art
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A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 6:53 pm

If the A380 were cancelled (not that that I think it will be), the governments that provided launch aid would lose all the capital they risked on the project. More likely, the A380 problems will result in profits on the program being severely curtailed.

Launch aid for has the A320 series has provided a very good return for the governments involved. The return on the A330/A340 investment is not clear to me. The return on the A380 looks bleak. The launch aid provided may result in a 100% loss.

In view of the A380 experience - possible or likely loss of around $4 billion launch aid - will the governments concerned still be prepared to provide launch aid funds for the A350XWB?
 
justloveplanes
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 7:29 pm

I doubt there will be a 100% loss for the A380. The program has been delayed, but its not dead. I think launch aid as has been practiced to date is in jeopardy, but as part of an EU/US trade agreement.

JPL
 
NAV20
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 7:42 pm

According to the terms I've seen (as summarised in the Gellman Report) launch aid provided under the 1998 rules is repayable with interest - either in the form of royallties on sales or as a lumps sum after 17 years.

So whether the A380 is cancelled or not doesn't matter. So long as EADS/Airbus doesn't go broke in the meantime, the EU taxpayers will eventually get their money back, with interest.

Whether EADS/Airbus will be able to afford to repay it, some time about 2018, is another matter.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
FlySSC
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 8:01 pm

Quoting Art (Thread starter):
If the A380 were cancelled

If ... If ... If .....
If my Aunt had balls, I would call her "Uncle" !
Do you really believe the A380 program, at this stage, could be cancelled ? come on !
And I think it is very premature to call it a "fiasco", just because of the delays announced.
All these "problems" will be forgotten in 2 or 3 years when the A380 will be fully part of the World's Sky with various airlines.
The A380 is not the first new aircraft to face delays for the first deliveries... and according to some recent news, ... it will not be the last.
 
Aither
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 8:01 pm

Fiasco ?

The A380 should be still flying in 2030...

So a one year delay is embarassing & costly but more important factors will determine the success or failure of this program.
Never trust the obvious
 
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zeke
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 8:06 pm

Quoting NAV20 (Reply 2):
Whether EADS/Airbus will be able to afford to repay it, some time about 2018, is another matter.

I dont think anyone is expecting the 350 to outsell the 787. If Airbus maintains its current market share I dont think the program will be unsuccessful.

If one were to assume the current MD11, 757, 767, 772 operators remained with Boeing, and the A300/310/330/340 remain with Airbus, it would still be 35% market share to Airbus.

35% market share of the projected future demands is a large chunk of change, last years orders alone were worth $95 billion, and annual turnover of 28 billion I dont think the company is going broke anytime soon.

I think it will be happy times ahead for both a & B.
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art
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 9:10 pm

Quoting FlySSC (Reply 3):
And I think it is very premature to call it a "fiasco", just because of the delays announced.
All these "problems" will be forgotten in 2 or 3 years when the A380 will be fully part of the World's Sky with various airlines.

Any new aircraft can be subject to delays. It seems that Airbus has failed to keep its customers in the picture with all sorts of unfortunate consequences for them. I call the unprecedented series of delays (due principally to project mismanagement) and the damage done through customer relations mismanagement a fiasco. I would be astonished if it were forgotten in 2 or 3 years.
 
CYatUK
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 11:10 pm

Quoting Art (Reply 6):
I would be astonished if it were forgotten in 2 or 3 years.

With the right financing everything can be forgotten within days. I may be wrong on this but I seem to recall that despite the A380 problems Airbus is still in a better financial position.
CY@Uk
 
Lumberton
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 11:11 pm

Quoting Art (Thread starter):
In view of the A380 experience - possible or likely loss of around $4 billion launch aid - will the governments concerned still be prepared to provide launch aid funds for the A350XWB?

On the contrary, I'm sure it will be used to make the case that more launch air, repayable launch investment, etc., is vital.

Quoting Art (Reply 6):
I would be astonished if it were forgotten in 2 or 3 years.

I'd be willing to bet that this will be discussed on a.net until the sun goes nova!
 Wink
"When all is said and done, more will be said than done".
 
CHIFLYGUY
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 11:17 pm

There is no danger, financially at least, to the A350 launch. This product is critical to the survival of Airbus and the Euro governments will simply not allow it to not happen due to a lack of financing, even if it means losing the US tanker bid, which is a long shot anyway. This is regardless of what happens with the A380.
 
NAV20
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 11:19 pm

Quoting Lumberton (Reply 8):
On the contrary, I'm sure it will be used to make the case that more launch air, repayable launch investment, etc., is vital.

Agree entirely, Lumberton. In cash flow terms alone, Airbus needs a financial transfusion amounting to some billions, or there ain't gonna be no A350XWB.

It also appears likely that that transfusion is going to have to come from government-controlled sources. No private investment source could risk clients' money on EADS' current outlook.

IMO, all that remains to be seen whether the 'rescue' money is called 'launch aid' or something else. And whether it comes from the European governments or the Russian one.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
Joni
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Sun Sep 24, 2006 11:49 pm

Quoting Justloveplanes (Reply 1):
I doubt there will be a 100% loss for the A380. The program has been delayed, but its not dead.

As other writers have already said, I don't think the delays (annoying and disturbing as they are) amount to anything like sufficient reason to call the program a "fiasco".
 
Dougloid
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:00 am

Never say never, boys.

I was there when Singapore cancelled an order for 20 MD11s for a lot less offense than Airbus is giving the potential operators of the A380 nowadays. They do not like being shoved around and I am sure there's a payoff somewhere.

I would not be very surprised if *some* orders were cancelled. Addison suggests that the delays are working to the advantage of people who are making more money with delay compensation than they would if the airplanes were delivered and carrying passengers or freight. I'm not as sanguine.

The proximate result of the continuing series of A380 and A350 flaps and clusterfucks at Festung Airbus will be remembered long after the localized problems are worked through and a lot of industry people out there may rethink future acquisitions-that's the outfall from this mess. It's going to take a lot of work to overcome this, and it's a tossup as to whether they can bring it off.
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futurecaptain
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:01 am

Quoting Lumberton (Reply 8):
I'd be willing to bet that this will be discussed on a.net until the sun goes nova!

Without a doubt there will always be an active topic about the whalejet's delays, even after the sun goes nova and we all type in the dark.

Quoting CYatUK (Reply 7):
With the right financing everything can be forgotten within days.

I doubt the airlines will forget how late the a/c is and it will make them more cautious launching Airbus a/c in the future. A few A330's thrown at them doesn't change the fact the a/c they ordered in over a year late.

With the UK selling its share in EADS and Russia buying up a portion how do you think that will affect launch aid? The UK has a huge budget, IDK about Russia's, but do they have hge amounts of money to throw around into new Airbus a/c?
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Stitch
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:03 am

Quoting NAV20 (Reply 10):
It also appears likely that that transfusion is going to have to come from government-controlled sources. No private investment source could risk clients' money on EADS' current outlook.

Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources to fund the Sonic Cruiser, 7E7, 787, KC-767, and 748 programs.

Not to mention RLA is like what, a third of any Airbus program's initial financing package? They have to get the other 66% somewhere, just like Boeing does. The A380 program is over budget and running late, but not only have airlines not cancelled, at least two have ordered or MoU'd more (SQ and QR).

Last I heard, EADS stock is still pretty stable after this latest delay, so it's looking like the markets aren't panicking this time like they did the last time a delay was announced because the airlines are committed to the program so the short-term forecast might be a bit gloomy do to the delays, but long-term, they expect Airbus to deliver all ~170 frames plus more.

So I don't see Airbus having to fund the A350 at 50% - much less 100% - RLA. EADS can't afford to do it, anyway, because it will trigger US trade retaliation. EADS isn't that important to the EU. After all, when the WTO ruled against the export tax credit Boeing (and others) were using to save hundreds of millions a year, the US folded rather then risk $4 billion a year in EU trade retaliation. I imagine the US has a similar "arsenal" of sanctions to employ against the EU if they increase funding on the A350 program beyond what is allowed under the 1992 agreement.

They should be perfectly able to get the money on the open market, they'll just have to pay a higher price to do so.
 
NAV20
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:19 am

Quoting Stitch (Reply 14):
Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources

Agreed, Stitch. But the 'internal sources' included firing most of the top management AND giving pink slips to around 30,000 people. Those options are not open to EADS.

I wouldn't mind betting that Gallois and Streiff, the day they were appointed, got their brief direct from the Elysee Palace. And that, in broad terms, it said:-

"You have a free hand to do whatever it takes to get the company out of trouble. Only exceptions to that rule are, DON'T cancel the A380, DON'T fire anyone except top management, and DON'T switch too much production around between France, Germany, and Spain."
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
art
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:28 am

Quoting Futurecaptain (Reply 13):
Without a doubt there will always be an active topic about the whalejet's delays, even after the sun goes nova and we all type in the dark.

Your typewriter will melt before the sun goes dark, making it difficult to type. You will melt, too. Typing on a melted typewriter with melted fingers is going to be even more difficult when it then gets dark!
 
Lumberton
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:32 am

Quoting Dougloid (Reply 12):
when Singapore cancelled an order for 20 MD11s for a lot less offense than Airbus is giving the potential operators of the A380 nowadays. They do not like being shoved around and I am sure there's a payoff somewhere.

IMO, SQ had other viable options at that time. There probably aren't any at this time for SQ in lieu the A380, or at least none the current management would admit to. Their star is hitched to the A380.
"When all is said and done, more will be said than done".
 
Lumberton
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:36 am

Quoting Stitch (Reply 14):
EADS isn't that important to the EU

Respectfully disagree. Its an undeniable success commercially. Symbolically, it may be even more important....
"When all is said and done, more will be said than done".
 
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Stitch
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:37 am

Quoting NAV20 (Reply 15):
Agreed, Stitch. But the 'internal sources' included firing most of the top management AND giving pink slips to around 30,000 people. Those options are not open to EADS.

As one of the 30,000 let go, and the consequent effect it had on the local SEA economy for a few years, I can understand the EU's desire not to see a wholesale shedding of jobs. But even in Japan, "lifetime employment" came to an end.

Still, I do agree with you that you will not see workforce shedding on anything like the scope Boeing did. For one thing, Airbus is not going to outsource a lot of their production work because they don't have the contentious labor issues Boeing does with their personnel. When the machinists struck last time, they just ensured most of the 787 would be built outside of PAE. That is why even as Boeing is back to record sales and deliveries, they're not back to record employment.  Sad

But still, if Airbus needs to "shrink to grow", I am sure they can come up with incentive plans to get folks to leave, as Ford is now doing and many other companies have done in the past (including Boeing).
 
CHIFLYGUY
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:43 am

Quoting Stitch (Reply 14):

Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources to fund the Sonic Cruiser, 7E7, 787, KC-767, and 748 programs.

Stitch, there is one very important difference between the Boeing and Airbus situations. Boeing was suffering because of underinvestment, Airbus is suffering from overinvestment. Arguably the former is much easier to recover from than the latter. Boeing also benefitted significantly from defense spending increases post-9/11.

The A380 is going to be an "overhang" on Airbus' performance for quite some time, just like dotcom overinvestment continues to drag on many industries.
 
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Stitch
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:50 am

Quoting CHIFLYGUY (Reply 20):
Stitch, there is one very important difference between the Boeing and Airbus situations. Boeing was suffering because of underinvestment, Airbus is suffering from overinvestment...The A380 is going to be an "overhang" on Airbus' performance for quite some time, just like dotcom overinvestment continues to drag on many industries.

Aye, probably true. But I still don't see it as a concrete weight that will drown Airbus as many on this board feel. I still feel Airbus can move forward under the current agreements. They may not enjoy as strong margins and RoI as they have in the past, but hey, they had a great five year-plus run. Time to let Boeing enjoy the sun a bit.  Smile
 
art
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 1:13 am

Quoting Stitch (Reply 19):
But still, if Airbus needs to "shrink to grow",

Why should it need to shrink? The A320E should steal the lead from the 737NG, the A350XWB seems to be a design driven by customer corrective input solving some of the non-competitive A350 and A340 problems, the A380 should (eventually) sell well.

The A380 foul up is not going to stop airlines ordering Airbus products but I think it is going to reduce future Airbus sales from where they could have been. I think it will also make finance for new Airbus projects more expensive or more difficult to obtain, reducing Airbus profits.

Quoting Joni (Reply 11):
As other writers have already said, I don't think the delays (annoying and disturbing as they are) amount to anything like sufficient reason to call the program a "fiasco".

Perhaps "fiasco" is too strong a term to describe a situation in which the one hand (Hamburg) does not appear to know what the other hand (Toulouse) is doing and vice versa. I suppose you could call it a "misunderstanding" but a misunderstanding that will cause major disruption to airlines' planning, directly cost Airbus several billion dollars and indirectly cost them a lot more in the future due to the damage done to their credibility.
 
CYatUK
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 2:41 am

Quoting Futurecaptain (Reply 13):
I doubt the airlines will forget how late the a/c is and it will make them more cautious launching Airbus a/c in the future. A few A330's thrown at them doesn't change the fact the a/c they ordered in over a year late.

With the UK selling its share in EADS and Russia buying up a portion how do you think that will affect launch aid? The UK has a huge budget, IDK about Russia's, but do they have hge amounts of money to throw around into new Airbus a/c?

I don't think that the aid UK is providing is all because of BAE. Don't forget that all Airbus' wings are manufactured here and that any problems between the UK and EADS may have an impact on that.

Also, I am definitely sure that when airlines sign up to be launch customers there are numerous terms and conditions under which this agreement is signed - and the possibility of delays (and compensations) are part of it.

People are moaning about the A380 as if they are loosing money themselves! Nobody seems to recongise the fact that this plane is unique and carries very complex rechnology. A delay of 1-1.5 years on the programme is nothing compared to the 20-25 years that is expected to be in service as well as the advantages that it will bring.
CY@Uk
 
airfrnt
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 8:09 am

Quoting Art (Thread starter):
In view of the A380 experience - possible or likely loss of around $4 billion launch aid - will the governments concerned still be prepared to provide launch aid funds for the A350XWB?

Sure. Because Launch aide has never been about commercial practicality, it's been about national prestige and jobs.

Europe propped airbus up for 20 years before they finally had a plane that would sell. They will continue to do so now.

As far as investment goes, there will be no shortage of idiots in the world who would invest in Google at $400 a share. Airbus, even with the A380 production snafus are infinitely better investment then that.
 
A300605R
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 8:12 am

Quoting Justloveplanes (Reply 1):
The program has been delayed, but its not dead.

 checkmark 

Quoting FlySSC (Reply 3):
All these "problems" will be forgotten in 2 or 3 years when the A380 will be fully part of the World's Sky with various airlines.

 checkmark 

Quoting FlySSC (Reply 3):
The A380 is not the first new aircraft to face delays for the first deliveries... and according to some recent news, ... it will not be the last.

 checkmark 

Quoting Aither (Reply 4):
The A380 should be still flying in 2030...

 checkmark 

Quoting Zeke (Reply 5):
I dont think the company is going broke anytime soon.

 checkmark 

Quoting Stitch (Reply 14):
They should be perfectly able to get the money on the open market, they'll just have to pay a higher price to do so.

 checkmark 

Quoting Lumberton (Reply 17):
IMO, SQ had other viable options at that time. There probably aren't any at this time for SQ in lieu the A380, or at least none the current management would admit to.

 checkmark 

Quoting Art (Reply 22):
the A350XWB seems to be a design driven by customer corrective input solving some of the non-competitive A350 and A340 problems

 checkmark 
I think that will be a very important factor in the future of Airbus.
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NYC777
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 8:19 am

Quoting FlySSC (Reply 3):
and according to some recent news, ... it will not be the last.

Yeah I agree, I wouldn't be surprised if the A350XWB faces the same problems that the A380 is facing.
That which does not kill me makes me stronger.
 
A300605R
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 8:29 am

Quoting NYC777 (Reply 26):
Yeah I agree, I wouldn't be surprised if the A350XWB faces the same problems that the A380 is facing.

Hopefully not.  Wink
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glacote
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 9:47 am

Quoting NAV20 (Reply 10):
In cash flow terms alone, Airbus needs a financial transfusion amounting to some billions, or there ain't gonna be no A350XWB.

Is this statement based on the analysis of EADS fillings or on your guesses? The $15 billions A380 program was financed on 1/4th state loans and free cash flows over 6 years. The A350 is expected at $10 billions iirc with probably 1/3rd state loans.

Quoting Art (Reply 22):
[the fiasco will] directly cost Airbus several billion dollars and indirectly cost them a lot more in the future due to the damage done to their credibility.

How to you come up with this figure? I would be shocked if all three delays eventually cost more than $500 millions (discounted to today) over all operators. Delayed cash flows are not lost money - the actual lost part is the discounted part of it. At 5% capital return (in an opportunity cost reasoning, use whatever return Airbus may have had in investing into another project) the famous $2 billions delayed cash-flows over "a few years" probably do not exceed $0.3 billions...

Quoting Lumberton (Reply 18):
Quoting Stitch (Reply 14):
EADS isn't that important to the EU

Respectfully disagree. Its an undeniable success commercially. Symbolically, it may be even more important....

Airbus is a crucial symbol of European achievements. Just look at the 5 head of states who travelled into China to sell 5 A380 for around $2 billions. For comparison Microsoft sole profit of its monopoly in Europe largely exceeds this figure. Every year. Yet nobody seems to care. Because computers are boring while planes are dream machines.

Quoting CHIFLYGUY (Reply 20):
The A380 is going to be an "overhang" on Airbus' performance for quite some time, just like dotcom overinvestment continues to drag on many industries.

That's quite a stretch. A380 deliveries are still expected to yield positive net cash flows outside of SQ ones.

The real question is how much the lost credibility (managerial, industrial and communication-wise) will cost Airbus in futures sales. This industry being a duopoly I am guessing this will not affect Airbus too much (unfairly so, but so it is...)
 
dw747400
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 11:10 am

Quoting Glacote (Reply 28):
Delayed cash flows are not lost money

Delayed flows are not as significant as the dramatic costs of a long, drawn out testing and redevelopment program, numerous customer penalties, and efficiencies lost due to the very slow rate of production the first several years.

Quoting Glacote (Reply 28):
That's quite a stretch. A380 deliveries are still expected to yield positive net cash flows outside of SQ ones.

I've seen this argued both ways. If anyone has a firm source, please post it.
CFI--Certfied Freakin Idiot
 
Shenzhen
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 12:17 pm

Quoting Glacote (Reply 28):
How to you come up with this figure? I would be shocked if all three delays eventually cost more than $500 millions (discounted to today) over all operators. Delayed cash flows are not lost money

Well, if you took that 20 billion (15 plus inventory and such) and bought Government bonds, they have already lost 2 billion over two years, without having to pay one guy to come in on a Saturday.

Cheers
 
NAV20
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 1:14 pm

Quoting Glacote (Reply 28):
The A350 is expected at $10 billions iirc with probably 1/3rd state loans.

And $3.33B. in 'state loans' doesn't amount to "a financial transfusion amounting to some billions"?

The short answer about EADS' current financial situation is that NOBODY knows what it is. Because nobody knows what the A380 programme is ultimately going to cost, or when the aeroplane will finally be delivered.

Not even EADS themselves, as they just said in a press release:-

"Consequently, from what is known today, there will be further delays.

"The current status is that we have not finalized the schedule of deliveries nor the financial impact of any delays.

"All appropriate resources are focused on bringing the ongoing assessment to maturity. EADS and Airbus will provide more detailed information within 4 weeks as Airbus is currently working on developing action plans and a solid delivery schedule to its customers. In the meantime flight testing milestones of the A380 are progressing as planned."


http://www.eads.com/web/lang/en/1024...F00000000400004/6/03/31000036.html
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
MCIGuy
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 2:36 pm

Quoting Art (Reply 22):
Why should it need to shrink? The A320E should steal the lead from the 737NG

I don't see this happening. Airbus will be very busy for the next few years with A380 and then A350. Not to mention, their cash will be tied up. By the time A350 goes to market, 787 development will be down to derivatives. So, Boeing will have a bunch of engineers with free time and a boat load of cash to spend on Y1. I think Y1 (787 Lite?) will get to market first.
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futurecaptain
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 5:03 pm

Quoting CYatUK (Reply 23):
A delay of 1-1.5 years on the programme is nothing

It only makes it the most delayed commercial airliner in HISTORY. But yes, that is nothing. right?

Lets face it, the A380 was a presteige plane, Airbus wanted to prove to the world they could build a very large a.c and they did, it sold about how we expected and no better. Yes, you Europeans built a bigger commercial liner than us Americans have, now lets see you produce it for 40 years and make billions in profits off it over time, like the 747.
Investors want $$$, if Airbus tries this again I doubt they will have very much outside support. Lets move on Airbus, back to reality, in markets where a/c sales remain steady.
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sebolino
Posts: 3506
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 5:08 pm

Quoting NAV20 (Reply 2):
According to the terms I've seen (as summarised in the Gellman Report) launch aid provided under the 1998 rules is repayable with interest - either in the form of royallties on sales or as a lumps sum after 17 years.

So whether the A380 is cancelled or not doesn't matter. So long as EADS/Airbus doesn't go broke in the meantime, the EU taxpayers will eventually get their money back, with interest.

Wait NAV20. I may have a bad recall, but I think you were one of the first and most active in the anti-A squad when it was to say that the launch aid will never be paid back, and that it was disguised subisidies.
You didn't tell us before about your new point of view.
 
Joni
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 5:57 pm

Quoting CHIFLYGUY (Reply 20):
The A380 is going to be an "overhang" on Airbus' performance for quite some time, just like dotcom overinvestment continues to drag on many industries.

The A380 will in all likelihood bring Airbus profits, not "overhang". Profits both directly because the program will be profitable, and from being able to package other planes to sell alongside the A380s. Consternation about the delays IMO reflects the modern-day phenomenon that everything is perceived to turn on the information currently in front of people's eyes, whatever the underlying reality is. This regrettable trend is particularly evident on A.net, and even more so if said information is in any way negative of Airbus.

Quoting Art (Reply 22):
directly cost Airbus several billion dollars and indirectly cost them a lot more in the future due to the damage done to their credibility.

EADS' statement said that 2B revenue was transferred to lated years - e.g. this isn't "lost" money but it will be received as the delivery schedule catches up later on.

Quoting Dw747400 (Reply 29):
I've seen this argued both ways. If anyone has a firm source, please post it.

The minutes from EADS' board meeting is pretty firm IMO, and they said that there's a risk that the first 1-2 planes to SQ would not be cashflow-positive if the delay penalties eat up the narrow margin these planes were sold at. The risk didn't involve all SQ's planes, just the first 1-2.
 
art
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 7:47 pm

Quoting MCIGuy (Reply 32):
Quoting Art (Reply 22):
Why should it need to shrink? The A320E should steal the lead from the 737NG

I don't see this happening. Airbus will be very busy for the next few years with A380 and then A350. Not to mention, their cash will be tied up. By the time A350 goes to market, 787 development will be down to derivatives. So, Boeing will have a bunch of engineers with free time and a boat load of cash to spend on Y1. I think Y1 (787 Lite?) will get to market first.

The A320E is a modest step forward. IIRC the aim is for >3% improvement in fuel burn. Correct me if I am wrong, but I don't think it requires big funds to develop and I think it is promised for 2009. That's a long time before Y1, isn't it?
 
trex8
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 8:55 pm

Quoting Sebolino (Reply 34):
Wait NAV20. I may have a bad recall, but I think you were one of the first and most active in the anti-A squad when it was to say that the launch aid will never be paid back, and that it was disguised subisidies.
You didn't tell us before about your new point of view.

those who are "converted" often become the greatest proponents of any view!  Smile
 
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sebolino
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 9:10 pm

Quoting Joni (Reply 35):
Profits both directly because the program will be profitable, and from being able to package other planes to sell alongside the A380s.

Agreed.

Except that there is a possibility that the program will never be profitable. A small one I believe. Anyway, even if not profitable, the loss won't be as huge as anti-A activists  Smile want us to believe.

And you have a very good point with the package concept. Some companies will probably be very interested to have the A380 with smaller planes, at a negociated price.
 
zvezda
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 9:36 pm

Quoting NAV20 (Reply 10):
In cash flow terms alone, Airbus needs a financial transfusion amounting to some billions, or there ain't gonna be no A350XWB.

It also appears likely that that transfusion is going to have to come from government-controlled sources. No private investment source could risk clients' money on EADS' current outlook.

The private capital markets make much riskier investments. Have you heard of junk bonds? Higher risk simply means higher interest rates. There is no reason in the world why Airbus couldn't or shouldn't privately raise the money needed to the launch the A350. There is no possible justification for governments to steal money from us to pay for it. Welfare for corporations is unforgivable.
 
NAV20
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Mon Sep 25, 2006 10:17 pm

Quoting Sebolino (Reply 34):
Wait NAV20. I may have a bad recall, but I think you were one of the first and most active in the anti-A squad when it was to say that the launch aid will never be paid back, and that it was disguised subisidies.

I think your memory IS at fault, Sebolino. I don't know the terms on which launch aid was advanced in the early years, but I've always made it clear, in many discussions, that in my view, since 1998, launch aid is 'repayable.'

However, I still think that launch aid is a 'bad thing' - for several reasons.

Firstly, any major project is 'made or broken' at the early planning stages. The initial cash flow analysis estimates HAVE to add up and show a profit - and all possible technical problems have to be foreseen, and 'solved' in advance. You have to have a clear plan and confidence that it will work, otherwise you don't start. In any case, in the private sector, if you can't show that the project has a better-than-even chance of washing its face, the client won't fund it in the first place.

'Launch aid' works the other way. It makes it easy to start a project - "Hey! Free money, we don't even have to pay the interest for SEVENTEEN whole years!' - and damned difficult to call it off, because the politicians who advanced the 'aid' will already have announced it. That's the sort of problem that the 'Critical Project Appraisal' required by the 1998 Agreement was supposed to avoid, but Airbus never produced one for the A380.

Secondly, the taxpayer can't win, even under the 1998 Agreement. The most he can hope for is his money back. No private organisation would ever advance 'aid' on such a basis; not because they are greedy, but simply because of an odd 'reversal' which is increasingly evident in modern times. Private-sector funding sources are more and more conscious that they are risking 'other peoples' money' - the public sector seems less and less likely to 'give a damn.'

Thirdly, every good agreement takes ALL possibilities into account. The obvious possibility that 'launch aid' doesn't take into account is the possibility that EADS, like any OTHER limited company (including Boeing, if you like) might go broke before the launch aid become repayable. In which case the aforesaid EU taxpayer will be lining up with all the other creditors, and may have to accept one cent in the Euro instead of getting the due amount back.

So I don't so much think that 'launch aid' is bad for Boeing, or Bombardier, or any other aircraft manufacturer. They've proved that they can stay competitive whatever.

I think 'launch aid' is bad for AIRBUS. Because it has engendered a careless, thoughtless, unprofessional, overly-political company culture.

I don't know if you've ever brought kids up? If you have, you'll know that one of the things you have to give a lot of thought to over the years is helping them while not 'spoiling' them.

That's my view in a nutshell. 'Launch aid' from the EU parent has 'spoiled' Airbus.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
CYatUK
Posts: 388
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 3:27 am

Quoting Futurecaptain (Reply 33):
It only makes it the most delayed commercial airliner in HISTORY. But yes, that is nothing. right?

Not really. It is going to be in passenger service for 25 or so years and in cargo service for even more. The delay is really nothing compared to the benefits. Also, lets not forget that the programme to both Airbus and Boeing is not set by anybody external but the companies themselves. It is therefore their right to change this programme, if required.

And yes, a delay has an impact on the airlines that ordered the aircraft but this is covered in the contract between the manufacturer and each individual airline. People tend to refer to the delays as if the money is coming out of their own pockets.
CY@Uk
 
art
Posts: 2696
Joined: Tue Feb 08, 2005 11:46 am

RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 4:47 am

Quoting CYatUK (Reply 41):
Quoting Futurecaptain (Reply 33):
It only makes it the most delayed commercial airliner in HISTORY. But yes, that is nothing. right?

Not really. It is going to be in passenger service for 25 or so years and in cargo service for even more. The delay is really nothing compared to the benefits. Also, lets not forget that the programme to both Airbus and Boeing is not set by anybody external but the companies themselves. It is therefore their right to change this programme, if required.

If either Boeing or Airbus thought the way you do, they would go out of business.
 
DAYflyer
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 4:50 am

According to the Gellman report, they have 17 years to pay it off. Even if it were to be cancelled, which I HIGHLY doubt, they would have sufficient capital from other aircraft sales to take care of it.
One Nation Under God
 
CYatUK
Posts: 388
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 6:06 am

Quoting Art (Reply 42):
If either Boeing or Airbus thought the way you do, they would go out of business.


I think you may have misunderstood my point.

All I am saying is that you better get something right even with a delay rather than on time and wrong. Timing should never compromise the quality of a product. Of course the ideal situation would be "right first time" but if this does not happen due to the complexity of a project, that does not mean that the project should not be done in the first place.

[Edited 2006-09-25 23:11:38]
CY@Uk
 
art
Posts: 2696
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RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 7:29 am

Quoting CYatUK (Reply 44):
Quoting Art (Reply 42):
If either Boeing or Airbus thought the way you do, they would go out of business.


I think you may have misunderstood my point.

All I am saying is that you better get something right even with a delay rather than on time and wrong. Timing should never compromise the quality of a product.

OK, sorry if I misunderstood your point.
 
BoomBoom
Posts: 2459
Joined: Fri Nov 04, 2005 2:26 am

RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 8:27 am

Quoting Stitch (Reply 14):
Boeing was hurting in the late 1990s and early 2000s thanks to the production snafu and implosion of the airliner sales market post 9/11/SARS/TechBoom, yet they were able to scrounge up billions from internal and market sources to fund the Sonic Cruiser, 7E7, 787, KC-767, and 748 programs.

Our favorite analyst, Richard A., addressed this in his WSJ op-ed piece The Airbus Debacle:

Quote:
A few years ago, Boeing looked like it was in Airbus-like dire straits, yet the situation was in fact very different. Before launching the 787 in 2004, Boeing spent eight years shortchanging its product line but returning billions to shareholders. Airbus spent a fortune on its product line, but misinvested horribly, jeopardizing return on investment. Thus, it was easy for Boeing to start raising cash for the 787.

Even if the 787 stumbles, Boeing would recover, since that plane satisfies strong demand and brings in cash. Airbus, by contrast, is merely racing to build a handful of A380s so it can transfer resources to a more important aircraft.

http://online.wsj.com/article/SB1150...7384778.html?mod=todays_us_opinion

The 7E7 and 787 programs are the same thing.

[Edited 2006-09-26 01:31:29]
Our eyes are open, our eyes are open--wide, wide, wide...
 
art
Posts: 2696
Joined: Tue Feb 08, 2005 11:46 am

RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 9:43 am

Quoting BoomBoom (Reply 46):
Even if the 787 stumbles, Boeing would recover, since that plane satisfies strong demand and brings in cash. Airbus, by contrast, is merely racing to build a handful of A380s so it can transfer resources to a more important aircraft.

I think I get the picture: building aircraft to satisfy demand and bring in cash is a good idea if you are Boeing but a bad one if you are Airbus. Airbus' real interest in completing development of the A380 is to to get the handful of orders it has out of the door thereby freeing up resources for the A350XWB.

Quoting BoomBoom (Reply 46):
Our favorite analyst, Richard A.,

Your favourite analyst, not mine. He talks partisan rubbish too much of the time for my liking.
 
BoomBoom
Posts: 2459
Joined: Fri Nov 04, 2005 2:26 am

RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 11:40 am

Quoting Art (Reply 47):

I think I get the picture: building aircraft to satisfy demand and bring in cash is a good idea if you are Boeing but a bad one if you are Airbus.

No, you missed the picture:

Quote:
The A380 program was launched in 2000 in the face of considerable skepticism. Aircraft were getting smaller, not larger. New technologies allowed long-range travel with great economies. Passengers wanted direct flights offering more choices, more often. Airlines wanted smaller planes to get rid of discount travelers. The A380 was a $13 billion bet on a shrinking niche.

From a business standpoint, this "whole new way to fly" was nonsense. Yet bureaucrats saw national pride at stake, hence a slam-dunk reason to invest public cash. They've basked in reflected glory, with European prime ministers and officials attending every major A380 milestone.

A board of diverse, apolitical and independent shareholders would never have tolerated the risk associated with such a shallow business case.

http://online.wsj.com/article/SB1150...7384778.html?mod=todays_us_opinion
Our eyes are open, our eyes are open--wide, wide, wide...
 
glacote
Posts: 357
Joined: Thu Jun 02, 2005 1:44 am

RE: A350XWB Launch Aid At Risk Due To A380 Fiasco?

Tue Sep 26, 2006 12:08 pm

Quoting NAV20 (Reply 31):
And $3.33B. in 'state loans' doesn't amount to "a financial transfusion amounting to some billions"?

You must be kidding right? These arerepayable loans and have been factored in every Airbus program. And again you shall only count on the the eventual interest discount w.r.t. market rates. Obviously not the 3.3 billions themselves. But not even the interests on them. Only what you estimate is the difference in rate from state-aid compared to market rates.

Quoting NAV20 (Reply 31):
The short answer about EADS' current financial situation is that NOBODY knows what it is. Because nobody knows what the A380 programme is ultimately going to cost, or when the aeroplane will finally be delivered.

Are you suggesting that the impact of these delays amount to several billions? I mean - the overall delay to date will not impact Airbus more tha a couple millions per frames. For a total production cost of less than 140 millions and a 35% discount price of 200 millions. Please...

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