Joni
Topic Author
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Alcoa Take On New A380 Production Delays

Fri Jun 16, 2006 5:01 pm

"People are going to stick with the aircraft," William Christopher, group president for engineered solutions, told Reuters. "I don't see it changing the underlying market demand for the plane."

http://yahoo.reuters.com/news/articl...13&WTModLoc=HybArt-C1-ArticlePage2

This sounds quite reasonable amid all the clamouring and herd panic that's been going on around this announcement the past few days.
 
ikramerica
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:20 am

Quoting Joni (Thread starter):
This sounds quite reasonable amid all the clamouring and herd panic that's been going on around this announcement the past few days.

Considering Airbus and EADS themselves are fighting and there is talk of a major shakeup, it's great to read from a supplier that it's all just overblown and everything is fine...

Airbus is in disarray. Hopefully they can right the ship. But the ongoing 350/380 drama is not just a bunch of "clamouring and herd panic" and is in fact a quite real problem.
Of all the things to worry about... the Wookie has no pants.
 
Joni
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:24 am

Quoting Ikramerica (Reply 1):

Airbus is in disarray. Hopefully they can right the ship. But the ongoing 350/380 drama is not just a bunch of "clamouring and herd panic" and is in fact a quite real problem.

Naturally it's a real problem, however it isn't a critical problem, that would warrant a share price drop of tens of percent.
 
zvezda
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:27 am

Quoting Joni (Reply 2):
it isn't a critical problem, that would warrant a share price drop of tens of percent.

If you understand the situation at Airbus better than the market, then you have an opportunity to make a fortune betting against the market.

Don't rely too much on what Alcoa has to say about it though. They want to sell some very, very expensive aluminium alloys.
 
PolymerPlane
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:33 am

Quoting Joni (Reply 2):
Naturally it's a real problem, however it isn't a critical problem, that would warrant a share price drop of tens of percent.

Are you kidding? With EADS losing $2.6 billion in potential revenue, of course the share price drops.

Quoting Joni (Thread starter):
This sounds quite reasonable amid all the clamouring and herd panic that's been going on around this announcement the past few days.

from the article :

Quote:
Given long lead times on airline orders, he said he thought it unlikely that Airbus' delays would cause customers to switch to competing Boeing

With another 6-7 months delay, the availability of 747-8 will be closer to that of A380. It also gives more leeway for the airline to cancel order

Cheers,
PP
One day there will be 100% polymer plane
 
jonathan-l
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:34 am

Quoting Zvezda (Reply 3):
If you understand the situation at Airbus better than the market, then you have an opportunity to make a fortune betting against the market

The share is coming up. It was at 17 euros at its lowest on Wednesday, and it's back around 20. It's not back to 26 on Tuesday evening, nor above 30 earlier this year but the initial free fall was somewhat artificial.
 
airfrnt
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:35 am

Quoting Joni (Thread starter):
"People are going to stick with the aircraft," William Christopher, group president for engineered solutions, told Reuters. "I don't see it changing the underlying market demand for the plane."

Your pointing to a suplier of Airbus for a issue that seems to revolve more around corporate governence then engineering? Since the rumour is that the problem revolves around wiring in general and using Aluminum wiring (which Alcoa is presumably the provider of at least the raw Aluminum) they may not be the best resource.

More to the point, as a Aluminum manufacturer can you see what Alcoa might not be rooting for the Carbon Composite 787?

As for A380 demand, where is it? So far the A380 has eclipsed great sales records like that of the 717. The plane is still probably only half way to break even.
 
ikramerica
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:37 am

Quoting Jonathan-l (Reply 5):
nor above 30 earlier this year but the initial free fall was somewhat artificial.

Not artificial (it wasn't manipulated) but just reactionary. But that's common in such situations, not unique to Airbus.

If VS does the rumored 380 for 340 swap that some are claiming, expect another drop, even though airbus wouldn't be losing any orders on net.
Of all the things to worry about... the Wookie has no pants.
 
atmx2000
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 12:53 am

Quoting Joni (Reply 2):
Naturally it's a real problem, however it isn't a critical problem, that would warrant a share price drop of tens of percent.

A 10 to 20% drop in in earnings per share for a three to four year period due to a surprise delay that hadn't been hinted at at all, combined with a scent of scandal involving insider trading, discord in management and disarray in future product plans is a good reason for a stock dropping "tens of percent"
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
scouseflyer
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 1:01 am

My 2p

"With EADS losing $2.6 billion in potential revenue, of course the share price drops."

They're not losing $2.6 B it's just spread out over a longer timeframe - the money will still come in.

"If VS does the rumored 380 for 340 swap that some are claiming, expect another drop, even though airbus wouldn't be losing any orders on net"

Does that come from the same source as VS dropping the A380 for the T7?
 
PolymerPlane
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 1:14 am

Quoting Scouseflyer (Reply 9):
They're not losing $2.6 B it's just spread out over a longer timeframe - the money will still come in.

There's not how the market works. They are still losing $2.6 billion potential revenue in the next several years. The financial performance of a company is evaluated on yearly basis. The so-called potential revenue might be recouped 10 years or 20 years from now, or never. You just do not know.

Next year when the income outlook is much better than now, the price will increase. That's how the market works. It's based on the expectation, with shorter term matters the most.

Nevertheless, even if you want to see it that way, You are forgetting the time value of the earnings, delay penalties and shifts in break even point. Also with the delay, the cancellation is becoming more probable, thus increases the risk of the program.

Cheers,
PP
One day there will be 100% polymer plane
 
ikramerica
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 2:01 am

Quoting Atmx2000 (Reply 8):
surprise delay that hadn't been hinted at at all

worse, flatly denied up and down up until this point, insisting that EK would get their jets on the new timescale, SQ would EIS by December, etc.

Then, they turn a 180 when the BAE sale is pending.

Sounds like Enron and Global Crossing type management to me, with the similar (but not the same) government ties that these two companies had (to both parties in the USA, btw).
Of all the things to worry about... the Wookie has no pants.
 
atmx2000
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 2:18 am

Quoting Scouseflyer (Reply 9):
They're not losing $2.6 B it's just spread out over a longer timeframe - the money will still come in.

Not exactly. They are predicting $2.5 billion in reduced profits. The reduced profit may be attributable to interest bearing costs like loans and already purchased parts and fixed costs for utilities, rent and payroll that has to be paid regardless of whether they are leading to revenue generation. You won't recoup some of that money because you still have to pay it during actual production. Delays are very expensive because of all the things you have to pay for on a time basis.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
mrcomet
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:05 am

Ohhh. That's a really surprising comment from an Alcoa executive. I translate as this: "The company that accounts for hundreds of millions of dollars of sales per year for us is in really good shape and they're really cool guys. " This is followed by a distinct slurping sound.

Sorry. I don't give this one much credit.
The dude abides
 
ebbuk
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:25 am

Quoting Ikramerica (Reply 1):

Airbus is in disarray. Hopefully they can right the ship. But the ongoing 350/380 drama is not just a bunch of "clamouring and herd panic" and is in fact a quite real problem.

The drama is all going on here on a.net and the press. The "problems" at Airbus will help no one in the industry.

Well done to ILFC and EK for destroying the competition that they so craved for in the market place. With egomanic public rantings they've smashed already brittle confidence to pieces leaving Boeing full play in the market place. Mr Clark, don't cry foul when Boeing charge list price for your new planes.

Airbus also come in for some criticisms. Their reactions in private and public to attacks from their customers have been shambolic, not even to mention reactions to their main rival's offerings.

The only ones that can restore the confidence in Airbus are ILFC and EK with orders by the bucket load at Farnborough, I believe, or at least by year end.
 
zvezda
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:42 am

Quoting EbbUK (Reply 14):
The only ones that can restore the confidence in Airbus are ILFC and EK

IMO, the only ones who can restore confidence in Airbus are Airbus by delivering on their promises rather than making excuses, denying problems, and blaming their customers.
 
SeJoWa
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:45 am

Quoting EbbUK (Reply 14):
...

What you write is of no consequence.

Quoting Zvezda (Reply 15):
IMO, the only ones who can restore confidence in Airbus are Airbus by delivering on their promises rather than making excuses, denying problems, and blaming their customers.

 checkmark 
 
ebbuk
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:50 am

Quoting Zvezda (Reply 15):

IMO, the only ones who can restore confidence in Airbus are Airbus by delivering on their promises rather than making excuses, denying problems, and blaming their customers.

that alone, won't help them in the short to medium term. Perception in the market place is at an all time low, it will need more than on the button spec to turn it around.
 
11Bravo
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:52 am

Quoting EbbUK (Reply 14):
Well done to ILFC and EK for destroying the competition that they so craved for in the market place. With egomanic public rantings they've smashed already brittle confidence to pieces leaving Boeing full play in the market place. Mr Clark, don't cry foul when Boeing charge list price for your new planes.

Blaming customers for failing to deliver products on time is one of the big reasons Airbus finds itself where it does. The only entity Airbus should blame is Airbus.
WhaleJets Rule!
 
ebbuk
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:53 am

Quoting SeJoWa (Reply 16):
What you write is of no consequence.

A lot more than yours, friend. For I have offered some background to show my reasoning.

Yours is pretty vacant. Perhaps you fired off prematurely? It does happen
 
PlanesNTrains
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 4:02 am

Quoting EbbUK (Reply 14):
Airbus also come in for some criticisms.

Ya think?

Quoting EbbUK (Reply 14):
Well done to ILFC and EK for destroying the competition that they so craved for in the market place.

Airbus is more than capable of righting the ship. Change in leadership, new focused vision, etc. But this blame-the-customer crap has got to stop. If a company - any company - isn't doing it for the customers, then they have only themselves to blame.

Besides EbbUK, there is a lot of speculation that some INSIDE Airbus encouraged the public comments made by these customers.

-Dave
-Dave
 
SeJoWa
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 4:17 am

One would expect that most orders will stand this test. The CASM of the A380 has not spun out of control, it has merely been rendered less appealing by advanced technology. Most airlines that first stepped up to Airbus' till were those with the best potential routes, a savvy head office as well as a solid digestive tract. They still stand to gain from the Big One's release into regular service.

Emirates is even using the A380 to provide an entirely new level of pre- and post-flight experience.

Furthermore, many of those planes probably just got substantially cheaper.

Simply incredible, and of consequence, is the obfuscation and cluelessness of the top decision makers. Airbus had more than enough time to warn their best costumers about this, when they were actually telling them not long ago everything was just about on schedule.

We actually had our own very sharp observer on a.net proferring his evidence for a complete stop of planned assembly work.

If Airbus had a clear grasp of their current manufacturing problems and possible solutions, and had briefed their customers accordingly, this would have been stated by all and sundry, with emphasis on the details provided, even if these were confidential.

Airbus has been showing an increasing lack of focus lately. Boeing has a good plan. One wonders where this all might be headed?

[Edited 2006-06-16 21:18:44]
 
ebbuk
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 4:20 am

Quoting PlanesNTrains (Reply 20):

But this blame-the-customer crap has got to stop. If a company - any company - isn't doing it for the customers, then they have only themselves to blame. quote]



[quote=PlanesNTrains,reply=20]Besides EbbUK, there is a lot of speculation that some INSIDE Airbus encouraged the public comments made by these customers.

Let's be true about this, they never blamed the customer. It is widely pervceived that they did. What they did say about the early a380 delay is that they were caught unaware about the size of the task to customize the planes. And this has been the case ever since.

Who is to know that Campion told Noel at the outset that it would take a year to fix the but was ordered to turn it around in 6months?
May I say that I too at the time subscribed to this idea and with hindsight that person or people need to go. to play the game with the press you must be really savvy and play as one.

It's backfired big time, we talk of a 2 billion loss of earning but perhaps we can triple that, this year alone?. shocking
 
PlanesNTrains
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 4:49 am

Quoting EbbUK (Reply 22):
Let's be true about this, they never blamed the customer.

With all due respect, EbbUK, you can spin it any way you want, but perception is reality. It doesn't matter, though, because I wasn't referring solely to Airbus' statement, but rather to yours:

Quoting EbbUK (Reply 14):
Well done to ILFC and EK for destroying the competition that they so craved for in the market place. With egomanic public rantings they've smashed already brittle confidence to pieces leaving Boeing full play in the market place. Mr Clark, don't cry foul when Boeing charge list price for your new planes.

In other words - blame the customer.

-Dave
-Dave
 
ebbuk
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 5:06 am

Quoting PlanesNTrains (Reply 23):
but perception is reality

Never one to argue semantics but perception is NOT reality, it may be king in the market place, but reality, it is not

Quoting PlanesNTrains (Reply 23):

In other words - blame the customer.

Let's not play this blame game, it's cancerous and counter-productive.

But we can look back and understand what actions led up to the mess. Airbus have their responsibility just as much as the public rants of dissatisfaction have affected the shaky confidence. If EK and ILFC knew of the delays with the A380 would they have been as candid with the press about their feelings with the A350? A question that we will ask for years to come.

Which is why when we get a measured response like this one from Alcoa, we can all breathe a sigh of relief that despite the madness, there is some good stuff going on at Airbus and sooner rather than later, perhaps, the fortunes will return
 
Joni
Topic Author
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 5:09 am

Quoting PolymerPlane (Reply 4):
Are you kidding? With EADS losing $2.6 billion in potential revenue, of course the share price drops.

If they did lose that much revenue, it would be a significant hit. However this isn't the case as the revenue is only deferred, not "lost".
 
PolymerPlane
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 5:37 am

Quoting Joni (Reply 25):
If they did lose that much revenue, it would be a significant hit. However this isn't the case as the revenue is only deferred, not "lost".

It's so hard to argue when a person does not read the other's argument. Just for refresher:
1. Airbus IS losing those revenue, both the time value of the revenue and the opportunity in producing A380.
2. You can't turn back time and produce A380 and utilize their production plant, while Airbus still paying for rent, electricity, taxes and salary of its employee.
3. Any future order must be postponed until the delayed one is produced, thus creating an incentive of order going to the competitor.
4. Part of the $2.6 bil is the penalty that Airbus has to pay to the customers

This is what EADS said:

Quote:
The parent company of Airbus SAS said delays in delivering the A380 superjumbo jet, the world's biggest passenger plane, will reduce operating profit by a combined 2 billion euros ($2.5 billion) from 2007 to 2010.

http://www.bloomberg.com/apps/news?pid=10000085&sid=acAX8g2sq3Fs

If you still do not get it I am not going to try anymore. You can believe whatever you believe, but you should really really becareful on your investment.

Cheers,
PP
One day there will be 100% polymer plane
 
DAYflyer
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 5:39 am

Quoting Joni (Thread starter):
"People are going to stick with the aircraft," William Christopher, group president for engineered solutions, told Reuters. "I don't see it changing the underlying market demand for the plane."

It may not change the underlying need for the airplane, but that dont mean your customers won't be looking at the 747-8 now.
One Nation Under God
 
mham001
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 5:57 am

Quoting Joni (Reply 25):
If they did lose that much revenue, it would be a significant hit. However this isn't the case as the revenue is only deferred, not "lost".

No, it's lost. The slots in 2007, 2008, 2009 are gone - forever. Those planes will now be built in slots meant to be sold to other customers.
 
PlanesNTrains
Posts: 5347
Joined: Tue Feb 01, 2005 4:19 pm

RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 6:17 am

Quoting EbbUK (Reply 24):
Never one to argue semantics but perception is NOT reality, it may be king in the market place, but reality, it is not

Well, you managed to contradict yourself in one sentence. I'm sorry the point of what I was saying was lost on you.

Quoting EbbUK (Reply 24):
Let's not play this blame game, it's cancerous and counter-productive.

If you don't want to play the blame game, then skip statements like:

Quoting EbbUK (Reply 14):
Well done to ILFC and EK for destroying the competition that they so craved for in the market place. With egomanic public rantings they've smashed already brittle confidence to pieces leaving Boeing full play in the market place. Mr Clark, don't cry foul when Boeing charge list price for your new planes.

-Dave
-Dave
 
ebbuk
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 7:26 am

If you don't want to play the blame game, then skip statements like:

Quoting EbbUK (Reply 14):
Well done to ILFC and EK for destroying the competition that they so craved for in the market place. With egomanic public rantings they've smashed already brittle confidence to pieces leaving Boeing full play in the market place. Mr Clark, don't cry foul when Boeing charge list price for your new planes.[/quote]

I haven't blamed them for anything, here. I am stating that they have contributed to the Airbus debacle. I am trying to highlight responsibility as opposed to aportioning blame. The same I did with Airbus's contribution to the mess.

Quoting PlanesNTrains (Reply 29):
Quoting EbbUK (Reply 24):
Never one to argue semantics but perception is NOT reality, it may be king in the market place, but reality, it is not

Well, you managed to contradict yourself in one sentence. I'm sorry the point of what I was saying was lost on you.

I guess it was but i still know I am right.
 
WingedMigrator
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 2:55 pm

Quoting PolymerPlane (Reply 26):
The parent company of Airbus SAS said delays in delivering the A380 superjumbo jet, the world's biggest passenger plane, will reduce operating profit by a combined 2 billion euros ($2.5 billion) from 2007 to 2010.

http://www.bloomberg.com/apps/news?p...sq3Fs

Operating profit or revenue? I strongly suspect the latter.

Quoting PolymerPlane (Reply 26):
1. Airbus IS losing those revenue, both the time value of the revenue and the opportunity in producing A380.



Quoting Mham001 (Reply 28):
No, it's lost. The slots in 2007, 2008, 2009 are gone - forever. Those planes will now be built in slots meant to be sold to other customers.

You guys would be right if Airbus's order book was jammed to the brim and there was no room left in the production schedule as far as the eye could see.

But that is not so, at least right now, so they will get revenue later that they hadn't planned on, without booking a single new order.

Or look at it this way: if they were all booked up and as you say the revenue from the 2007-2010 slots were truly lost because they couldn't build enough A380s later on, wouldn't that be a nice problem for Airbus to have?

I do acknowledge there will be costs associated with fixing the problems and stretching out the ramp-up, not to mention compensating customers. That's all money down the drain, but probably nowhere near $2.5 billion's worth.
 
leelaw
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 3:14 pm

Quoting WingedMigrator (Reply 31):
You guys would be right if Airbus's order book was jammed to the brim and there was no room left in the production schedule as far as the eye could see...or look at it this way: if they were all booked up and as you say the revenue from the 2007-2010 slots were truly lost because they couldn't build enough A380s later on, wouldn't that be a nice problem for Airbus to have?

Wait a minute, hasn't Airbus, particularly John Leahy, been saying for the last year (before announcement of the "second" program delay), that new orders couldn't be delivered before 2011?

[Edited 2006-06-17 08:44:10]
Lex Ancilla Justitiae
 
Joni
Topic Author
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 7:38 pm

Quoting PolymerPlane (Reply 26):

It's so hard to argue when a person does not read the other's argument. Just for refresher:
1. Airbus IS losing those revenue, both the time value of the revenue and the opportunity in producing A380.
2. You can't turn back time and produce A380 and utilize their production plant, while Airbus still paying for rent, electricity, taxes and salary of its employee.
3. Any future order must be postponed until the delayed one is produced, thus creating an incentive of order going to the competitor.
4. Part of the $2.6 bil is the penalty that Airbus has to pay to the customers

2.6B is probably the total revenue associated with the delays, i.e. the revenue from the planes whose delivery dates are affected.

From the EADS release:

http://tinyurl.com/zry8b

From 2007 to 2010, EADS anticipates annual shortfalls of EBIT* contribution from the A380 programme of about € 500 million relative to the original baseline plan. The shortfalls result from the shift of margin to later years, excess costs tied to the recovery action and the late delivery charges which are to be negotiated with customers. Possible contract terminations under the new timetable have not been taken into account in this estimate.

Note the words "shift of margin", meaning that the margin will be actual in following years. I do see your point but the assumptions you're making aren't IMO very realistic - there will be a set number of A380s made, if you plot them by year you might get something like a gaussian (roughly) distribution with initial ramp-up, the steady-state, and then eventual petering off. This delay will affect the shape of this distribution, not the number of A380s made unless some customers would choose a competing plane instead because of the additional lead time - which is not likely both because there isn't much of a lead time increase (it's not rare that customers have to wait for years in any case) and because there is no direct competitor product.

Quoting PolymerPlane (Reply 26):
The parent company of Airbus SAS said delays in delivering the A380 superjumbo jet, the world's biggest passenger plane, will reduce operating profit by a combined 2 billion euros ($2.5 billion) from 2007 to 2010.

I think that's meant to read "revenue" and not "profit". The EBIT impact is €500M in those years as quoted above. Curiously, if the 500M figure didn't include other costs, then we could calculate a good estimate for the A380 margin fron knowing the revenue and EBIT  Wink
 
B707Stu
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 7:59 pm

Quoting Zvezda (Reply 15):
IMO, the only ones who can restore confidence in Airbus are Airbus by delivering on their promises rather than making excuses, denying problems, and blaming their customers.



Quoting EbbUK (Reply 24):
But we can look back and understand what actions led up to the mess. Airbus have their responsibility just as much as the public rants of dissatisfaction have affected the shaky confidence. If EK and ILFC knew of the delays with the A380 would they have been as candid with the press about their feelings with the A350? A question that we will ask for years to come.

Which is why when we get a measured response like this one from Alcoa, we can all breathe a sigh of relief that despite the madness, there is some good stuff going on at Airbus and sooner rather than later, perhaps, the fortunes will return

At this point I would have to guess it's later. The A-350 fiasco, more than the A380 trouble is the real blind spot. A huge miscalculation in the market, slowness to understand the miscalculation and then a failed attempt at responding to it- that's been the center of this period of Airbus's slow and steady failure. The A380, like all new aircraft, will move forward, whether profitable or not is yet to be known, another factor hurting Airbus. But the A350 mess is the real backdrop to all of this - they made a very bad strategic error and are now playing catch up. Unfortunately sometimes when you're playing catch up your competitor and their allies take advantage. That's the market place and to be expected. Boeing was feeling that way just 5 short years ago, maybe even 3. Now the market has turned around and it's Airbus's turn to be humble.

Quoting Joni (Reply 25):
If they did lose that much revenue, it would be a significant hit. However this isn't the case as the revenue is only deferred, not "lost".

Once an opportunity for revenue is gone, it's gone. It's not deferred, it's gone.
 
slz396
Posts: 1883
Joined: Tue Oct 02, 2001 7:01 am

RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 8:24 pm

Quoting Joni (Reply 33):
Curiously, if the 500M figure didn't include other costs, then we could calculate a good estimate for the A380 margin from knowing the revenue and EBIT

Congratulations!

After more than 3 days of numerous discussions and speculations based mainly on assumptions and personal wishes from both the most notorious A380 bashers as well as the A380 fan crowd, you are the first to have noted Airbus has given away a 'raw indication' of the profit margin they might have on the A380...


BTW, as a financial analyst myself, the EADS statement is remarkable in several ways because it repeatedly refers to the total reduction in operating income over several years combined. This is a very eye brow raising thing to mention really, first of all because it poses questions as to just what period one should take (2,3,4,5 or even more years?) and also because in itself it is a rather pointless combined figure, composed of additional costs, compensations to the first customers as well as deferred revenues from delayed sales. Whereas the first two things are indeed easy to see as a definite loss, the third (and most likely biggest part) is really just deferred revenue and does not need to be accounted for as a loss completely, just the immediate financial consequences of it. One could rightfully argue that it must still be seen as a 'loss' for the accounting year itself and I would fully agree, but strangely enough EADS statement does not limit the scope on the fiscal year, it has a span of 4 years, from 2007-2010, exactly the moment when the delays would have been absorbed and the 'deferred revenue' would no longer be accountable as 'a reduction in income' for them....
It definitely looks as if EADS wants to maximize the impact of this delay by adding up all costs, damages and losses of income over the entire affected period in order to make the situation worse than it is and thus lower the value of Airbus more than needed! And they did so, perfectly! Do you begin to see why BAe Systems (which wants to sell EADS its 20% share in Airbus) is so furious?

BAe Systems have exercised their put option almost 3 weeks ago, giving EADS yet another week to agree a price or an independent investment bank will be brought in to arbitrate within 14 days. Given the fact a compromise isn't likely, this means the price of Airbus will be decided on in 3 weeks, mainly based on the value of EADS (which is majority share holder of Airbus) Anybody dare to bet the share price of EADS will be around 22 euro by then? Close to what EADS wanted to pay BAe Systems in their initial offer...

Interesting to note is that EADS hopes to give its shareholders an update on the impact of the A380 delays around the time of the Farnborough air show, which starts on 17 July. This is just AFTER the deadline for fixing a price for the Airbus share sale. I for one would not be too surprised if EADS then proudly announces it has found ways to minimize the effect on their net results.

Now may be a good time to buy EADS shares if you want to make a nice profit over a relatively short period.  

[Edited 2006-06-17 13:55:27]
 
PolymerPlane
Posts: 832
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RE: Alcoa Take On New A380 Production Delays

Sat Jun 17, 2006 9:55 pm

Quoting WingedMigrator (Reply 31):
Operating profit or revenue? I strongly suspect the latter.



Quoting Joni (Reply 33):
I think that's meant to read "revenue" and not "profit". The EBIT impact is €500M in those years as quoted above. Curiously, if the 500M figure didn't include other costs, then we could calculate a good estimate for the A380 margin fron knowing the revenue and EBIT

EBIT is earnings before interest and tax. So yes it is profit. Operating profit to be exact. So,
EBIT = operating income - operating expense = operating profit.
In accounting world, when people are talking about earnings, they actually mean profit. Revenue is income.

Quoting Joni (Reply 33):
Note the words "shift of margin", meaning that the margin will be actual in following years....- there will be a set number of A380s made, if you plot them by year you might get something like a gaussian (roughly) distribution with initial ramp-up, the steady-state, and then eventual petering off

Let say, now is the ramp-up time right? So, the income now will be deferred till the tapering off period right? So say the tapering off is long years from now. Do you realize how much time value of money does it lose? Assuming Airbus's ROI is 10%, 10 years from now, the present value of $2.6 Billion is only about $1 Billlion, and 20 years from now, the present value is $380million.

So yes Airbus loses a lot of money, and thus affecting the stock price.

Cheers,
PP
One day there will be 100% polymer plane
 
atmx2000
Posts: 4301
Joined: Wed Oct 13, 2004 4:24 pm

RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 12:09 am

Quoting PolymerPlane (Reply 26):
4. Part of the $2.6 bil is the penalty that Airbus has to pay to the customers

There may be penalties to be paid to suppliers if they don't take parts on the delivery scale indicated. Alternatively, Airbus may have to pay for parts and store them, leading to an increase in interest payments, or reduction of interest income from cash tied up in inventory.

Quoting PolymerPlane (Reply 36):
In accounting world, when people are talking about earnings, they actually mean profit. Revenue is income.

Earnings is also net income.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
Joni
Topic Author
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 4:22 am

Quoting PolymerPlane (Reply 36):

EBIT is earnings before interest and tax. So yes it is profit. Operating profit to be exact. So,
EBIT = operating income - operating expense = operating profit.
In accounting world, when people are talking about earnings, they actually mean profit. Revenue is income.

Yes, the 500M figure is EBIT as the release says. The 2B figure is very likely revenue, and that was my point in the previous post.

Quoting PolymerPlane (Reply 36):

Let say, now is the ramp-up time right? So, the income now will be deferred till the tapering off period right? So say the tapering off is long years from now. Do you realize how much time value of money does it lose? Assuming Airbus's ROI is 10%, 10 years from now, the present value of $2.6 Billion is only about $1 Billlion, and 20 years from now, the present value is $380million.

Yes, but again assuming the worst as is your wont with everything relating to Airbus. I recall EADS said they'll catch up on the deliveries after 2010.
 
atmx2000
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 4:37 am

Quoting Joni (Reply 38):
Yes, the 500M figure is EBIT as the release says. The 2B figure is very likely revenue, and that was my point in the previous post.

The 2 billion euro figure is the total drop in profits from 2007 to 2010 from what I understand.

500M is the per year figure for those four years.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
zvezda
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 4:45 am

Quoting Joni (Reply 33):
2.6B is probably the total revenue associated with the delays, i.e. the revenue from the planes whose delivery dates are affected.

Sorry, no. Do the arithmetic. How many aircraft will be delayed? $2.6B divided by how many? Can that be the purchase price per?
 
PolymerPlane
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 5:00 am

Quoting Joni (Reply 38):
Yes, but again assuming the worst as is your wont with everything relating to Airbus. I recall EADS said they'll catch up on the deliveries after 2010.

Actually that's the best case scenario for Airbus, as it can fill up all their delivery slots. Regardless, profit is calculated per year basis, with the expectation of profit determines the stock price, along with many other things associated with the company, especially risk.

No matter how you try to cut it, next several years' profits are going to be down, and that's what matters most for the stock price. If you think about it, profit 10 years from now has a higher risk than profit next year. That is why any reasonable person would want the profit next year instead of 10 years from now. That is why stock price is more affected by short term events than long term events.

Like I said, if Airbus catches up with its airplane projects, and starts posting excellent financial results, the stock price will go back up again.

Quoting Atmx2000 (Reply 39):
The 2 billion euro figure is the total drop in profits from 2007 to 2010 from what I understand.

500M is the per year figure for those four years.

Correct.

Cheers,
PP
One day there will be 100% polymer plane
 
PlanesNTrains
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 5:01 am

Speaking of semantics...

Quoting EbbUK (Reply 30):
I haven't blamed them for anything, here. I am stating that they have contributed to the Airbus debacle. I am trying to highlight responsibility as opposed to aportioning blame.

Anyhoo...

Quoting EbbUK (Reply 30):
I guess it was but i still know I am right.

And that's all that matters.  Smile Here's looking forward to the A380's first revenue flight!

-Dave
-Dave
 
ebbuk
Posts: 844
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 10:55 am

Quoting PlanesNTrains (Reply 42):
Here's looking forward to the A380's first revenue flight!

-Dave

God the start of another bashing chapter I am sure. Big mama A380 is going to be on the recieving end of some flak for years to me. A lot of a.net peeps will be reminding her just how fat and ungainly she is and what a troubled upbringing she's had etc
 
PlanesNTrains
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 5:11 pm

Quoting EbbUK (Reply 43):
God the start of another bashing chapter I am sure. Big mama A380 is going to be on the recieving end of some flak for years to me. A lot of a.net peeps will be reminding her just how fat and ungainly she is and what a troubled upbringing she's had etc

I'm sure it will be fine. By then the first 787 will roll out and look like botox-gone-wild, delays will begin, and the B bashers will be on top of the world.

See - everything will be fine, EbbUK.  Smile

-Dave
-Dave
 
Joni
Topic Author
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 9:48 pm

Quoting PolymerPlane (Reply 41):
No matter how you try to cut it, next several years' profits are going to be down, and that's what matters most for the stock price.

This is certainly true, as can be seen from the reaction in EADS' stock to the delay news.

Quoting PolymerPlane (Reply 41):
Yes, but again assuming the worst as is your wont with everything relating to Airbus. I recall EADS said they'll catch up on the deliveries after 2010.

Actually that's the best case scenario for Airbus, as it can fill up all their delivery slots.

The best case, naturally, is if they can catch up in the deliveries as planned.
 
zvezda
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RE: Alcoa Take On New A380 Production Delays

Sun Jun 18, 2006 10:39 pm

Quoting Joni (Reply 45):
The best case, naturally, is if they can catch up in the deliveries as planned.

If Airbus is to catch up and deliver the first WhaleJet as planned, they don't have much time left until March 2006.  Yeah sure Even if you mean the second plan, they don't have much time left until May 2006.

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