Joni
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Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 1:06 am

http://news.bbc.co.uk/2/hi/business/4433030.stm

According to Leahy, the A380 is effectively near the 250-unit breakeven point since customers are holding around 100 options that they're not letting go - and therefore assumedly likely to firm up at some point. (This is well in-line with the rumours that the A380 will exceed its performance targets, discussed in another thread, since that would also make it far more likely options would be firmed)

He also discusses the delay compensation, fingering it at a "couple of million" USD.

Nice to see that both A and B appear to be doing so well nowadays.
 
art
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 1:57 am

"Mr Leahy also told reporters that the firm was now close to selling 250 of the superjumbos - the number the company needs to sell to break even on its investment. "

How close is close: 1 year away, 2 years away, 3... ? The 250 breakeven number: did JL say this or did the journalist look up "old" breakeven numbers? I thought Airbus had conceded it would be higher than 250, due to extra dev costs.
 
DfwRevolution
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:08 am

Quoting Art (Reply 1):
How close is close: 1 year away, 2 years away, 3... ? The 250 breakeven number: did JL say this or did the journalist look up "old" breakeven numbers? I thought Airbus had conceded it would be higher than 250, due to extra dev costs.

I also thought the break-even was higher than 250 frames. There was a period of media confusion regarding the A380 break-even because it seemed Leahy, Foregard, and Airbus divisions were all quoting different figures. A conservative number for now seems like 300-350.

In any event, Airbus won't break-even until "X" number of A388 are delivered. That will be some time from now, though Airbus could secure the backlog for the necessary break-even point in the near term.
 
Joni
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:11 am

From the article it appears that the journalist looked it up. Anyhow from the point-of-view of the statement that is doesn't matter much if the breakeven number is 250 or 280.

WRT the years, I think that by "close" he meant that the orders and options count is nearing the breakeven point (and that it looked likely the options _would_ be firmed up) and not referring to when the options would be firmed up.
 
leelaw
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 4:33 am

IMO, Breakeven Analysis is best used for pricing products, it's far too crude a yardstick to meaningfully measure/evaluate the financial performance of a long-term project because it doesn't take into account the time value of money. Airbus and Boeing like to use it for P.R. purposes because it's easier to understand than other measures of financial performance like I.R.R., etc. Additionally, there's added significance for Airbus because IIRC, Airbus uses Breakeven Point as a triggering event for the repayment of launch aid and the payment of royalties to risk sharing creditors.

On a related note, I've seen production capacity quoted anywhere from 44-50 units per year; IIRC, prior to the announcement of the program delay, capability of reaching full capacity was anticipated by early 2008. If what Mr. Leahy says is true and 5+ years of delivery slots are essentially spoken for already, I'd think Airbus would be looking at increasing capacity instead of having Mr. Champion proclaim that new customers will have to wait at least six years for delivery.

[Edited 2005-11-13 20:44:36]
Lex Ancilla Justitiae
 
FCKC
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 5:18 am

Never mind if the breakeven number is 250 or 350 , they will sell far more these numbers.
 
Joni
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 6:14 am

Quoting Leelaw (Reply 5):
I'd think Airbus would be looking at increasing capacity instead of having Mr. Champion proclaim that new customers will have to wait at least six years for delivery.

I have no inside info, but since it looks like the production slots really are effectively sold out for the next 5 years, you can bet that Airbus is looking at increasing the production rate. Making noises about the state of sold-out production is good for extracting higher prices for the A380s that they sell next, whereas actually increasing the production capacity costs a lot of money.

[Edited 2005-11-13 22:15:08]
 
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glideslope
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:12 am

ROFLMAO. Mr. Leahy is full of it up to his ears. The break even on the Whale Jet is close to 350 frames by now.

Show us some numbers John? You can't expect anyone to actually believe you, can you? Look at your record over the last 2 years?

More desperate Airbus PR as 07-Jan is looking like the earliest revenue service for the Whale.  

[Edited 2005-11-14 00:13:14]
To know your Enemy, you must become your Enemy.” Sun Tzu
 
abba
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 11:29 am

Quoting Glideslope (Reply 8):
ROFLMAO. Mr. Leahy is full of it up to his ears. The break even on the Whale Jet is close to 350 frames by now.

Show us some numbers John? You can't expect anyone to actually believe you, can you? Look at your record over the last 2 years?

With all respect Sir! Airbus is claiming that about 250 are the break even. If you want to be the one to claim this as plain wrong I find that you should be the one to provide the numbers necessary for proving this. I expect that such argument also include the real cost of production of the aircraft for Airbus which I believe is kept at as a deep secret in Toulouse. In other words: If you do not have substantial data to prove otherwise, I and a few more will feel free to trust what Airbus says knowing of cause that numbers can be calculated in many different ways.


Abba
 
NWA742
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 11:34 am

Quoting Abba (Reply 9):
With all respect Sir! Airbus is claiming that about 250 are the break even.

Right, and they also claimed that there was no market or need for the 787 program. Now they're full force on the A350 project.

They claim their products are superior, so does Boeing. This is nothing more than PR bullshit. And from Leahy, no doubt.

Quoting Abba (Reply 9):
If you want to be the one to claim this as plain wrong I find that you should be the one to provide the numbers necessary for proving this.

Nonsense. That's not how it works, buddy.

Unless Leahy proves his comments correct, with hardcore numbers and facts, than Glideslope has every right to call him out on it and assume he's wrong.




-NWA742
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lehpron
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 12:27 pm

Does the break-even value depend on the fluctuation of the world economy or even how world currency is evaluated?

If the cost relative to a constant went up, then so would the number required to break-even; until the variable drops. Right now, the US Dollar to Euro ratio is greater than 1, wasn't that why the break-even rose when it did?
The meaning of life is curiosity; we were put on this planet to explore opportunities.
 
N908AW
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 12:32 pm

Let's put it this way guys. The Airbus A380 is closer to breakeven now than it ever has been.
'Cause you're on ATA again, and on ATA, you're on vacation!
 
NAV20
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 12:43 pm

Quoting Abba (Reply 9):
numbers can be calculated in many different ways.

The short answer to the question, "What is the A380's breakeven point?" is that no-one knows. Because it depends on the prices that are achieved for future sales. If you assumed:-

1. That all future sales will be at full list price ($US292M.) or better;
2. That those sales are all achieved within the next year;
3. That production rates can be increased so that 250-300 aircraft, instead of the likely 150, can be built and delivered over the next six years;

By assuming high prices and early sales, you could possibly produce a calculation that showed something like break-even, in terms of recouping development and build costs plus accrued interest. But, at the present moment, it wouldn't be worth the paper it was written on.

The only thing we can be certain of is that the programme is nowhere near the breakeven point yet. And that, given the low launch prices, the delivery delays, the mounting compensation bills, the stalled sales, and the likely low production rate, any such point remains a long way off at the present time.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
ikramerica
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 1:21 pm

Quoting N908AW (Reply 12):
Let's put it this way guys. The Airbus A380 is closer to breakeven now than it ever has been.

Very true. I would hope so, as going backward is never good.

Wonder how many options will be converted at Dubai?
Of all the things to worry about... the Wookie has no pants.
 
boeing767-300
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 1:59 pm

Wow.. this is an interesting topic. There are the usual posters here who are so quick to swallow any bu***hit that Leahy tells anyone.

There are also people who believe that the A380 won't be 'quite' as good as expected for a number of reasons but then that's creates an enviroment for healthy debate.

So before falling prematurely into either of the above a few basic financial questions of the project need to be asked.

How much investment required to launch A380 (15 Billion Euros - approx?)

How many aircraft to break even = 250

15 000 000 000 dived by 250 A380s = 60,000 000.

That's 60 Million per Aircraft.

The next big question is how much did the launch customers have to pay given the Airbus desperation to lauch the project in 2000.

I don't have the answers but you can be sure Singapore and Qantas paid nothing like full price for their copies and Emirates with an order for 43, what do you realistically think they paid? You can surely bet they didn't make ANYTHING on the first 50 or so copies!!

The big unknown is what is actually costs to produce a copy given the sheer size of the whalejet. There are huge transportation issues which large chunks coming from all over Europe, barging, trucking and associated road closures. These all take time and money and add to the cost of the project.

What price have EK SQ and QF got their options locked in at - the same as their original purchase - if so then if will be even harder to reach the break even point. If anybody has any figures please post them as this would assist in this debate. There were plenty of rumoured figures at the time.

I believe the current lack of sales in A380(744 outsold A380 in 2005) is because current customers Leahy is trying hard to aquire are being asked to pay a price that reflects all of the above. Given recent issues over weight, performance, engines, delays Airlines are waiting to see if A380 is worth the money being asked. Some or most of the launch customers were quite frankly offered the A380 at a price they could not refuse.

Most of the dribble that comes out of Leahys mouth is sales bu***hit that is cleverly designed to created value by inferring lack of supply. If this was not true then you would still see many Airlines that are currently holding back signing up.

I don't like Leahy but he is clever at what he does.

We don't need to respond to Dreamliner it is just a Chinese Copy of A330.

We can beat 787 by attaching the same Engines.

We have spent the last 12 months redesigning and redesigning again the A350 which is the response we did not need to compete with 787


Honestly I am tiring of Leahy's b/s
 
abba
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:07 pm

Quoting Boeing767-300 (Reply 15):
Honestly I am tiring of Leahy's b/s

You ask some good questions (differnetly from some of the others above). I just wonder if you apreasiate Leahy's opposite in Boeing more?

Abba
 
manni
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:16 pm

Quoting Boeing767-300 (Reply 15):
Some or most of the launch customers were quite frankly offered the A380 at a price they could not refuse.



Quoting Boeing767-300 (Reply 15):
If anybody has any figures please post them as this would assist in this debate



Quoting NWA742 (Reply 10):
You can surely bet they didn't make ANYTHING on the first 50 or so copies!!

Yet, any figures are missing. Speculation on your behalf, or can you provide the missing figures?

Quoting Boeing767-300 (Reply 15):
I believe the current lack of sales in A380(744 outsold A380 in 2005) is because current customers Leahy is trying hard to aquire are being asked to pay a price that reflects all of the above

Nothing unussual. Boeing sold 2 777's in the year preceeding the first revenue flight of the 777. And these were for ANA, who already placed orders at an earlier date, so no new customers the year preceeding the launch of the 777 in revenue service. This reflects that after the launch customers, airlines take a 'wait and see' approach towards new airliners. Expect a cascade of orders after the first few months the A380 is in revenue and performs as promised.
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NAV20
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:28 pm

Quoting Boeing767-300 (Reply 15):
How much investment required to launch A380 (15 Billion Euros - approx?)

One correction there, Boeing767-300 - it's usually estimated at $US15B. - say about E12B.

In orthodox project analysis terms, interest should be applied to the outstanding balance until it is recouped. Therefore the 'historic cost' will mount at something over E1B. p.a. until net inward project cash flow turns positive and begins to reduce it.

In addition, one-third of the development cost came in the form of 'launch aid', which (according to the 1992 Agreement rules, anyway) will have to be repaid in the form of royalties on sales, or in any event within 17 years of the commencement of the programme. Short-term, the royalties will be a further drain on profits; longterm, unless fully repaid by way of royalties, the balance of the launch aid will represent a large future capital commitment which will have to be provided for in some way.

[Edited 2005-11-14 06:30:15]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
coa747
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:31 pm

I think that new order will be slower in coming. Airlines want to see the A380 in service and watch Qantas and Singapore work out all the bugs before they make up their mind. Options turned into orders from the original lanch customers are likely to be the first new orders before any new A380 customer commits. The 747 Adv when launched will put a dent in A380 sales. How much remains to be seen. But the Boeing product doesn't have to take away too many sales to make an impact. By the way do the current order totals for the A380 include both the passenger and freighter variant? My estimation is that it will take 10 years before Airbus starts to turn a profit on the A380 and it may not be much to get excited about. It depends on building a family of aircraft that can let the A380 grow and advance like the 747 line did. The 747-100 wasn't a big money maker for Boeing but successive advanced models like the 200 and 200B was where Boeing started to cash in and orders went through the roof. Does the A380 have staying power that is the real question. We won't know that for some time yet.
 
NAV20
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 2:46 pm

Quoting Coa747 (Reply 19):
By the way do the current order totals for the A380 include both the passenger and freighter variant?

I believe that 17 of the current orders total relate to the freight version - which has yet to be fully-designed, tested, and certified.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
antares
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 3:05 pm

NAV20,

Your supposed to be out there with an antique fire arm shooting the damn thing down last we corresponded on this, not sitting in front of a computer.

Yours from another antique

Antares
 
ptcflyer
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 3:54 pm

Don't ever forget: Revenue is a fact. Profitability is an opinion! No one knows for sure what "rationalizations" exist in various executive statements about breakeven, profitability, payback, development cost recovery, etc.

How firm are those orders really? Is the pricing offered to the initial carriers rational -- factoring in development/manufacturing/all fixed/variable costs? What are the true risks to the airline operators, Airbus's manufacturing capabilities, the plane's operational performance? How does one anticipate probable threats to large-scale passenger growth requiring the A380 (Bird-flu, terrorism, oil prices, economic, geopolitical challenges) that may delay the delivery of those 200 + copies. With all of these threats and a year away from first delivery.. it is so hard to determine what the appropriate number of airfames is required for the program to truly be profitable.
 
astuteman
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 5:28 pm

Quoting Boeing767-300 (Reply 15):
How much investment required to launch A380 (15 Billion Euros - approx?)



Quoting NAV20 (Reply 18):
One correction there, Boeing767-300 - it's usually estimated at $US15B. - say about E12B.

As usual we're throwing some of the conspiracy theory numbers around. "It's usually estimated at".. by you?

The correct figures for the A388 + A38F are:-
$12.6Bn in total (dollars, you'll note)
$9.5Bn provided by Airbus, of which $3Bn is repayable launch aid.
$3.1 Bn provided by risk sharing partners (therefore nothing to do with Airbus)

Quoting NAV20 (Reply 18):
interest should be applied to the outstanding balance until it is recouped. Therefore the 'historic cost' will mount at something over E1B. p.a.

Once again, the correct figures are:-
Outstanding debt for the A380 is $3Bn govt loans at average 4.25% and E1Bn (say $1.25Bn) Eurobonds at 4.75%. The rest came from cash.
The ANNUAL interest charge IS $180m (dollars, you'll note..)

Quoting Boeing767-300 (Reply 15):
The big unknown is what is actually costs to produce a copy given the sheer size of the whalejet. There are huge transportation issues which large chunks coming from all over Europe, barging, trucking and associated road closures. These all take time and money and add to the cost of the project.

Once again, the correct figure is:-
These huge transportation costs amunt to the grand total of 0.015% per frame - disastrous!  Smile
The production cost might not be as unknown as you think  Wink

Quoting Boeing767-300 (Reply 15):
You can surely bet they didn't make ANYTHING on the first 50 or so copies!!

YOU can be sure that whtever you say is probably wrong. Feel free to enjoy your conspiracy theory.
Whatever they make on the 1st 50 frames, large launch discounts are normal, discounts are normal.
"You can be sure" they were factored into the project beak-even analysis.

Quoting Boeing767-300 (Reply 15):
Most of the dribble that comes out of Leahys mouth is sales bu***hit



Quoting Boeing767-300 (Reply 15):
Honestly I am tiring of Leahy's b/s

Won't be long before we'll be quoting the same about you, will it?  Wink
 
Scorpio
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 5:34 pm

Quoting Glideslope (Reply 8):
The break even on the Whale Jet is close to 350 frames by now.

Source, or are you talking out of your backside, as usual?

Quoting Glideslope (Reply 8):
Show us some numbers John?

Why don't you show some too?

Quoting Glideslope (Reply 8):
You can't expect anyone to actually believe you, can you?

But you do expect us to take YOU serious, right?

Quoting Glideslope (Reply 8):
Look at your record over the last 2 years?

Let's look at yours over the last month: 2nd A380 won't fly until December at the earliest, Aeroflot only will only pay $70 million for A350 (with NO sources or anything at all to back it up), etc.

Lesson: you are the LAST person to be telling anybody they have no cerdibilty...

Quoting NWA742 (Reply 10):
Right, and they also claimed that there was no market or need for the 787 program.

Where did they ever claim that? They had been IN that market for years themselves...

Quoting Boeing767-300 (Reply 15):
We don't need to respond to Dreamliner it is just a Chinese Copy of A330.

We can beat 787 by attaching the same Engines.

We have spent the last 12 months redesigning and redesigning again the A350 which is the response we did not need to compete with 787

That's PR. Boeing does the same thing.
 
bill142
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 7:27 pm

Quoting Boeing767-300 (Reply 15):
We don't need to respond to Dreamliner it is just a Chinese Copy of A330

I think you'll find that was a Foregard comment and not one from Leahy
 
Jet-lagged
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:04 pm

IMHO, Mr. Leahy is making such a statement based on:
- simple breakeven, and not a more relevant positive ROI factoring time value of money
- options counted as solid orders, without significant discounts
- the assumption that Airbus doesn't pay back the Sugardaddies' money - if A380 doens't make a profit, they don't pay back the 'loans', right?

Of course he is entitled to do so, and that is his job. Other manufacturer spokespersons might do the same.

The A380 is a nice aeroplane. But to purport that the A380 will reach profitability at unit sales volumes significanly less that other new programs . . . well, you can believe whatever you want.

Cheers!
 
astuteman
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:11 pm

Quoting Jet-lagged (Reply 26):
IMHO, Mr. Leahy is making such a statement based on:
- simple breakeven, and not a more relevant positive ROI factoring time value of money
- options counted as solid orders, without significant discounts

"Simple breakeven" - I'm certain you are correct on that one (in fact I've seen it documented somewhere, but blowed if I can find it.). There's no way that I would consider that a breakeven on a discounted cash flow basis.

"Options counted as orders" - you're correct again - in fact he says so in the interview text.

"Without significant discounts". - Don't think I can agree with you on that one. Any business plan would have had to factor in both launch discounts, and ongoing discounts in general, as both are "normal" operating practices.
Whether they were factored in to the extent that has actually been realised is, of course, another thing  Smile
A
 
Jet-lagged
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:16 pm

Quoting Astuteman (Reply 27):
"Without significant discounts". - Don't think I can agree with you on that one. Any business plan would have had to factor in both launch discounts, and ongoing discounts in general, as both are "normal" operating practices.

You are right. But we are talking communications to public, not internal financial models. And in the article he reiterated US$285million. So, I guess he'll use that figure to his advantage.
 
boeing767-300
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:24 pm

Quoting Astuteman (Reply 23):
These huge transportation costs amunt to the grand total of 0.015% per frame - disastrous!
The production cost might not be as unknown as you think

Well then if you are so 'astute' (sorry couldn't help the pun) then with an extremely informative tiny fraction amounting to less than a tenth of one percent perhaps you could enlighten us to the actual cost... I thought not.

Quoting Astuteman (Reply 23):
Won't be long before we'll be quoting the same about you, will it?

And you blindly believe everything Leahy says without question. And no doubt you believed everything Lord Haw Haw said as well?  knockout 

Quoting Scorpio (Reply 24):
Quoting Boeing767-300 (Reply 15):
We don't need to respond to Dreamliner it is just a Chinese Copy of A330.

We can beat 787 by attaching the same Engines.

We have spent the last 12 months redesigning and redesigning again the A350 which is the response we did not need to compete with 787

That's PR. Boeing does the same thing.

Thats not PR thats called seriously miscalculating both your market and your oppisition - period. yes 
 
Joni
Topic Author
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:47 pm

Quoting Jet-lagged (Reply 26):
The A380 is a nice aeroplane. But to purport that the A380 will reach profitability at unit sales volumes significanly less that other new programs . . . well, you can believe whatever you want.

The reason it will break-even at lower unit sales is that since it's a bigger widebody plane, the margins are larger as they tend to be. This effect is increased further by the fact that there is no competing plane.

Quoting Jet-lagged (Reply 28):
You are right. But we are talking communications to public, not internal financial models. And in the article he reiterated US$285million. So, I guess he'll use that figure to his advantage.

The text reiterates this is the "list" price, which implies that discounts are used. Anyhow they certainly didn't assume they'll sell the planes at list price when they calculated the breakeven point!
 
NAV20
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 8:58 pm

Quoting Antares (Reply 21):
NAV20,

Your supposed to be out there with an antique fire arm shooting the damn thing down last we corresponded on this, not sitting in front of a computer.

'Er - bit of a stuffup there, old boy' - of the sort beloved of Commonwealth armies.

I was on my break. The duty troop 'spotted and plotted' it, but didn't open fire because they classified it as a 'friendly'. Real sneaky of Airbus to use Qantas markings, I reckon.......

No harm done, though. I gather that the bomb-release gear didn't work, and rumours are that the raid on 'chez-Nav' will be delayed six months.........  Smile
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
astuteman
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:06 pm

Quoting Boeing767-300 (Reply 29):
Well then if you are so 'astute' (sorry couldn't help the pun) then with an extremely informative tiny fraction amounting to less than a tenth of one percent perhaps you could enlighten us to the actual cost... I thought not.

Pardon my slip, Boeing767-300 - it should have been 0.15% of frame cost.
Can you enlighten yourself as to the actual cost with that information.  Smile

I thought not  Wink
 
User avatar
PM
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:14 pm

"We are essentially there now. We have 159 firm orders and I have got about 100 options that are blocking delivery slots, most of them over the next five years," Mr Leahy said.

My guess is that a fair few of these are options from existing customers rather than potential new but so far anonymous customers. I can no longer remember the numbers but LH, SQ and QF alone have about as many options as they do orders. (Can someone confirm these numbers?) If the same is true of a few other customers (say, AF, VS...) then that would account for maybe half of the 100 or so "options blocking delivery slots" that Sir John speaks of.

Still, if we take him at face value, the numbers imply that there are "new" airlines out there who have reserved delivery slots but who have not yet announced an order. Interesting...
 
sabenapilot
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:21 pm

Quoting Boeing767-300 (Reply 16):

We don't need to respond to that Dreamliner; it is just a Chinese Copy of A330.

We can beat 787 by attaching the same engines to the A330.

We have spent the last 12 months redesigning and redesigning again the A350 to come with a response we did not need to compete with the 787.



Quoting Scorpio (Reply 24):
That's PR. Boeing does the same thing.

NO they don't!

Boeing generally sticks to the first kind of statements for well over 5 years (767 vs A330) and then makes a pathetic attempt to pull something which resembles very much like the second statement (767-400). After a few years sticking to that plan, their sales numbers are so depressing they decide to do an in depth market analysis and send their engineers back to the drawing boards with the outcome, then organize a large PR campaign in all aviation magazines and tell the whole world they have just discovered airlines want something that pretty much resembles eh.. well eh... Hum, yeah, basically a slightly more efficient copy of your competitor's plane!

At least Airbus has shown the balls to change strategy, wipe the drawing table clean and come with a decent answer to the newest product of its competitor all within the short time span of a few months.
I suppose it must be frustrating to see Airbus managed to fight back in such a sort time and offers a modern product which can very well match the 787 according to many customers.


Back to topic:
Thank you Astuteman for providing us with interesting FACTS in reply 23.
I think it will serve as a reference in future discussions more than once when some of the doom's day preachers around here try to do some of that DIY accounting again.
 
art
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:32 pm

Quoting PM (Reply 33):
Still, if we take him at face value, the numbers imply that there are "new" airlines out there who have reserved delivery slots but who have not yet announced an order. Interesting...

Indeed. If delivery slots could be reserved cheaply, this would be one way to go with a new aircraft: wait and see if it works; when that is clear, re-assess whether you actually need it; if you do, order it.

Do such arrangements exist?
 
trex8
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:43 pm

Quoting Leelaw (Reply 5):
If what Mr. Leahy says is true and 5+ years of delivery slots are essentially spoken for already, I'd think Airbus would be looking at increasing capacity instead of having Mr. Champion proclaim that new customers will have to wait at least six years for delivery.

nah, they saw what happened to Boeing in 97, why takes charges of several billion to ramp up production and lose money making products! besides it keeps prices up and since the A380 is such a niche product, if an airline really wants it they will wait as they are no alternatives short of taking planes of a substantially smaller size
 
Scorpio
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:44 pm

Quoting Boeing767-300 (Reply 29):
Thats not PR thats called seriously miscalculating both your market and your oppisition - period.

"The Airbus will be like any other European plane: they'll build a few dozen and disappear."
"There is no market for the A320."

I repeat: Boeing does the same thing.
 
Shenzhen
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:53 pm

One would think that at least ONE would need to be delivered before bragging about break even. Airbus has a long way to go before delivering one, let alone 300.

Anyway, sounds good when going to the market to finance your next airplane.

Cheers
 
mrcomet
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:56 pm

Quoting Abba (Reply 9):
With all respect Sir! Airbus is claiming that about 250 are the break even. If you want to be the one to claim this as plain wrong I find that you should be the one to provide the numbers necessary for proving this. I expect that such argument also include the real cost of production of the aircraft for Airbus which I believe is kept at as a deep secret in Toulouse. In other words: If you do not have substantial data to prove otherwise, I and a few more will feel free to trust what Airbus says knowing of cause that numbers can be calculated in many different ways.

No need to prove it. Airbus quoted a breakeven of 250 aircraft in 2001 when it was a $10 billion project. Now it is $15 billion and counting. Airbus has conceded breakeven is higher. Just using the 50% growth in costs, it makes sense the breakeven is closer to 50% greater or 375 aircraft. Is Leahy promising sales of 375? Not yet.

Many industry analysts have also said Airbus cut to the bone to make sales....far more than they wanted to.

Leahy's quotes are utter BS. Leahy has a documented history of utter BS. He is a salesman just doing his job.

This isn't a A vs. B post. Both Boeing and Airbus salesmen mislead, misdirect, confuse, confound and do whatever they can to make things seem better. The bad ones outright lie. I would say Leahy has crossed the line on this one. The A380 has as much chance of breaking even this year or next as Jacque Chirac has of winning the gold medal in female gymnastics in the next Olympics
The dude abides
 
Ruscoe
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 9:58 pm

My interpretation is that Leahy is saying:

"Cripes, I've got airlines with options who might by the plane blocking production slots I could sell to airlines which will definitely buy the plane"

Ruscoe
 
WAH64D
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 10:04 pm

Quoting Glideslope (Reply 8):
ROFLMAO. Mr. Leahy is full of it up to his ears. The break even on the Whale Jet is close to 350 frames by now.

Show us some numbers John? You can't expect anyone to actually believe you, can you? Look at your record over the last 2 years?

Same old drivel Glideslope. You really are one seriously boring poster here on a.net

Quoting Glideslope (Reply 8):
More desperate Airbus PR as 07-Jan is looking like the earliest revenue service for the Whale.

Straight from the brain of Glideslope? Revenue service doesn't make any difference to A380 sales. Delivery to customer is the date people look at.
I AM the No-spotalotacus.
 
JetMaster
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 10:08 pm

Quoting Glideslope (Reply 8):
More desperate Airbus PR as 07-Jan is looking like the earliest revenue service for the Whale.

Says who? You? Wait - didn't you predict many other "things" as well?  Smile


Regards,
JM
The Journey is my Destination
 
Jet-lagged
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 10:10 pm

Quoting Joni (Reply 30):
since it's a bigger widebody plane, the margins are larger as they tend to be.

There are no physical laws of the universe that guarantee such a thing.

Quoting Joni (Reply 30):
Anyhow they certainly didn't assume they'll sell the planes at list price when they calculated the breakeven point!

When they calculate ROI - or whatever - for the shareholders - I agree with you. When they calculate breakeven - which is a pretty meaningless term - I don't agree; they can do all sorts of things to make a good story.


Anyway, none of us - Pro-As, or Pro-Bs, or Agnostics, should believe what Mr. Leahy says (or his B counterpart) unless they provide sufficient additional evidenence to back up their big words. Otherwise, we are just playing puppets to their plans.
 
NAV20
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 10:18 pm

Quoting Astuteman (Reply 23):
Outstanding debt for the A380 is $3Bn govt loans at average 4.25% and E1Bn (say $1.25Bn) Eurobonds at 4.75%. The rest came from cash.

Have to comment on that point, Astuteman. The 'cash ' concerned was shareholders' funds, which would otherwise have been distributed as profits. They are entitled to a return on the investment of their money, it can't just be spent and forgotten. Hence my point that, in any orthodox project analysis, interest must be charged on all expenditure until it is recouped; there is no proper way of accounting for it by any other method.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
N79969
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 10:59 pm

Break even is not a static figure. They would have to achieve 250 sales by a certain date to breakeven. Because of interest rates, the profitability of specific deals, the timing of sales, and other variables the number will change over time. Rather than recognizing that straightforward financial truism, Airbus seems to be publicly deeming that 250 is the hard breakeven point. That is unusual.

Leahy reminds me of a street musician who sticks a few dollars in his own tip jar to convey the impression that people are handing him money. Airbus would be better served to have a less pugnacious representative talk about the A380 program and let him just go sell.
 
boeing767-300
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 11:51 pm

Quoting N79969 (Reply 45):
Leahy reminds me of a street musician who sticks a few dollars in his own tip jar to convey the impression that people are handing him money. Airbus would be better served to have a less pugnacious representative talk about the A380 program and let him just go sell.

N79969... I could not have put it better myself!! bigthumbsup 
 
sabenapilot
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RE: Leahy: A380 Already Close To Breakeven

Mon Nov 14, 2005 11:58 pm

Well, you do know that almost all legendary best selling musicians like the Beatles or the Stones never took any lessons as such, but learned to play on the streets and in small pubs. It didn't hinder them becoming world acts, just like Leahy's big mouth didn't hinder airbus to become the NUMBER ONE PLANE MAKER! Big grin
 
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sebolino
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RE: Leahy: A380 Already Close To Breakeven

Tue Nov 15, 2005 12:05 am

I wonder why all Americans (nearly) in this forum are so angry or at the minimum disdainful (engl. word ?) towards Leahy when he does his job of PR.
Isn't it the normal American way to do business ?

Reminds me of people like Bush Jr., just as an example.
 
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Stitch
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RE: Leahy: A380 Already Close To Breakeven

Tue Nov 15, 2005 12:29 am

Quoting Boeing767-300 (Reply 15):
don't have the answers but you can be sure Singapore and Qantas paid nothing like full price for their copies and Emirates with an order for 43, what do you realistically think they paid? You can surely bet they didn't make ANYTHING on the first 50 or so copies!!

While I am sure Airbus sold the first set of A380s - and especially the huge EK order - at a significant discount, I don't know why people assume that Airbus had to sell them at a loss just to secure the order.

Every one of these airlines told Boeing to go jump into Lake Washington when they offered the various 747 derivatives as an alternative. So it wasn't like they were all giving serious consideration to ordering 745s/746s/74Xs and Airbus had to undercut Boeing to secure the order.

Now that doesn't mean Airbus could say "$200 million - take it or leave it", but it also doesn't mean Airbus having to discount into the loss category or a few million over it to secure the order. Airbus probably made a decent margin for each sale and as the plane proves itself in testing and, later on, service, Airbus will be able to raise those margins on future orders, which will undoubtedly happen.

I too do not believe Airbus needs to sell just 250 to "break-even", but then the A380 is not a program with a five year shelf-life, either. As FCKC and N908NW noted, it is very likely Airbus will sell hundreds of A380s over the two-plus decade program life and they're moving forward in securing those orders.
 
A319XFW
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RE: Leahy: A380 Already Close To Breakeven

Tue Nov 15, 2005 3:08 am

Let's look at it how it is, John Leahy is a salesman and a good one at that. I think this year he was off ill for a few weeks and Airbus sales were virtually zero (or so it seemed) - he came back and sales picked up again.
His job is to sell aircraft to customers, not to please people here on a.net or anywhere else for that matter (well apart from his customers).
And like his counterpart at Boeing who might not be as prominent and well-known, as he hasn't been in his job that long (tell me if I'm wrong, but I think Boeing had a sales department sort-out recently?), they are both doing their jobs at A and B respectively - selling aircraft..... And at the moment they are doing it well regardless who is first and who is second.

I read somewhere today (I think Reuters) that Leahy said that he won't be
doing the mistake again and saying how many aircraft the A350 needs to seel to break even. And from looking at the slating he gets on here, he's probably right (not to) to say that!

[Edited 2005-11-14 19:10:06]