with two engines) are not available it is in fact irrelevant.

As I pointed out -- and will again for you -- the A380 could have been powered by three current generation engines. The fact that it is powered by 4 instead only shows that there is a relationship between the intended mission of the airplane and its design.

Quote:
Don't forget that the fact that Boeing has lost its 747 monopoly is a win for Airbus by itself. This could mean that it was a good decision even if they don't sell as much.

I was clear about my position on the A380. I claimed that I thought that Airbus could maintain at least twice <7% margins, or >13-14%. I claimed that I thought if they couldn't make money on 400 airplanes then something had gone horribly wrong for them.

Yet, the game doesn't end with the A380. By launching the A380, Airbus left itself in a position for a period of years to not be able to match what Boeing could do in other segments. The segment Boeing chose was the 200-250 seat segment. In a game of limited resources, spending too much on one can mean that you get left out in another segment. The A350 is by no means an optimum design for its segment.

So, it remains to be seen whether or not the A380 was a good decision. The B747 was coming to the end of its life, anyway. It's not like Boeing could have expected to milk the B747 for decades to come if the A380 didn't exist.

Quoting Udo (Reply 37):
...the A380 will be one of the most efficient aircraft of its time, expected to offer 20% lower operating costs than the B747-400.

The number is 15%.

Quote:
It's irrelevant when you have one landing slot per day with 400-500 people demanding a seat.

I never said that there weren't points where it was irrelevant. I simply pointed out where it wasn't irrelevant. Even so, it's not necessarily irrelevant in this example. Depending on the number of O&D customers, there are other means to grow around slot restrictions, such as hub bypass.

Quoting Lehpron (Reply 43):
Too much thrust? I think you think that way just because it has 4 engines, huh? It has the same thrust to weight ratio as a 744, which is lower than a 772.

What are you talking about? I said that the A380 requires too much thrust (at current technology levels) to be a twin. To be a twin, the A380 would require ~160klb class engines. That is 40% more power than is currently delivered by the GE90-115B.

So, I don't need a lesson about what I've all ready written.

Quoting Gigneil (Reply 44):
4 engines does not inherently imply increased fuel use or maintenance cost, and that's where the myth is present.

You really should know better than that, Gigneil.

If you had two airplanes designed for the same mission and exact in every way, except one was powered by current-technology 4-engines and the other was powered by current-technology 2-engines, the twin wins on fuel and maintenance.

Otherwise, the A340-200 would not have been a failure and the same-size, same-wing A330-200 a success; BAE wouldn't have gone to all the (failed) effort to convert the 146 from a 4-holer to a twin; the new platforms like the A350 or B777 or B787 would have more than two engines (not to mention airplanes like the A320 that were designed to replace the B727); and the ball wouldn't have started rolling back in the 1930s when the twin-engine DC-3 began replacing the 3-engine Ford Trimotors...

Some myth.  Yeah sure

BTW, an item that you could have argued is that historically increased thrust has been related to BPR and thus, fan diameter. That has sped-up the ability of the engine OEMs to increase thrust output. Yet, to do it for an airplane the weight of the A380 might be unfeasible due to physical constraints. So, we might need to wait for other technologies to improve to the point where an efficient ~160klb engine can fit in the same dimensions as a current ~115klb engine.
 
Boeing7E7
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RE: A380 Break-even: 300+

Fri Mar 11, 2005 7:02 am



Quoting ExFATboy (Reply 41):
I'm not entirely clear on why the drop in the dollar would make the break-even go up so significantly - the only US orders so far are UPS, FedEx, and ILFC, which is a total of 30 birds IIRC.

Because EADS parts financing is dollar based. Meaning, as the Euro goes up against the dollar the cost of production goes up. Right now, it's actually cheaper to buy a Boeing even if Boeing offers a higher price than an Airbus in a bid contest. Havign a stronger currency isn't always the best thing to have. For the US a weak currency is actually good right now as we come out of our dot-com bust - post 9/11 - Iraqi War economic hicup. It makes our products more attractive.
 
Udo
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Joined: Tue May 18, 1999 5:16 pm

RE: A380 Break-even: 300+

Fri Mar 11, 2005 8:04 am



Quoting QFA001 (Reply 47):
As I pointed out -- and will again for you -- the A380 could have been powered by three current generation engines.

I'd like to see that design...  Wink

Quoting QFA001 (Reply 47):
Depending on the number of O&D customers, there are other means to grow around slot restrictions, such as hub bypass.

Tell that to the airlines. Some CEOs seem to think a bit different about that issue. "Hub bypass" sounds good in theory, practically it's another story.


Regards
Udo
Me & You & a Plane Named Blue...

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