|Quoting Halibut (Reply 13):|
Quoting Halibut (Reply 12):
" have any A380's been sold at a price that would have have resulted in a profit for Airbus " ????
Anyone have any idea on this ?
I've got some comments but they're not an answer, Halibut.
I've seen nothing that particularly says that discounting on the A380 up to now has been any different to the discounting strategies on other aircraft programmes. To date, those strategies deliver c 10% - 11% operating margin for Airbus, and an "underlying" margin of 7% - 8% for Boeing (i.e. ignoring the effect of strikes etc).
I personally expect both of these to stay at (A) or reach (B) double figures for the next 5 years or so.
I've seen a fair amount of data and evidence (not proof) that suggest that Gellman was some $30m-$40m over in his estimate of A380 production cost.
Commercial confidentiality prevents more expansion (yes I know, how can I be trusted
, but keep reading - it may not matter)
I'm uncomfortable that this figure gives a clear view even if it is more representative.
There are a number of things that will influence the "break-even" price of an A380:-
1. Despite hedging, Airbus are exposed to some currency fluctuation exposure, so the B/E price may move between contract award + delivery.
2. Because of "fixed" company overheads, ANY throughput change affects pricing. EG
raising A320 production from 25 frames/month to 30 frames/month could reduce the break-even price for an A380 by some $5m or so, as an increasing portion of corporate costs is borne by the A320. If throughput changes between Contract award and delivery, so does break-even pricing.
3. R+D is a "fixed" overhead i.e. not directly related to throughput. Airbus R+D has been around $2Bn - $2.1Bn for 3 years now. In that time, it has fallen from 9% of turnover to 6% of turnover, because turnover has gone up. Ergo, the break-even price of an A380 (and every other frame) has fallen 3% in the period.
4. I detect an increasing trend for airframers to discount more up front, offset by greater support and spares involvement downstream (much like the engine manufacturers already have) - others may have a view on this.
5. I also detect a movement towards increased levels of customer financing by the airframers that may result in fairly positive cashflows/profitability. (again, others may wish to comment)
6. Productivity gains made between contract award and delivery will alter the break-even cost (and are)
7. The escalator clauses placed in the contract, and their relation to real price index increases can alter the break-even cost.
Obviously both Airframers will have some forward view of many of these influences, but I have to assume that some pricing adjustments get made year-on-year to account for some of these items not quite panning out as planned.
AFAIK, it's entirely possible for an A380 frame sold below cost in 2001 to make quite strong profit for Airbus a) at the time of delivery, and possibly b) post-delivery also.
Obviously the converse is also possible (and undoubtedly happens). Judging by the financial performance of both Boeing and Airbus, these guys get it right more often than they get it wrong.
I apologise if this is a long-winded way of saying "I'm not sure if there actually IS
an answer to your question, except for "it depends""....
It's the only sensible (I hope) answer that I personally can come up with. As an aside, I think we are frequently guilty on A-net of trivialising "profitability" relating to a particular sale. I suspect the real answers are much more convoluted than we might think.