leelaw
Posts: 4520
Joined: Sat May 29, 2004 4:13 pm

FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:29 pm

The electronic edition of this week's Flight International is reporting:

FI 24-January-2006 "Airbus to offer cash back on A340 as 777 stretches lead" (fair use)

"Airbus executives [John Leahy is quoted in the article] say they will not be panicked into a "rash" decision to reinvigorate the 340-500/600 family and believe they can compensate for the higher operating costs of the four-engined aircraft over the rival Boeing 777 by offering cashback deals to potential customers rather than investing in a costly redesign..."

Hopefully the full article will be online by the end of today.

[Edited 2006-01-23 11:35:50]
Lex Ancilla Justitiae
 
User avatar
garpd
Posts: 2308
Joined: Thu Aug 11, 2005 9:29 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:35 pm

Quoting Leelaw (Thread starter):
higher operating costs of the four-engined aircraft over the rival Boeing 777

So its true then? The A340 DOES cost more to operate?
arpdesign.wordpress.com
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:42 pm

So they'll effectively be PAYING people to fly their aeroplanes?

Does rather make you wonder whose money they're planning to use?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
HS748
Posts: 621
Joined: Tue Oct 11, 2005 3:01 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:45 pm

Quoting NAV20 (Reply 2):
So they'll effectively be PAYING people to fly their aeroplanes?

Don't be silly.
 
aerosol
Posts: 497
Joined: Mon Oct 23, 2000 10:31 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:46 pm

Quoting NAV20 (Reply 2):
So its true then? The A340 DOES cost more to operate?

With a possibily of oil hitting the $100 this week, I think so!
 
TheSonntag
Posts: 4296
Joined: Wed Jun 15, 2005 7:23 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:53 pm

Just to keep things in perspective: McDD was paying (or, better said, compensating) customers for years because the MD11 didn't do what it was promised to do.

Certainly not good, but nothing unusual.
 
Mir
Posts: 19092
Joined: Mon Jan 05, 2004 3:55 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 7:54 pm

Airbus is starting to sound like a car company.

-Mir
7 billion, one nation, imagination...it's a beautiful day
 
Glom
Posts: 2051
Joined: Sat Apr 23, 2005 2:38 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:10 pm

Quoting Mir (Reply 6):
Airbus is starting to sound like a car company.

No. They're started to sound like Sainsburys.
 
SFORunner
Posts: 306
Joined: Fri Jul 30, 2004 4:23 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:13 pm

What's next, a free tank of gas with each new A340 purchased? Fuzzy dice for the cockpit?
 
Lumberton
Posts: 4176
Joined: Fri Jul 29, 2005 7:34 am

RE: FI: Airbus To Offer Customers Cash Back On A34

Mon Jan 23, 2006 8:13 pm

Quoting TheSonntag (Reply 5):
McDD was paying (or, better said, compensating) customers for years because the MD11 didn't do what it was promised to do.

That would be somewhat different. The MD-11 didn't make its performance guarantees. I believe that McDD wasn't paying the operators as an incentive to purchase. Mir is right in that this is what car dealers to--provide incentives to buy the product in the first place.
"When all is said and done, more will be said than done".
 
leelaw
Posts: 4520
Joined: Sat May 29, 2004 4:13 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:15 pm

Quoting NAV20 (Reply 2):
So they'll effectively be PAYING people to fly their aeroplanes?

From FI Article:

"Is it a good investment [for Airbus] to spend a couple of billion dollars to get a better aircraft, when you can solve the fuel burn problem with money?" asks Leahy...."I can agree a figure with a customer that reflects a fuel burn delta and run that out over 12 years and pay it to them."
Lex Ancilla Justitiae
 
airways45
Posts: 282
Joined: Wed May 10, 2000 1:26 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:16 pm

In 2005 there were 12 A340-500/600s sold compared to 154 777s.

The 777-300ER has, according to Airbus a single digit fuel burn advantage over the A340-5/600.

Airbus COO John Leahy stated:

"Is it a good investment [for Airbus] to spend a couple of billion dollars to get a better aircraft when you can solve the fuel burn problem with money".

From Flight International:

The A340-600 and 777 have "comparable ranges and seat counts and Rolls-Royce guarantees that maintenance costs for four engines are the same as the twin".

John Leahy continues:

"I can agree a figure with a customer that reflects the fuel burn dela and run taht out over 12 years and pay it to them... but if the 777's fuel burn advantage was to give it greater range, then we'd have to look at [improving the A340]."
 
olympicbis
Posts: 162
Joined: Thu Nov 25, 2004 6:32 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:18 pm

Quoting Mir (Reply 6):
Airbus is starting to sound like a car company

The way Boeing sounded when they "sold" their B738s to Ryanair for example and to name only one ?
 
vfw614
Posts: 3166
Joined: Mon Dec 10, 2001 12:34 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:20 pm

Why don't they simply lower the sales price accordingly ? Would only look half as stupid as this pay-back stuff and cannot be rocket science to calculate....
 
Lumberton
Posts: 4176
Joined: Fri Jul 29, 2005 7:34 am

RE: FI: Airbus To Offer Customers Cash Back On A34

Mon Jan 23, 2006 8:30 pm

Just my opinion, but I am surprised to see this out in the public domain. A company as public relations sensitive as Airbus usually opts to incentivize customers privately. (and I am only referring to "above board" business here; not insinuating anything untoward!) Again, just my opinion, but there is a solid cadre of A340 operators around the world that have too much invested in this aircraft to change horses: SAA, LH, VS, PR, Sri Lankan, Air Tahiti Nui, IB, and others. Would the current operators eligible for the fuel burn discount, as well?

[Edited 2006-01-23 12:30:56]
"When all is said and done, more will be said than done".
 
RichardPrice
Posts: 4474
Joined: Sat Apr 23, 2005 5:12 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:31 pm

Quoting Vfw614 (Reply 13):
Why don't they simply lower the sales price accordingly ? Would only look half as stupid as this pay-back stuff and cannot be rocket science to calculate....

Because a cashback means you GET the money to start with, and can start earning interest on it. It doesnt say if the customer gets all the money at the start, or over the period the delta is agreed on. If its the latter, then Airbus continue to earn interest until the money is paid each year.

If Airbus can do this, then it means they can put off developing a replacement aircraft for a few years and benefit from the advance in technology that happens in the meantime, which means a better aircraft.
 
Kangar
Posts: 362
Joined: Fri Feb 04, 2000 8:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:33 pm

Ah, so we're back to believing everything Mr Leahy says now, are we?
 
SFORunner
Posts: 306
Joined: Fri Jul 30, 2004 4:23 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:36 pm

Quoting Leelaw (Thread starter):
offering cashback deals to potential customers

Airbus gets subsidies to launch the A340.

Airbus provides subsidies to buy the A340.

 duck 
 
keesje
Posts: 8601
Joined: Thu Apr 12, 2001 2:08 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:38 pm

So, what is new ?

OEM "support" to "bridge" a "transistion period". Hardly any deals without it.

Take a good look at recent the Air Canada and NWA deals.

[Edited 2006-01-23 12:40:42]
"Never mistake motion for action." Ernest Hemingway
 
leelaw
Posts: 4520
Joined: Sat May 29, 2004 4:13 pm

RE: FI: Airbus To Offer Customers Cash Back On A34

Mon Jan 23, 2006 8:39 pm

Quoting Kangar (Reply 16):
Ah, so we're back to believing everything Mr Leahy says now, are we?

Why would we doubt Mr. Leahy's credibility or veracity on this matter?

[Edited 2006-01-23 12:41:06]
Lex Ancilla Justitiae
 
Oykie
Posts: 1563
Joined: Sat Jan 07, 2006 9:21 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:48 pm

I don't think this is a dumb Idea. If you can sell the A340-600 at a price that makes the capital investment so much lower than the 777 that it makes up for the increase of fuel burn over a period of 12 years then Leahy has something to sell to airlines. And I think Airbus is able to sell the A340 at a low price and still make money. If they can get the sales to keep the A340 going until the A340-600 enhanced is available it might not be such a bad idea after all.
Dream no small dream; it lacks magic. Dream large, then go make that dream real - Donald Douglas
 
sabenapilot
Posts: 2442
Joined: Sat Feb 26, 2000 6:18 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:56 pm

I think this is in fact a very good and sound business strategy!

It has been used with much success by Airbus in the past, notably to offset the higher cost of:
additional crews
increased maintenance investments (spare parts)
extra facilities (containers, loaders, trolleys)
and all other expected investments new Airbus operators are looking at when switching from B to A, so why not use the same financial mechanism to take away the only disadvantage the A340 has developed vs the 777 only recently, that of the higher fuel bills?

As RichardPrice pointed out, a cashback operation would give airlines back all the financial benefits of the A340, namely the already relatively lower acquisition price as well as a traditionally similar operating cost than the 777.

Quoting Lumberton (Reply 14):
I am surprised to see this out in the public domain.

These kind of deals are quite common for Airbus really (see above), so I think Mr Leahy is just signaling that A has done their calculations and decided it can come up with similar mechanisms to offset the higher fuel bills too. Expect a much more in-depth explanation of the mechanism to be handed over to several key customers and I think many airlines will be seduced to at least evaluate the A340 somewhat closer again in the future....

Quoting Lumberton (Reply 14):
Would the current operators be eligible for the fuel burn discount as well?

Of course, but because of other financial savings through commonality too, don't expect the 'cash back' for an all Airbus operator like IB to be the same than for a new A340-600 operator, which is why Airbus has always prefered to work with compensating mechanisms (taylor made for each case) rather than with a price cuts on the list price.

Very good news in my view!

[Edited 2006-01-23 12:59:02]
 
Kangar
Posts: 362
Joined: Fri Feb 04, 2000 8:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 8:56 pm

Quoting Leelaw (Reply 19):
Why would we doubt Mr. Leahy's credibility or veracity on this matter?

Because you doubt it on pretty much every other matter.......
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 9:29 pm

However.......................... As with any contract, this would end as soon as the airplane is sold, meaning the re-sale value of the airplane is unaffected, therefore the purchase price is still to high.

If Airbus are at the point of stating this in public, then it is quite obvious that it hasn't worked in the recent past, so is now being used as some sort of PR gimick. Remeber when he said, "I'll just drop the price of the A330-200, because I don't have any development cost" ?


Cheers
 
Tifoso
Posts: 432
Joined: Wed Jan 04, 2006 9:15 pm

RE: FI: Airbus To Offer Customers Cash Back On A34

Mon Jan 23, 2006 9:42 pm

Quoting Sabenapilot (Reply 21):
as well as a traditionally similar operating cost than the 777.



Quoting Leelaw (Thread starter):
Airbus executives [John Leahy is quoted in the article] say they will not be panicked into a "rash" decision to reinvigorate the 340-500/600 family and believe they can compensate for the higher operating costs

A little contradictory there, Sabenapilot? After all, Airbus is coming up with this scheme to offset the higher costs associated with using the A340.

[Edited 2006-01-23 13:46:19]
 
leelaw
Posts: 4520
Joined: Sat May 29, 2004 4:13 pm

RE: FI: Airbus To Offer Customers Cash Back On A34

Mon Jan 23, 2006 10:25 pm

Quoting Leelaw (Reply 19):
Quoting Kangar (Reply 16):
Ah, so we're back to believing everything Mr Leahy says now, are we?

Why would we doubt Mr. Leahy's credibility or veracity on this matter?

Because you doubt it on pretty much every other matter.......


IMO, it's a wise policy to take most of the sales puffing that Baseler and Leahy spout with a grain of salt, this seems like a more substantive policy proposal than usually attributed to Mr. Leahy.

[Edited 2006-01-23 14:30:34]
Lex Ancilla Justitiae
 
Kangar
Posts: 362
Joined: Fri Feb 04, 2000 8:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 10:33 pm

I would say it's a throwaway comment myself, remember, he's a salesman, he doesn't run the show.....
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 10:50 pm

Quoting Kangar (Reply 26):
remember, he's a salesman, he doesn't run the show.....

Tell you the truth, Kangar, IMO he does run the show. If he doesn't run the sales side properly, in the end nobody eats........

I must admit that I find it difficult to believe that any businessman on whom the jobs of tens of thousands of people depend could say something quite as stupid as, "Is it a good investment to spend a couple of billion dollars to get a better aircraft when you can solve the fuel burn problem with money?"

That's a slippery slope if ever I saw one. Don't bother producing a quality product - just peddle second-rate stuff and throw money at people if they complain. That would be a lousy business stance for a corner grocery - leave alone an aircraft manufacturer.......

I wonder if they propose to index-link the fuel subsidies to the future price of oil? Now that would be a surefire oneway ticket to the boneyard, wouldn't it?

Can't help feeling that Airbus management has finally 'lost the plot.'
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
leelaw
Posts: 4520
Joined: Sat May 29, 2004 4:13 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 10:56 pm

Quoting Kangar (Reply 26):
I would say it's a throwaway comment myself, remember, he's a salesman, he doesn't run the show.....

I disagree with your assessment, I think the likelihood of an uncoordinated and/or unsanctioned Leahy pop-off on any subject is low at this point in time, given last week's need to issue multiple clarifications of Mr. Forgeard's remarks about the future of the A320 program.
Lex Ancilla Justitiae
 
N79969
Posts: 6605
Joined: Tue Jan 29, 2002 1:43 am

RE: FI: Airbus To Offer Customers Cash Back On A34

Mon Jan 23, 2006 11:00 pm

Quoting Sabenapilot (Reply 21):
I think this is in fact a very good and sound business strategy!

You believe anything Airbus says or does to be good and sound.
************

This does not inspire confidence in the A340. Unless the A340 has suddenly become cheaper to manufacture, this is clearly not good for Airbus.

It could be that if Airbus can cover just the fixed costs of the production line, they can live with a loss on some of the variable costs of A340 production.

It could be that Airbus is simply cornered if fuel costs are expected to rise as now seems likely.

[Edited 2006-01-23 15:17:00]
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:01 pm

Quoting NAV20 (Reply 27):
I must admit that I find it difficult to believe that any businessman on whom the jobs of tens of thousands of people depend could say something quite as stupid as, "Is it a good investment to spend a couple of billion dollars to get a better aircraft when you can solve the fuel burn problem with money?"

That's a slippery slope if ever I saw one. Don't bother producing a quality product - just peddle second-rate stuff and throw money at people if they complain. That would be a lousy business stance for a corner grocery - leave alone an aircraft manufacturer.......

One has to wonder what Rolls Royce has to think about these comments. If an airline is to be offered a 777NG performance gurantee, then one could assume that they would be dragged into the fold and expected to pay their fair share.

Seems that Airbus upper management are in disarray, and need to get a little training on how to cope with market share loss.
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:06 pm

Shenzhen, I think you meant 'an A340NG performance guarantee'. Still time to edit.  Smile
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:15 pm

Quoting NAV20 (Reply 31):
Shenzhen, I think you meant 'an A340NG performance guarantee'. Still time to edit.

I may not have worded it perfectly, but I meant 777NG gurantee, as that is what the A340 will be guaranteed against.

Cheers
 
akelley728
Posts: 1964
Joined: Tue Dec 07, 1999 12:35 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:19 pm

Quoting Olympicbis (Reply 12):
The way Boeing sounded when they "sold" their B738s to Ryanair for example and to name only one ?

Or the way Airbus sounded in their Easyjet deal?  

[Edited 2006-01-23 15:20:05]
 
whitehatter
Posts: 5180
Joined: Sat Jun 12, 2004 6:52 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:21 pm

Quoting Shenzhen (Reply 30):
One has to wonder what Rolls Royce has to think about these comments. If an airline is to be offered a 777NG performance gurantee, then one could assume that they would be dragged into the fold and expected to pay their fair share.

Rolls Royce delivered the Trent 500 to Airbus specifications. Their part of the deal has been delivered on. You cannot expect a company to compensate anyone for a product that works. Whether they do engage in the scheme is up to them and would be dependent on what is in it for Rolls Royce.

If we ignore the cheerleading and spin, and look at what Leahy may have been alluding to, any cashback deal probably is tied into oil prices and therefore jet fuel costs. If fuel goes above a certain level then the price and operating cost differential the A340 offers over the 773ER starts being eroded over time. So on that basis Airbus can underwrite any increase in operating cost to the buyer should this occur.

A perfectly reasonable way of doing business, as it is straightforward and transparent.

It's a bit like a guarantee really, kicks in when needed and stays dormant if fuel is static or drops.
Lead me not into temptation, I can find my own way there...
 
keesje
Posts: 8601
Joined: Thu Apr 12, 2001 2:08 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:30 pm

Quoting Shenzhen (Reply 30):
and need to get a little training on how to cope with market share loss.



Quoting NAV20 (Reply 31):
Still time to edit

Indeed, they gained market share for the last 5 years & probably will continue to do so in 2006 and 2007.

Personally I don't think the heralded new agressive Boeing sales strategy is only about superior products & and good reletions. Deep price cuts & "whatever it takes" conditions can also be part of it. http://seattlepi.nwsource.com/business/228255_boerecovery13.html
"Never mistake motion for action." Ernest Hemingway
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:37 pm

Quoting WhiteHatter (Reply 34):
Rolls Royce delivered the Trent 500 to Airbus specifications. Their part of the deal has been delivered on. You cannot expect a company to compensate anyone for a product that works. Whether they do engage in the scheme is up to them and would be dependent on what is in it for Rolls Royce.

Ahhh.... what is in it for them.... well how about four engines per airframe. If Rolls Royce wants to sell any more of those engines that "work" on them there A340s, then they may need to join Airbus' party. LOL

Last time I looked, there isn't any Trents on the 777NG, therefore its a market segment loss for them also.

[Edited 2006-01-23 15:41:30]
 
N79969
Posts: 6605
Joined: Tue Jan 29, 2002 1:43 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:38 pm

Quoting WhiteHatter (Reply 34):
If we ignore the cheerleading and spin, and look at what Leahy may have been alluding to, any cashback deal probably is tied into oil prices and therefore jet fuel costs. If fuel goes above a certain level then the price and operating cost differential the A340 offers over the 773ER starts being eroded over time. So on that basis Airbus can underwrite any increase in operating cost to the buyer should this occur.

A perfectly reasonable way of doing business, as it is straightforward and transparent.

This is just completely and abjectly absurd.

Airbus is an aerospace manufacturer and supplier of aircraft to airlines. That it now must consider assuming the risks normally borne by airlines and possibly provide fuel-hedging services to customers is not a positive for the company. Indeed it shows that Airbus have been backed into a corner by the cost of fuel and by the B777.
 
Tifoso
Posts: 432
Joined: Wed Jan 04, 2006 9:15 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:40 pm

Quoting NAV20 (Reply 27):
Don't bother producing a quality product - just peddle second-rate stuff and throw money at people if they complain.

NAV20, there is no denying the fact that the A340 is a quality product. It may not be as good as it's competitor when it comes to fuel burn and operating costs, but to insinuate that the A340 is not well engineered or second-rate is carrying it a bit over the top.

I think your analogy is totally wrong in this regard. The same can be said about the 767 when it is compared to the A330. Let's not get too carried away here.

Quoting Keesje (Reply 35):
I don't think the heralded new agressive Boeing sales strategy is only about superior products & and good reletions. Deep price cuts

Deep price cuts won't do you much good if the product is inferior to begin with. Also, Boeing has restructured itself, which has allowed to company to reduce prices, yet continue to have impressive margins and profits.
 
jaysit
Posts: 10186
Joined: Thu Jun 01, 2000 11:50 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:44 pm

Quoting Lumberton (Reply 14):
Just my opinion, but I am surprised to see this out in the public domain. A company as public relations sensitive as Airbus usually opts to incentivize customers privately. (and I am only referring to "above board" business here; not insinuating anything untoward!)

I agree.
Especially as the much ballyhooed A380 is about to start passenger service this year. By publicly acknowledging that the A340 is an inferior product, they're not exactly going to win over clients.
Atheism is Myth Understood.
 
Shenzhen
Posts: 1664
Joined: Wed Jun 25, 2003 12:11 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:46 pm

Quoting Keesje (Reply 35):
Indeed, they gained market share for the last 5 years & probably will continue to do so in 2006 and 2007.

Not going to dig through any numbers, but would be willing to bet that any A340 market share gain over the past 5 years was negated in 2005. Certainly 2006 and 07 can't be as bad.
 
OldAeroGuy
Posts: 3185
Joined: Sun Dec 05, 2004 6:50 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:46 pm

Quoting Airways45 (Reply 11):
The 777-300ER has, according to Airbus a single digit fuel burn advantage over the A340-5/600.

The problem is that the single digit is an exponent to ten in scientific notation. The 773ER burns about 10% less fuel per trip compared to the A346HGW.

Quoting RichardPrice (Reply 15):
If Airbus can do this, then it means they can put off developing a replacement aircraft for a few years and benefit from the advance in technology that happens in the meantime, which means a better aircraft.



Quoting Sabenapilot (Reply 21):
I think this is in fact a very good and sound business strategy!

The problem is that the costs can mount rapidly and you end up with the same product at the end of the day.

Let's say that the touted A346E would cost 2B USD to develop. If Airbus spent that, they would have a better product to market.

On the other hand, a 10% fuel disadvantage equates to about 2M USD per airplane per year at today's fuel prices.

If Airbus compensates this fuel disadvantage with up front money and a twenty year operating life is assumed, Airbus can only subsidize the purchase of 50-100 A346HGW with 2B USD depending on the cost of money and changes in fuel costs. Since spending this money does not improve the product, it sounds like a very bad business decision.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
 
NYC777
Posts: 5065
Joined: Wed Jun 09, 2004 3:00 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:55 pm

This is a very telling statement from Airbus. Instead of investing money to improve a product which would take years and require cash outlays in the future, Airbus is opting to pay customers (presumably from free cash flow) to buy the A340. It sounds like they don't have enough resources to spend on improving the A340 as they have their hands full with the problems with the A380 and the A350.
The cash back award is not going to sork all that well if Boeing and GE continues to improve the fuel efficiency of the 777. What does Airbus do at that point other than offering more cash back.

And what if airlines want to sell the A340. Does Airbus extend the cash give back to the purchaser? Actions like this will only serve to reduce the residual value of the A340. Not a smart move.

Boeing's program of tweaking out small but additive fuel savings from the 777 is going to continuously eat away at the A340 sales despite how much money Airbus gives back to the customer.
That which does not kill me makes me stronger.
 
NAV20
Posts: 8453
Joined: Thu Nov 27, 2003 3:25 pm

RE: FI: Airbus To Offer Customers Cash Back On A340s

Mon Jan 23, 2006 11:56 pm

Tifoso, I was reacting to Leahy saying, "Is it a good investment to spend a couple of billion dollars to get a better aircraft....." I wasn't implying that the A340 isn't (should I say 'wasn't'?  Smile ) properly-built - just that it's definitely second-rate as compared with the 777 in the areas that count, like fuel economy, carrying capacity, maintenance........

Just occurred to me how idiotic Leahy's latest comment is. After all, the A340 isn't the only Airbus aircraft that is thirstier than its Boeing counterpart. For a start, every airline that Leahy mentions the A350 to is going to have the begging-bowl out too, from this moment on...........

What an utter comedian the man is.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
OldAeroGuy
Posts: 3185
Joined: Sun Dec 05, 2004 6:50 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Tue Jan 24, 2006 12:28 am

Quoting OldAeroGuy (Reply 41):
Airbus can only subsidize the purchase of 50-100 A346HGW with 2B USD

On second thought, maybe the subdizidation plan is an admission that Airbus thinks the future market of the A345/6 is 100 airplanes or less.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
 
killjoy
Posts: 601
Joined: Thu Dec 02, 1999 6:00 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Tue Jan 24, 2006 12:28 am

I find this a bit strange. While I understand the reasoning, I can't figure out why it should be a simple all or nothing decision.

Spending huge amounts of money improving the A340 would probably be a waste as stated, but what's wrong with small improvements? The older FI article claimed that re-engining alone would cut about 6% off the fuel burn. Surely that wouldn't cost 2 billion? Why do nothing? Especially since engine commonality with the A350 would offer customers secondary benefits.

And if this is how they feel about the A340, why didn't they think about it before they blew all that cash on the HGW? By launching it now they could've included all the developments from the A350, possibly even making it temporarily better than the 777, until Boeing's next upgrade.

I seriously hope they have at least some sort of upgrade plans going on, or they're completely screwed until they complete their designs for a successor.
 
trex8
Posts: 4577
Joined: Sat Nov 02, 2002 9:04 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Tue Jan 24, 2006 12:35 am

if its good enough for Daimler Chrysler, GM, Ford,(ok so those two are going down the tubes!) even Honda and Toyota why isn't it good enough for an aircraft manufacturer?
the other way to do some innovative financing using a housing analogy would be to have the manufacturer essentially pay points on the loan interest for the customer. I would suspect that reducing finance costs to the airline in such a way would more than adequately allow the airline to essentially receive an amount of cash equivalent to whatever cash rebate is being talked about.
 
max999
Posts: 946
Joined: Fri Dec 09, 2005 11:05 am

RE: FI: Airbus To Offer Customers Cash Back On A34

Tue Jan 24, 2006 12:37 am

This cash back is similar to what Ford and General Motors are doing recently... offering heavy discounts on products they know are selling very poorly.

For those who aren't in the United States, Ford and General Motors had been recently offering major discounts on their cars because of a very large inventory backlog. This backlog, losing market share to foreign car manufacturers, and many other factors is prompting them to discount their vehicles.
All the things I really like to do are either immoral, illegal, or fattening.
 
PlaneDane
Posts: 347
Joined: Wed Feb 09, 2005 3:08 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Tue Jan 24, 2006 12:39 am

Quoting Leelaw (Thread starter):
"Airbus executives [John Leahy is quoted in the article] say they will not be panicked into a "rash" decision to reinvigorate the 340-500/600 family and believe they can compensate for the higher operating costs of the four-engined aircraft over the rival Boeing 777 by offering cashback deals to potential customers rather than investing in a costly redesign..."

Wouldn't the best solution be for Airbus to simply let the A340 program die?

The current A350 design and perhaps a further stretch could take the place of the A340 and then even use its assembly line once all orders are filled.

Sometimes, the best solution is to do nothing.
 
killjoy
Posts: 601
Joined: Thu Dec 02, 1999 6:00 am

RE: FI: Airbus To Offer Customers Cash Back On A340s

Tue Jan 24, 2006 12:40 am

Quoting Max999 (Reply 47):
This cash back is similar to what Ford and General Motors are doing recently... offering heavy discounts on products they know are selling very poorly.

Bill Ford is live on TV right now discussing job cuts of up to 30 000 people Big grin .

Who is online