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First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 1:35 am

Airbus sees losses on first A380 superjumbos - report
Tue Jun 27, 2006 7:58 PM IST

Airbus Chief Executive Gustav Humbert in the leaked minutes of a May 12 audit committee meeting tells the two chairmen and two CEOs of EADS that the first two A380s to Singapore Airlines would be sold at a loss and there could be more.

"He noted that the two first Singapore Airlines aircraft are at loss and that it is too early to say if the next three, to be delivered early next year, are also at loss," according to the minutes, which French newspaper Le Monde posted on its website.

Reuters
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Stitch
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 1:49 am

When you calculate in the launch discounts and the up-front costs of infrastrucure and components, do the first frames of any plane sell at a profit?

Or is this loss indeed solely due to the production and delivery delays and whatever compensation is having to be paid out?
 
astuteman
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 2:03 am

IIRC Humbert has also said that overall, production won't now start returning profits until 2008, which pretty much backs up this report.

Quoting Stitch (Reply 1):
Or is this loss indeed solely due to the production and delivery delays and whatever compensation is having to be paid out?

This is, of course, a good question.

Regards
 
AerospaceFan
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 2:09 am

To be honest, I'm not all that concerned that the first few A380's are loss-making, because the A380 is such a new aircraft. I continue to hope and wish the best for the A380 for what it is.

Boeing itself states that there should be around a 300-unit market within which the A380 might compete, IIRC, and so there is room for profit in the future on the Airbus program. This is aside from the fact that there are, what, 150 or so orders for the A380 as it stands.

I don't think, really, that the A380 will be the raging success that its staunchest proponents (read: a certain Mr. Leahy, et al.) urged that it will be, but on the other hand, I think that the A380 will in some ways become iconic and a significant aircraft whatever the numbers of sales it generates. Heck, in some ways, the A380 is already iconic, both in good ways and bad.

Boeing might be right that the A380 market could max out at about 300, but then again, the market might be a bit larger -- say, 400 or 500. And some of that could be the 747-8I. Only time will tell.

As they say, we shall see.
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StarGoldLHR
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 2:16 am

Quoting AerospaceFan (Reply 4):
Boeing might be right that the A380 market could max out at about 300, but then again, the market might be a bit larger -- say, 400 or 500. And some of that could be the 747-8I. Only time will tell.

Why would boeing enter a market where the maximum size is 300 sales, when there already is a new entrant with 50% of that share ?

by the time boeing ramped up... the market would be exhausted.


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airfrnt
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 2:16 am

Quoting Singapore_Air (Thread starter):

Airbus Chief Executive Gustav Humbert in the leaked minutes of a May 12 audit committee meeting tells the two chairmen and two CEOs of EADS that the first two A380s to Singapore Airlines would be sold at a loss and there could be more.

"He noted that the two first Singapore Airlines aircraft are at loss and that it is too early to say if the next three, to be delivered early next year, are also at loss," according to the minutes, which French newspaper Le Monde posted on its website.

Ouch.

More importantly, there are rumours floating around from the same leaked minutes that Airbus is looking at restating it's earnings. That's really bad news, if it isn't just a rumour.
 
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Stitch
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 5:31 am

Quoting StarGoldLHR (Reply 4):
Why would boeing enter a market where the maximum size is 300 sales, when there already is a new entrant with 50% of that share? by the time boeing ramped up... the market would be exhausted.

Well it does explain why Boeing decided against "clean-CATIAing" a VLA and tried to tweak the 747 to fit. Since 747 freighter sales remain strong, they were able to convince cargo carriers to commit to a new model. At that point, offering a passenger variant really doesn't incur all that much additional risk and cost, especially in the early stages.

If Boeing had been unsuccessful in getting cargo operators to buy the 748, I doubt the project ever would have been launched, and would have instead joined the 745, 746, and 74X programs as design studies.
 
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 5:38 am

Lockheed couldn't make a profit on the L-1011, despite selling 250 frames...

And it was a superbly engineered aircraft that everyone, airlines, crews, and pax, all loved.
 
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 5:48 am

Quoting Stitch (Reply 1):
When you calculate in the launch discounts and the up-front costs of infrastrucure and components, do the first frames of any plane sell at a profit?

Development costs are amortised over x number of frames. What I think they are saying is that when you add the amortised costs, plus the cost to build, plus the contract penalties, they are in the hole.

Quoting StarGoldLHR (Reply 4):
Why would boeing enter a market where the maximum size is 300 sales, when there already is a new entrant with 50% of that share ?

They didn't. Airbus entered the VLA market, Boeing has been there since 1966.

Quoting StarGoldLHR (Reply 4):
by the time boeing ramped up... the market would be exhausted.

With 250 or so 747 freighters out there, it wont be a problem for Boeing to make money on the 748 with or without passenger sales. The 380 must get passenger sales or they will lose a LOT of money.

New build freighters are 10% more reliable than conversions, which is why they have sold over 50 in the last 18 months or so. New builds just make more money for thier operators, and that means sales.

Quoting Stitch (Reply 6):
If Boeing had been unsuccessful in getting cargo operators to buy the 748, I doubt the project ever would have been launched, and would have instead joined the 745, 746, and 74X programs as design studies.

Yep. Boeing always knew the 747 would end up a freighter, they just underestimated how long passenger models would sell by say 30 or so years. It is a near perfect freighter, which is why the 747 carries half of all air cargo.

[Edited 2006-06-27 22:56:03]
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saturn5
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 5:53 am

Quoting StarGoldLHR (Reply 4):
Why would boeing enter a market where the maximum size is 300 sales, when there already is a new entrant with 50% of that share ?

A380 and 747-8 markets overlap but they are obviously not identical because these airplanes are not identical. The '300' number (or whatever) may apply to 500+ pax. class aircraft only.

By the way, the break-even point for the A380 sales is now 300 airplanes because of the current problems. This number used to be 250.

[Edited 2006-06-27 22:55:16]
 
leelaw
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RE: First 5 SIA A380s Could Be Loss-Making For Air

Wed Jun 28, 2006 6:14 am

Quoting DeltaDC9 (Reply 8):
Development costs are amortised over x number of frames.

Depends on whether you're talking about financial accounting or managerial/cost accounting. For financial acccounting purposes they are largely expensed as incurred. For managerial/cost accounting purposes (in this case measuring/evaluating the financial performance of a long-term project) they are accumulated and amortised over a pre-determined number of units.

[Edited 2006-06-27 23:19:14]
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breiz
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 7:15 am

What is a bit puzzling is that my post named : Eads Meeting On A380 In May 06 (by Breiz Jun 26 2006 in Civil Aviation)
has attracted little interest while this post on the same subject, but referring to A380 program losses, gets a lot of comments.
Are many members out for the sensational more than the real facts?
 
zvezda
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 7:25 am

Quoting StarGoldLHR (Reply 4):

Why would boeing enter a market where the maximum size is 300 sales, when there already is a new entrant with 50% of that share ?

If Boeing sell only 150 SuperJumbos, they will have made a very tidy profit.

Quoting Saturn5 (Reply 9):
By the way, the break-even point for the A380 sales is now 300 airplanes because of the current problems. This number used to be 250.

This number was 300 before the second delay, due primarily to the change in exchange rate. Now, after the third delay, it is probably in the 400 to 500 range. Further exchange rate movement or more delays could change the numbers again.
 
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 7:48 am

Quoting Breiz (Reply 11):
Are many members out for the sensational more than the real facts?

Just like real world journalism, Breiz. Got to package it with a catchy title! E.g., "Minutes of EADS Board Meeting Leaked!"  Wink
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airmailer
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 11:26 am

Quoting Lumberton (Reply 13):
Just like real world journalism, Breiz. Got to package it with a catchy title! E.g., "Minutes of EADS Board Meeting Leaked!"

Dude's got a point!!

add 'leaked' to the headline and see what happens!
 
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 11:48 am

 
worldxplorer
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 12:05 pm

There was a previous thread that touched on this topic and the leaked EADS board meeting minutes.
Eads Meeting On A380 In May 06 (by Breiz Jun 26 2006 in Civil Aviation)
 
Halibut
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 12:18 pm

Quoting Zvezda (Reply 12):
This number was 300 before the second delay, due primarily to the change in exchange rate. Now, after the third delay, it is probably in the 400 to 500 range. Further exchange rate movement or more delays could change the numbers again.

Zvezda,
Could the fact that Airbus is extremely weak in the mid section affect the break even # on the A380 in any way ? They are now so much more dependent on A380 sales due to the gap in there line up .

400 to 500 is startling !

Halibut
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 12:33 pm

What do they mean by loss? My interpretation is that their out of pocket cash expenditures are more than they have sold the aircraft for and that there is nothing as a contribution towards recovering the investment they have in the program or the day to day overheads of the business.
On top of all this they will be forced to pay damages, in cash, if performance guarantees are not met and/or deliveries are delayed. Their negative cash per frame could go on for quite a period. This cannot be quantified because their selling price per unit is not known.
 
saturn5
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 12:51 pm

Quoting SunriseValley (Reply 18):
What do they mean by loss?

I interpret this loss as meaning that they even won't recover all the expenses on this particular aircraft - parts+labor. This is even less than the typical parts+labor+investment(partial)+profit.

Quoting SunriseValley (Reply 18):
My interpretation is that their out of pocket cash expenditures are more than they have sold the aircraft for and that there is nothing as a contribution towards recovering the investment they have in the program or the day to day overheads of the business.

This is my interpretation too.
 
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 2:41 pm

Quoting Zvezda (Reply 12):
This number was 300 before the second delay, due primarily to the change in exchange rate. Now, after the third delay, it is probably in the 400 to 500 range. Further exchange rate movement or more delays could change the numbers again.

These numbers look a bit on the high side. If the initial break even was 250 units, to cover development costs etc., during a 6 year span, it is highly unlikely that a one year delay will cost them an additional 60% (400 units) or 100% (500 units). Obviously my guess is as good/bad as yours, but I'm not going to guess as any number put forward would be pure speculation.
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ikramerica
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 2:46 pm

Quoting Breiz (Reply 11):
What is a bit puzzling is that my post named :

It's called a non-descriptive/non-enticing thread topic. Blaming people for not reading it is kind of silly.  Wink
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glacote
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 3:02 pm

Quoting AirFrnt (Reply 5):
More importantly, there are rumours floating around from the same leaked minutes that Airbus is looking at restating it's earnings. That's really bad news, if it isn't just a rumour.

I read the minutes and did not see this. Which specific part are you/these rumours referring to?
 
PlaneHunter
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 3:13 pm

Quoting Lumberton (Reply 13):
Just like real world journalism, Breiz.

 Yeah sure

Quoting Halibut (Reply 17):

400 to 500 is startling !

And it's just an estimate, we shouldn't forget. No reason to take that for fact at this point of time.


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leelaw
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 3:14 pm

Quoting Manni (Reply 20):

We'll probably know a lot more once the financials for the quarter ending June 30, 2006 are released.

First, we'll know whether the independent accountants/auditors have required Airbus/EADS to set-up a loss reserve related to the anticipated expenses associated with the program delays. IIRC, after last year's program delay, such a reserve was not required as it was claimed at the time the costs associated with the program delay could be "unwound internally." It seems unlikely this will remain the case.

Second, revised "breakeven" guidance will likely be forthcoming at that time. It seems certain the number will have increased significantly over the former guidance of 300 units.

In any event, the the estimates of what the "wiring-harness imbroglio" is going to cost will be a lot more accurate and firm than the preliminary guidance offered with the announcement of the second program delay on June 13th.
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zvezda
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 3:33 pm

Quoting Halibut (Reply 17):
Could the fact that Airbus is extremely weak in the mid section affect the break even # on the A380 in any way ?

I don't see how it would, but I haven't slept in 26 hours. What is your theory?

Quoting Manni (Reply 20):
These numbers look a bit on the high side. If the initial break even was 250 units, to cover development costs etc., during a 6 year span, it is highly unlikely that a one year delay will cost them an additional 60% (400 units) or 100% (500 units).

You're overlooking that the estimate was revised by Airbus from 250 to 300+ before the one year (combined second and third) delay due to the rise of the euro relative to the dollar.
 
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 3:34 pm

Quoting DeltaDC9 (Reply 8):
Development costs are amortised over x number of frames. What I think they are saying is that when you add the amortised costs, plus the cost to build, plus the contract penalties, they are in the hole.

Hardly likely that they're counting in the development costs at all at this stage, DeltaDC9. At the commonly-accepted figure of $US15B., the development costs would average out at $100M. per aeroplane over 150 sales, before allowing for accumulated interest. it's hardly likely that they are recouping that amount, on top of production costs, in the sale prices of aeroplanes ordered in 2001.

As I read it, Humbert was talking about 'marginal' losses; the sale prices not even recouping the production costs of the individual aeroplanes.
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astuteman
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 3:52 pm

Quoting NAV20 (Reply 26):
As I read it, Humbert was talking about 'marginal' losses; the sale prices not even recouping the production costs of the individual aeroplanes.

Agreed, and for the first 4 or 5 planes, that should be no surprise to anyone, especially after the delays.

What surprises me is that Humbert believes there's a chance of an "operational" break-even on the 3rd, 4th + 5th plane for SIA. Post delay, that's a phenomenal situation (if true), far, far removed from the "heavy losses" scenarios that have been the norm on A-net for 2 years.

As NAV20 has pointed out earlier, Humbert has said recently that 2008 will be the first year that A380 turns an operational profit. Shame that profits been reduced by E500m because of the delays

Regards
 
leelaw
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 7:58 pm

Quoting Astuteman (Reply 27):

I'll repeat a couple of things I said in response to you in another thread:

1. It's possible SQ's "launch discount" may be front-loaded on the first two aircraft delivered in order to compensate SQ for EIS costs and hiccups associated with being "first to fly" the RR-powered variant. Consequently, the "losses" discussed on May 12th related to these two units could be substantial, and not necessarily restricted to delay-related compensation.

2. I would also note that at the time of the meeting in question, May 12th, the "production audit" commissoned to assess the depth and breadth of the "wiring-harness imbroglio" was ongoing. It appears as though on May 12th they were still anticipating delivering 2 A380's to SQ in 2006, and three more in early 2007 (before the second program delay SQ was anticipating delivery of 7 A380s by March 31, 2007) which seems to indicate they weren't fully aware of the troubles that lay ahead? In short, any judgements about anticipated cost overruns and penalty compensation reached on May 12th were most likely premature and largely inaccurate.

Additionally, it would be nice to know how "operational" break-even is being defined; i.e. does this include accumulation and amortisation of development costs which have already been expensed for financial accounting purposes? Is this "break-even" analysis being done to assess short-term cash flows/earnings estimates (financial accounting), or to evaluate the overall mid/long-term financial performance of the A380 program (managerial/cost accounting)? IMO, it's probably the former.
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Joni
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 8:17 pm

Quoting Stitch (Reply 1):

Or is this loss indeed solely due to the production and delivery delays and whatever compensation is having to be paid out?

Well that is what it says in the article:

Airbus parent EADS faces losses on the first of the A380 superjumbos it delivers because of late-payment charges demanded by airlines
 
redcordes
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 8:28 pm

The 380 is a long, long way from being profitable--even if unexpected problems don't show up as it is placed into service. Additionally, current and future developments by the competition will adversely affect profitability during this overly long-term program. This aircraft needs to be put into service in reasonably large numbers and fairly quickly, if it is to be profitable. IMO, there is about a 50% chance this aircraft will EVER be profitable (history repeats itself), simply because it is outside the envelope of what has been successful in the past.
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Halibut
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 8:41 pm

Quoting Zvezda (Reply 25):
What is your theory?

Didn't really have one . That's why I asked you . I was just curious to hear what you had to say about it .

Quoting Zvezda (Reply 25):
but I haven't slept in 26 hours

Oh , been spending some time in Amsterdam I see . sarcastic 

 drunk 

Halibut
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astuteman
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 10:34 pm

Quoting Redcordes (Reply 30):
The 380 is a long, long way from being profitable

Depends whether you're defining "profitable" on a programme or per frame basis.

From an overall programme viewpoint, what you're saying makes total sense.

From an Airbus "operational" viewpoint, Airbus will need to make an "operational" profit on each frame they sell. When this "operational" profit per frame has accumulated to an amount equal to the initial development cost, Airbus will "break-even" on the A380 programme on an accounting basis.
On a discounted cash-flow basis (DCF), the "operational" profit per frame will be factored downwards by the DCF rate each year. That will mean it will take more frames in profit before real break-even is reached.

FWIW, Airbus's initial statements originally said (quoting) the $10.7Bn development cost will be recovered over 250 frames, equating to an anticipated "profit" per frame of c$43m (which may not all come from the initial sale, of course..)
Some sources modified this figure to a possible 300 frames, equating to c$36m "profit" per frame.
(I'm only using Airbus numbers there BTW, for illustration).

The discussion above has been focussed on "per-frame operational profitability".
I don't think anyone's suggesting that the A380 programme will break even in 2008. I don't think sales will have even reached $10.7Bn by then, much less the nearer $15Bn that the programme must be approaching.

The question is:- which deliveries start the "per frame" profits rolling in which start to repay the development costs?

Hope that's of use.

Quoting Leelaw (Reply 28):
I'll repeat a couple of things I said in response to you in another thread:

As per previous thread, cautions noted with thanks.  checkmark 

Regards
 
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RE: First 5 SIA A380s Could Be Loss-Making For Air

Wed Jun 28, 2006 10:46 pm

Quoting Saturn5 (Reply 19):
I interpret this loss as meaning that they even won't recover all the expenses on this particular aircraft - parts+labor. This is even less than the typical parts+labor+investment(partial)+profit.

From reading the minutes I think they are also including the compensation they are paying out on a per-plane basis in the loss per aircraft calculation.
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bjornstrom
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 10:52 pm

Lossmaker or not - get it certified and ferry it to SIN. I've got a CRWSTAR1 with 19k unused miles waiting to be used. I wanna be on a A380 SIN-SYD but I can't wait longer than approx Dec 20th...
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deltadc9
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 10:59 pm

Quoting NAV20 (Reply 26):
As I read it, Humbert was talking about 'marginal' losses; the sale prices not even recouping the production costs of the individual aeroplanes.

Wow, if thats true this is really ugly.
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art
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Wed Jun 28, 2006 11:18 pm

Quoting Zvezda (Reply 12):
Quoting StarGoldLHR (Reply 4):

Why would boeing enter a market where the maximum size is 300 sales, when there already is a new entrant with 50% of that share ?

If Boeing sell only 150 SuperJumbos, they will have made a very tidy profit.

Somewhat unlikely that 748-I would get 150 sales and the A380 0.
 
okelleynyc
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 12:12 am

Here's a link to a group that tried to answer the above questions back in 2001. It's since been updated as of 2004. While it seems one sided, their assumptions are interesting to follow and at least provides some "place holder" numbers for us to at least discuss.

In particular, it discusses the pricing points for the first 50, the next 60 and all follow on aircraft and discusses the timing and flow of funds from the airliners as well as discusses launch loan payment schedules.

http://www.raes.org.uk/raes/research/KeithH/KH4.pdf
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deltadc9
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 12:20 am

Quoting Art (Reply 36):
Somewhat unlikely that 748-I would get 150 sales and the A380 0.

Almost as unlikely as Boeing selling more than 50 747s while Airbus sold 0 380s of any type. But they did.
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Joni
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 12:28 am

Quoting NAV20 (Reply 26):

As I read it, Humbert was talking about 'marginal' losses; the sale prices not even recouping the production costs of the individual aeroplanes.

Well, you're reading it incorrectly. The word "marginal" doesn't even occur in the Reuters article, as can be easily established by doing a search. What is written in the article is that they expect the planes to be at a loss due to delay compensation. This means that the first few planes were sold at razor-sharp margins, which can be consumed by the delay penalties. This we already knew, and it's in fact industry practice.

Quoting DeltaDC9 (Reply 35):
Wow, if thats true this is really ugly.

Don't worry, it isn't.
 
astuteman
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 12:29 am

Quoting Okelleynyc (Reply 37):

Not "The Gellman Report" again - please.......  banghead 
 
okelleynyc
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 12:33 am

Quoting Astuteman (Reply 40):
Not "The Gellman Report" again - please.......   

That Bad huh?!!!  rotfl 

I guess as a newbie, I've gotta lot to learn! Mea Culpa
Just give me my Vario, my Ozone Mojo and a gorgeous day of soaring.
 
DAYflyer
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 1:07 am

The A-380 program will likely not break even for some time, since the delays are now resulting with the airlines extracting a lot of blood (money) from Airbus.

I wonder if the delays due to the IFE wiring can be passed along to the vendors involved??
One Nation Under God
 
NAV20
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 1:17 am

Quoting Joni (Reply 39):
What is written in the article is that they expect the planes to be at a loss due to delay compensation.

I'm afraid that you're dead wrong there, Joni. Humbert's comments were made at a meeting on May 12, long before the announcement of any delays. The cost of compensation for the (even longer) delays announced in June will therefore go ON TOP of the losses he was referring to.

[Edited 2006-06-28 18:18:07]
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
astuteman
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 1:33 am

Quoting Okelleynyc (Reply 41):
I guess as a newbie, I've gotta lot to learn! Mea Culpa

In all fairness, it provoked some fascinating debate, but it all seems such a long time ago..........
I suppose it's churlish to prevent newcomers from sharing the same debate.
Apologies Okelleynyc.

Regards
 
airmailer
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 1:48 am

Quoting Astuteman (Reply 32):
The discussion above has been focussed on "per-frame operational profitability".
I don't think anyone's suggesting that the A380 programme will break even in 2008. I don't think sales will have even reached $10.7Bn by then, much less the nearer $15Bn that the programme must be approaching.

 checkmark  I like the way that you broke that down Astuteman.
It makes sense to me, seems like you could use that method to guesstimate the break even point with as much accuracy as a spectator can.

Quoting Astuteman (Reply 32):
The question is:- which deliveries start the "per frame" profits rolling in which start to repay the development costs?

One thing to add here...
If the first 15 frames (just throwing out a number) loose money for Airbus, and frame 16 finally starts to turn a 'per frame' profit; it might not be until 10 frames later (frame 26) that Airbus has offset the initial per frame losses, and can finally start paying down the developent costs+intrest.
 
airmailer
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 1:56 am

Quoting Zvezda (Reply 12):
This number was 300 before the second delay, due primarily to the change in exchange rate. Now, after the third delay, it is probably in the 400 to 500 range. Further exchange rate movement or more delays could change the numbers again.

Zvezda,
Sorry for asking this if this has already been answered in another thread but...
The A380 was developed and is built in Europe.
Don't the French citizens pay their taxes in Euros?
How does the exchange rate with the U.S. factor into all of this?

(Or is it the Euros overall position in the global curency market that is affecting this?)
 
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Stitch
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 3:00 am

Quoting AirMailer (Reply 46):
How does the exchange rate with the U.S. factor into all of this?

Aircraft are sold in US dollars. Also, many materials are probably purchased in US dollars. So Airbus/EADS needs to have US dollars - billions of them. To their credit, Airbus/EADS have done some truly brilliant currency hedging these past few years to minimize the impact the falling dollar/rising Euro has had on their financials, but most of those hedges will have expired by 2007 and new hedges do not appear to be in place (or are not as comprehensive), so the continuing fall of the Dollar and rise of the Euro is starting to have a bigger negative impact on Airbus/EADS' financials.
 
Ken777
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 3:22 am

Since I only run a one man company I'm not very sophisticated in terms of finance, but I believe that each 380 that goes out the door needs to take care of it's share of the R&D costs, launch aid repayment and related interests. The fact that there is a loss only means that the company assigned all proper costs to the plane.

On the positive side - the loss will reduce the company's tax liability, preserving cash which would be nice with the BAE payment due soon.

More importantly, it avoids pushing these costs on to future 380s. To make the future planes assume these costs (in addition to the costs they normally would have) from the first 10 or so would only increase their sales price and reduce the market potential. That can be a nasty trap that I don't think Airbus wants to get into as it could cause more long term harm to the 380 program than the ones the program faces for the next few years.
 
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breiz
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RE: First 5 SIA A380s Could Be Loss-Making For Airbus

Thu Jun 29, 2006 5:31 am

Quoting Ikramerica (Reply 21):
Quoting Breiz (Reply 11):
What is a bit puzzling is that my post named :

It's called a non-descriptive/non-enticing thread topic. Blaming people for not reading it is kind of silly.

Not blaming anybody, Ikramerica.
My point is that some members participating in the threads are not interested by , for example, the A380 itself. They are only interested by its problems leading, they have no doubt, to its failure. That's crunchy!
But to read the facts, my god, how boring.
I find it kind of pitiful if one claims to be interested in aviation.
And I am not a journalist looking for a big splash, I am an aviation enthusiast providing facts (when I can) to fellow enthusiasts.

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