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$1B In A350 Penalty Payments In Q4

Wed Nov 08, 2006 11:44 pm

Buried in the following article:

http://www.iht.com/articles/ap/2006/...iness/EU_FIN_EARNS_France_EADS.php

is the following quote:

Quote:
Penalty payments to airlines that ordered a now-abandoned, less ambitious version of the A350 could reach up to €800 million (US$1 billion) in the last quarter of the year, Ring said.

Ring is the EADS CFO and soon to be the Airbus CFO, so it must be a true statement.

I wonder why so much money all goes out at the same time?

If one accepts the penalty payments, does that have any impact on your ability to cancel?

Are any A350 orders now "in the cancellation zone"?

Herr Ring may reget coining that particular phrase...

[Edited 2006-11-08 15:48:56] Ring is EADS CFO and soon to be EADS CFO... also clarified statement about "ability to cancel"...

[Edited 2006-11-08 15:50:32]
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osiris30
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RE: $1B In A350 Penalty Payments In Q4

Wed Nov 08, 2006 11:48 pm

Erfff...

Money + Airbus = Money.In.The.Toilet...

Are these guys wiping with 100EU bills in the restrooms... good god..
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futurecaptain
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RE: $1B In A350 Penalty Payments In Q4

Wed Nov 08, 2006 11:57 pm

Quoting Osiris30 (Reply 1):
Are these guys wiping with 100EU bills in the restrooms...

Agreed. This seems excessive. How much per frame does that equal? 10 million? 20 million? more? How many frames are they paying compensation for?
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katekebo
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RE: $1B In A350 Penalty Payments In Q4

Wed Nov 08, 2006 11:58 pm

Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.
 
wingman
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:00 am

Jesus, this is turning into a legendary business case study. Outside of direct criminal activity like Enron or Wolrdcom I'm not sure I can recall a more negligent or imcompetent management team in the last 20 years. It is shocking to see the share price not get battered some more today. The threshold for pain amongst the European investment community is extraordinary.
 
bringiton
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:02 am

Adding 1 billion to the project cost just to make up for a previous version sounds very painful . Did the 12 billion $ previously announced Dev. money for the A350XWBcfrp include provisions for this 1 billion?
 
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:03 am

Quoting Katekebo (Reply 3):
Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.

Interesting point. I think many will convert to A350XWB, but I wonder if it is not too big an airplane for some customers, and if it's too late for others.

In any regard, I'm just curious about the timing aspect. If this financial hit is predicted for Q4, does that mean we'll see most of the conversions to A350XWB and/or cancellations of A350v1..A350v5 in Q4?
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mush
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:04 am

Wow! So this is another 800,000,000 Euros thrown away because Airbus was flippant with respect to the 7E7 aka the "Chinese copy of the A330" aka the 787. If I was an EADS shareholder I would be pissed off. To bad Toulouse doesn't have Eliot Spitzer around to make these bastards accountable.
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mush
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:09 am

Quoting Revelation (Reply 6):
Quoting Katekebo (Reply 3):
Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.

Interesting point. I think many will convert to A350XWB, but I wonder if it is not too big an airplane for some customers, and if it's too late for others.

I too agree that some will make the switch to the A350XWB, but if I was an airline that was getting 50,000,000 Euros (round number for arguments sake) for penalty payments, I would make sure I got more than that in discounts for the A350XWB. If Airbus simply offered 50,000,000 off the future price I would say no thanks and take the penalty money now and invest it in some short term investment, thereby making some money off of the penalty money and then buy some A350XWBs later with the same 50,000,000 Euros that have been making me money for the past couple of years.

Thanks,
Mush
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wingman
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:19 am

The other thing I don't understand is the apparent lack of leadership in the new regime, especially with regard to public communications. The media is just slaughtering Airbus right now and the way EADS is communicating is just feeding the negative machine. Now is the time for Gallois to show his workers, his investors and his customers that Airbus will come roaring back, this is truly the time for some Churchill-like stump speeches to rally the troops.

As much as I like Boeing, I like them more than anything else for the way in which they came roaring back themselves. Without Airbus we'd all still be flying 733's and 767's. There wouldn't be any 777's or 787's or even this website. Someone has to stand up right now and drag Airbus out of this ditch. If they do Airbus and EADS will emerge a stronger competitor than they've ever been and we'll all be the better off for it. Allez allez!!!
 
bringiton
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:20 am

There will be some that will stick on and take the discounts because as it appears the XWB will be a very very capable aircraft however what about those airlines who WANTED a A330 type aircraft with 8 abreast ? Would they like the bigger aircraft sinced they truely subscribed to the smaller one ? Another point of contention would be that these airlines can take their compensation and go buy the dreamliner which is available in 2013 and beyond and is far more predictable . What if you were an airline that said at farnborough that "Ok I'll take the new XWB over the original A350 " and then you find out that the New version will be 1-2 years delayed . would you stick in for Round 2 or take the money and go elsewhere.
 
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:48 am

You can bet you bottom dollar (quite an appropriate phrase considering response 2!) that AB costed this out very carefully in that the extra sales for the XWB would more than cover this cost.

I take two things from this - the XWB is happenning that Airbus are trying to "clear the decks" of all the bad news in one go before they update the sales figures for October (that will double their YTD sales!) and launch the XWB.

Or they could just be flailing about with no clue!
 
mush
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:56 am

Quoting Wingman (Reply 9):
Without Airbus we'd all still be flying 733's and 767's. There wouldn't be any 777's or 787's or even this website.

With all due respect, I don't think that is a fair statement. If Airbus SAS wasn't around McDonnell Douglas probably wouldn't have folded like they did. Without the A320, the DC-9 descendants would have generated more sales and the MD-11 would have been able to pick up some of the A330/A340 sales. The success that they would have had would have forced Boeing to make their move with the 737NG series and the 777.

As for the 787...I don't know what would have happened. It could have ended up being the sonic cruiser...or it could have been a 717 type airplane with smaller variants to compete in the RJ market. Nobody knows what would have happened with that, but I'm almost positive that their would have been a composite airplane being developed because of the run up in the price of oil over the last few years.

Quoting Wingman (Reply 9):
Someone has to stand up right now and drag Airbus out of this ditch.

Sad, but true...someone needs to step in and clean house. I'm talking about an engineer, not some idiot who makes promises without knowing the cost or even if it is feasable. I'm an engineer and I know some very capable engineers that are great managers so I don't want to hear the BS that an engineer can't handle running a multiBillion Euro company.
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jacobin777
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:58 am

Quoting Katekebo (Reply 3):
Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.



Quoting Mush (Reply 8):
I too agree that some will make the switch to the A350XWB, but if I was an airline that was getting 50,000,000 Euros (round number for arguments sake) for penalty payments, I would make sure I got more than that in discounts for the A350XWB. If Airbus simply offered 50,000,000 off the future price I would say no thanks and take the penalty money now and invest it in some short term investment, thereby making some money off of the penalty money and then buy some A350XWBs later with the same 50,000,000 Euros that have been making me money for the past couple of years.

The problem is that Airbus needs to keep a certain level of profit margins to stay profitable and competitive.

Airbus previous advantage was that they were much more efficient in manufaturing than Boeing was, but that has now swung to Boeing's favour..in fact, looking at the A380 imbroglio, it seems as if Airbus have become a model of inefficiency...

They need to seriously get their act together... The A350xwb has to be a good plane...it better be!
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UALMMFlyer
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 12:58 am

Quoting Scouseflyer (Reply 11):
You can bet you bottom dollar (quite an appropriate phrase considering response 2!) that AB costed this out very carefully in that the extra sales for the XWB would more than cover this cost.

Could you explain your statement in more detail? Are you saying Airbus will build in the the penalty $ in the selling prices of the A350XWB? I always thought market decides the price. Also, where are the extra sales? The plane is not even launched yet?
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scouseflyer
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:04 am

Quoting UALMMFlyer (Reply 14):
Could you explain your statement in more detail? Are you saying Airbus will build in the the penalty $ in the selling prices of the A350XWB? I always thought market decides the price. Also, where are the extra sales? The plane is not even launched yet?

What I meant was that they wouldn't have gone ahead and cancelled a plane the A350NB that had 100 signed orders (and thus probably half way to its Break-even point) and some more expressions of interest if the didn't have much more interest and almost guarenteed sales of the replacement (obviously there are no guarentees in this world but as close as). The profit for those sales would cover the cost of the possible cancellations - $1B is also the may cost that this change could cost.

My opinion is that if the A380 mess hadn't happened the XWB would have been launched earlier and it would probably have more than those 100 sales already - say 70 conversions (30 cancelled), 20 for SQ and maybe 30 for LH or someone similar.
 
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:08 am

If payments are indeed going to be upwards of $1 billion, that could bode well for the number of A350 customers who have agreed to continue with the A350XWB since that's over $5 million per frame based on orders of the A350.

These payments could be a pre-emptive move to try and lock customers into the A350XWB program should Boeing be able to free up slots in the early 2010's and then offer them to current A350XWB customers.

It could also be an internal acknowledgement that 2013 might be "optimistic" for an EIS and Boeing could still win orders even without new slots as the EIS is pushed back, so they need to try and lock the customers in now rather then risk them later.
 
474218
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:33 am

Quoting Revelation (Thread starter):
Quote:
Penalty payments to airlines that ordered a now-abandoned, less ambitious version of the A350 could reach up to €800 million (US$1 billion) in the last quarter of the year, Ring said.



Quoting Katekebo (Reply 3):
Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.

If Airbus is only giving discounts off the price of the A358XWB and not paying cash. Please explain why it will cost them $1 billion in the last quarter of this year?
 
scouseflyer
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:39 am

Quoting 474218 (Reply 17):

If Airbus is only giving discounts off the price of the A358XWB and not paying cash. Please explain why it will cost them $1 billion in the last quarter of this year?

As far as I understand - this is a known cost so they need to account for it now - plus if they get all of the cr@p out of the way in one go figures later on look better. Someone who understands accounting might want to try and explain better that I did!
 
osiris30
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:41 am

Quoting Wingman (Reply 4):
It is shocking to see the share price not get battered some more today.

That's like because Spain and Russia are buying which is supporting the price.

Quoting 474218 (Reply 17):
If Airbus is only giving discounts off the price of the A358XWB and not paying cash. Please explain why it will cost them $1 billion in the last quarter of this year?

Indeed. These look like cash payments in addition to any future discounts. Otherwise said costs would be recognized down the road against those purchases.

This looks to be a cash out the door type of thing.
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osiris30
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:44 am

Quoting Scouseflyer (Reply 18):
As far as I understand - this is a known cost so they need to account for it now - plus if they get all of the cr@p out of the way in one go figures later on look better. Someone who understands accounting might want to try and explain better that I did!

I don't think that is correct. If they costs are being applied as discounts I don't think they have to be explicitly accounted for anywhere. I amy be wrong though, it's been forever since I've looked into this sort of thing.
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flysherwood
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 1:58 am

Quoting Scouseflyer (Reply 11):
Or they could just be flailing about with no clue!

I would bet this to be the case!!! In another thread I stated that the heads of BAE deserve bonuses for life for getting out when they did and walking away with $2 billion!
 
jacobin777
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 2:24 am

I find it funny only a certain amount of people could take such bad news and "spin" it into good..

Airbus is in a HUGE problem..they are losing billions and don't even have an answer yet for plane which is turning out to be the fastest selling widebody plane in history....

Their debt might be getting downgrading, making it much harder to raise needed capital.

"EADS May Suffer Ratings Cut After Losing FedEx Order (Update1) "

http://www.bloomberg.com/apps/news?p...601087&sid=at.tp3fJL1gA&refer=home

There is tons of political bickering between countries, and other countries such as Russia are meddling their hands now and trying to become an influencing factor...not to mention, the government of countries such as Spain are purchasing more shares to gain more influence....

I don't know how anyone could put a positive spin on this...

Airbus must be privatised, otherwise it will not get out of this situation....
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 2:36 am

Quoting Jacobin777 (Reply 22):
"EADS May Suffer Ratings Cut After Losing FedEx Order (Update1) "

As I stated in another thread, this would be EADS' second ratings cut in a month. Boeing has had one bump in that time. Both of them started at the same rating.
When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' -Theodore Roosevelt
 
osiris30
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 2:59 am

Quoting Jacobin777 (Reply 22):
Their debt might be getting downgrading, making it much harder to raise needed capital.

It also drives up their costs to their end customers, as the development money becomes more 'expensive' and as such the R&D budget becomes more expensive.
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Stitch
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 3:05 am

Quoting Jacobin777 (Reply 22):
I find it funny only a certain amount of people could take such bad news and "spin" it into good...

It's honestly not "spin" on my part, but trying to look at it from more then just one particular angle.  Smile
 
NoWorries
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 3:34 am

Quoting Jacobin777 (Reply 22):
Airbus must be privatised, otherwise it will not get out of this situation....

The original consortium seemed to do quite well (A320, A330). What was the rationale for the EADS/BAE subsidiary -- it seems to have hurt more than it helped?
 
Glom
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 4:00 am

With Airbus being completely boned at the moment, it is only a matter of time before Boeing becomes complacent again like they did in the 90s. They will then see the same floundering they did then and nearly be driven out of the commercial aircraft market.

Why should Boeing have to suffer for Airbus's mistakes?
 
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Stitch
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 4:02 am

Quoting Glom (Reply 27):
With Airbus being completely boned at the moment, it is only a matter of time before Boeing becomes complacent again like they did in the 90s. They will then see the same floundering they did then and nearly be driven out of the commercial aircraft market.

I would prefer to hope that as Boeing appears to have learned from their past difficulties, so will Airbus from these, and going forward both companies will act prudently to the benefit of themselves, the airlines, and the travelling public.
 
airfrnt
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 4:55 am

Quoting Katekebo (Reply 3):

Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.

Bear in mind that accounting doesn't just let you take random charges in the future against the balance sheet with no reckoning. Airbus tends to take cash charges against current problems to let it show on it's books. Airbus will almost certainly do it here as well.

Quoting Katekebo (Reply 3):
Jesus, this is turning into a legendary business case study. Outside of direct criminal activity like Enron or Wolrdcom I'm not sure I can recall a more negligent or imcompetent management team in the last 20 years. It is shocking to see the share price not get battered some more today. The threshold for pain amongst the European investment community is extraordinary.

That's a bit harsh, and I don't believe fair. The A380 woes, as well as some cancellations are already factored into Airbus's stock price. Buying Airbus at it's current price is akin to just buying the narrowbody business.

Airbus has made a number of really significant miscalculations, all of which stem from the decision to launch the A380. In short Airbus got caught drinking the kool-aide. They believed that if they built it, airlines would come (despite the fact that statistics have been trending away from VLA for 20 years), that Boeing would not be able to respond to the A380 (this was mostly correct until Boeing launched the 748) and that Boeing would not be able to do anything interesting enough with the 767 and 757 replacement generation to threaten the A330 significantly.
 
airfrnt
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 4:59 am

Quoting Jacobin777 (Reply 22):


Their debt might be getting downgrading, making it much harder to raise needed capital.

Airbus has actually done a pretty good job managing their credit rating to this point. They can afford a few more downgrades before capatal is unavailable via the standard equity markets.

It does drive up their costs. But they are not in danger anytime soon. Watch out when/if their debt gets in the B band.
 
katekebo
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 5:17 am

The whole issue is that Airbus may be building great airplanes and have a full house of magnificent engineers, but from the business management point of view they screwed-up olympicly, and consequently are in a serious cash crunch. The A380 delay is costing them, give or take, 2b Euros in profits over the next 2 years. On top of that they have to pay BAE - although it does not impact profits, it has a huge impact on cashflow. Now, on top of that they have to face penalty payments to A350 customers due to delays in EIS of the new airplane - it's still to be seen if they are going to account for it as an expense (loss), i.e. cash payment, or a liability (i.e. discounts against future revenues) - I suspect they will choose the later.

The net result of this situation is that Airbus does not have enough free cash over the coming 2-3 years to kick-start the development of the A350XWB rev.5.1. Numbers will probably look better further down the road once the production expenses of the A380 get back to normal and fresh cash starts flowing in from A380 deliveries.

From the financial point of view the best option for Airbus is probably to weather through current issues, and just wait a couple of years. However, by doing this they risk leaving out the entire mid-size widebody market to Boeing. The A350 is already coming late (some will say too late) - so finding creditors willing to risk money on the project isn't easy.
 
ikramerica
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 5:27 am

Part of this points squarely at Leahy and the deals he was making, and the management who wanted so desperately to outsell Boeing that it seems that with the 350 and the 380, the terms of the contracts for airlines were very Airbus negative.

You can't make money by selling your entire product line as loss leaders with golden parachute contracts for the buyer. Outside of the low margin A320, that seems to be the Airbus strategy. Discount A330s as compensation (for no gain, maybe a loss), sweetheart contracts to take orders away from Boeing, etc., all in order to "be the market leader" rather than growing the business by selling better planes. And I think it really begins to shed a light on the situation.

It isn't Enron or Global Crossing, but it sure is another form of fraud to the shareholder, and the creditors (the EU citizens) and this scandal should be bigger than it seems to be so far...
Of all the things to worry about... the Wookie has no pants.
 
thebry
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 5:34 am

Quoting Katekebo (Reply 3):
Most likely these penalty payments won't be made in cash, but will be applied as discounts toward the A350XWB price. Only the customers who decide to cancel the orders for the A350 could get a cash payment. While it's bad news for Airbus finances, using the money to discount the price of the A350XWB is the best way out - airlines will get a more capable airplane for less, and Airbus will be able to defer the cashflow impact several years down the road. I "guesstimate" $10m or so discount per frame.

These customers should cancel, receive cash payment, then apply that cash towards 787s. Odds are they'd still receive their 787s before the second-generation A350XWB (or whatever it'll be called) enters into service.

Quoting Scouseflyer (Reply 11):
Or they could just be flailing about with no clue!

 checkmark 

Quoting Glom (Reply 27):
With Airbus being completely boned at the moment, it is only a matter of time before Boeing becomes complacent again like they did in the 90s.

Once bitten, twice shy. These guys are gonna have to make hay while the sun shines, and have to know their every step is going to be under scrutiny. I think they've (finally) got a great thing going for them. They won't let history repeat itself.

Quoting AirFrnt (Reply 29):
Airbus has made a number of really significant miscalculations, all of which stem from the decision to launch the A380. In short Airbus got caught drinking the kool-aide. They believed that if they built it, airlines would come (despite the fact that statistics have been trending away from VLA for 20 years), that Boeing would not be able to respond to the A380 (this was mostly correct until Boeing launched the 748) and that Boeing would not be able to do anything interesting enough with the 767 and 757 replacement generation to threaten the A330 significantly.

AirFrnt, with all due respect, it seems as though you just defeated your own argument made in reply 29 (about folks being too harsh) -- your responses above are EXACTLY why this is going to be a B-School case-study for the ages. They'll study why certain decisions were made, what the outcome might have been if other decisions were made, etc.
 
RIXrat
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 5:49 am

Katekebo,

Check me if I'm being naive, but earlier you said that the $1 billion in penalty payments would work out to be about $10 million discount per frame. In my simple calculation, that would mean that Airbus would have to make 1,000 frames just to break even. Am I missing something here?
 
jacobin777
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 5:55 am

Quoting Stitch (Reply 25):

It's honestly not "spin" on my part, but trying to look at it from more then just one particular angle.  Smile

I'm not so sure if there even is a positive angle.. Smile

Quoting Osiris30 (Reply 24):
It also drives up their costs to their end customers, as the development money becomes more 'expensive' and as such the R&D budget becomes more expensive.

which makes it uncompetitive against other manufacturers......

Quoting N328KF (Reply 23):
As I stated in another thread, this would be EADS' second ratings cut in a month. Boeing has had one bump in that time. Both of them started at the same rating.

Good grief, I had no idea this is their possible second downgrade...

Quoting NoWorries (Reply 26):
The original consortium seemed to do quite well (A320, A330). What was the rationale for the EADS/BAE subsidiary -- it seems to have hurt more than it helped?

It was to "integrate" the whole company into one basic umbrella to help it compete....

Quoting Glom (Reply 27):
With Airbus being completely boned at the moment, it is only a matter of time before Boeing becomes complacent again like they did in the 90s. They will then see the same floundering they did then and nearly be driven out of the commercial aircraft market.

with the former Boeing management out, I hope Boeing doesn't make the same mistakes...

Quoting Stitch (Reply 28):

I would prefer to hope that as Boeing appears to have learned from their past difficulties, so will Airbus from these, and going forward both companies will act prudently to the benefit of themselves, the airlines, and the travelling public.

 checkmark ...at least lets hope so... Smile

Quoting AirFrnt (Reply 30):

Airbus has actually done a pretty good job managing their credit rating to this point. They can afford a few more downgrades before capatal is unavailable via the standard equity markets.

No they can't afford a few more downgrades..they are already having finance problems, and that's without the next potential bond downgrade...
"Up the Irons!"
 
bringiton
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 5:57 am

Quoting Glom (Reply 27):
it is only a matter of time before Boeing becomes complacent again like they did in the 90s. They will then see the same floundering they did then and nearly be driven out of the commercial aircraft market.

Why do you think that a boeing downturn is such obvious? Boeing seems to be playing the right cards at the moment with the 787 dreamliner which its recent sales ( 450 firmed with over 200 on options) have shown seems to be exactly what the market wanted . They are not becoming GREEDY and promising more then what the can deliver in terms of Delivery ramp ups , trying to get he 747-8 out earlier etc etc , Infact most of the future Aircraft TALK about a NB seems to be comming out of the Boeing camp with Mulluly talking about it at farnborough etc . The Y1 Is most likely going to get the green light once the 787 EIS's and the 748 becomes more mature and boeing wont really find it hard to muster the 10-12 billion $ that they'll need to develop that family . Even if boeing can get the 787 and 747-8 as promised and try to shed weight and price on the 777 they will have a great time over the next 10 years or so despite of what Airbus does or does not do .
 
katekebo
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 6:08 am

Quoting RIXrat (Reply 34):
that would mean that Airbus would have to make 1,000 frames just to break even.

I'm not sure that I understand how did you get to the 1000 frames break-even point, but certainly at $12b development costs Airbus will need to sell 400-500 frames to break-even.
 
Ruscoe
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 6:47 am

Quoting Wingman (Reply 9):
The other thing I don't understand is the apparent lack of leadership in the new regime

Agreed, and I am becoming increasingly concerned that Gallios is a watered down version of Foregeard. Also Airbus has formed a "Presidents Office" comprising Gallios and a new COO named Fabric Bregier, who has a past history of being an "advisor to French Ministers". Seems to me that the political influence is likely to contine

Quoting Jacobin777 (Reply 22):
Airbus must be privatised, otherwise it will not get out of this situation....

Exactly, but all the indications are that it won't. I too am surprised by how tolerant the European investors are. Even if Airbus gets out of this one, another crisis will happen again in the future unless the structure is changed, and the political influence reduces to normal levels.

Where is Leahy in all this?
Was he not appointed Airbus COO for a while?
If so he has been replaced.
Anybody know what Leahy is upto.

Ruscoe
 
Shenzhen
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 6:47 am

Quoting Revelation (Thread starter):
Buried in the following article:

http://www.iht.com/articles/ap/2006/...iness/EU_FIN_EARNS_France_EADS.php

is the following quote:

Quote:
Penalty payments to airlines that ordered a now-abandoned, less ambitious version of the A350 could reach up to €800 million (US$1 billion) in the last quarter of the year, Ring said.

Ring is the EADS CFO and soon to be the Airbus CFO, so it must be a true statement.

I wonder why so much money all goes out at the same time?

If one accepts the penalty payments, does that have any impact on your ability to cancel?

Are any A350 orders now "in the cancellation zone"?

Herr Ring may reget coining that particular phrase...

It would appear that the quote from the above article has changed, as this is what just read...

quote
EADS could take A350-related charges of as much as €800 million (US$1 billion) in the fourth quarter, Ring warned, depending on the decision it takes on the program's future.
unquote

This seems to state a program charge, not penalty payments to customers.

Cheers
 
airfrnt
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 6:51 am

Quoting Shenzhen (Reply 39):
quote
EADS could take A350-related charges of as much as €800 million (US$1 billion) in the fourth quarter, Ring warned, depending on the decision it takes on the program's future.
unquote

This seems to state a program charge, not penalty payments to customers.

That makes a bit more sense. I suspect that is the charge that Airbus will take if they cancel the A350.
 
Ruscoe
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 6:54 am

Quoting Shenzhen (Reply 39):
This seems to state a program charge, not penalty payments to customers.

To me this means that cancellation of the program is under consideration, and the CFO ispointing out the cost of this. Still seems that the penalties would be paid, but one could also say this was a program charge to wind it up.

Ruscoe
 
osiris30
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 7:04 am

Quoting Jacobin777 (Reply 35):

which makes it uncompetitive against other manufacturers......

Well it puts them at a significant disadvantage. They can either match prices and give up margin dollars, or keep the margin and lose sales.. which again impacts profits.. either way it's a long term burden to bear. This is lost on folks who think everything will be 'ok' once the 380 screw up is over.

Quoting Ruscoe (Reply 38):
I too am surprised by how tolerant the European investors are.

They aren't being tolerant.. It's owned by governments.. most of the little guys are likely selling and their shares being bought by Spain/Russia.
I don't care what you think of my opinion. It's my opinion, so have a nice day :)
 
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glideslope
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 7:40 am

Quoting Mush (Reply 7):
Wow! So this is another 800,000,000 Euros thrown away because Airbus was flippant with respect to the 7E7 aka the "Chinese copy of the A330" aka the 787. If I was an EADS shareholder I would be pissed off. To bad Toulouse doesn't have Eliot Spitzer around to make these bastards accountable.

OMG, could you believe Spitzer at Airbus? They would not be able to get off the crapper!!!!  bigthumbsup 
To know your Enemy, you must become your Enemy.” Sun Tzu
 
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glideslope
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 7:41 am

Quoting Osiris30 (Reply 42):
They aren't being tolerant.. It's owned by governments.. most of the little guys are likely selling and their shares being bought by Spain/Russia.

Remember the word "Russia."
To know your Enemy, you must become your Enemy.” Sun Tzu
 
Shenzhen
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 8:13 am

Quoting Osiris30 (Reply 42):
Well it puts them at a significant disadvantage. They can either match prices and give up margin dollars, or keep the margin and lose sales.. which again impacts profits.. either way it's a long term burden to bear. This is lost on folks who think everything will be 'ok' once the 380 screw up is over.

This is probably having an affect on the narrow body sales this year. Airbus might be trying to increase margins on the A320 to cover all the widebody expenses, whilst Boeing are using the widebody margins to increase their narrow body sales.

One thing is certain, Boeing may be talking nice about Airbus in the Press, but one would have to believe that the reality is quite different. Throw in the EU/US exchange rate, EADS inabilities to off set the rate with recent hedges (past 4-5 years?) and ......

Cheers
 
jacobin777
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 8:20 am

Quoting Ikramerica (Reply 32):
Part of this points squarely at Leahy and the deals he was making, and the management who wanted so desperately to outsell Boeing that it seems that with the 350 and the 380, the terms of the contracts for airlines were very Airbus negative.

You can't make money by selling your entire product line as loss leaders with golden parachute contracts for the buyer. Outside of the low margin A320, that seems to be the Airbus strategy. Discount A330s as compensation (for no gain, maybe a loss), sweetheart contracts to take orders away from Boeing, etc., all in order to "be the market leader" rather than growing the business by selling better planes. And I think it really begins to shed a light on the situation.

It isn't Enron or Global Crossing, but it sure is another form of fraud to the shareholder, and the creditors (the EU citizens) and this scandal should be bigger than it seems to be so far...

That's right..and I've been saying for years that if I was an investor in EADS stock, I would be mad as hell... mad 

While EADS's might get back into the back in a few years, it seems as if their profit margins are going to be quite thin....

Quoting Ruscoe (Reply 38):
Quoting Jacobin777 (Reply 22):
Airbus must be privatised, otherwise it will not get out of this situation....

Exactly, but all the indications are that it won't. I too am surprised by how tolerant the European investors are. Even if Airbus gets out of this one, another crisis will happen again in the future unless the structure is changed, and the political influence reduces to normal levels.

Looks like people just don't care.... no 

As in investor, I sure in 'ell would...

If anything, it seems to be getting worse than better...

Quoting Osiris30 (Reply 42):

Well it puts them at a significant disadvantage. They can either match prices and give up margin dollars, or keep the margin and lose sales.. which again impacts profits.. either way it's a long term burden to bear. This is lost on folks who think everything will be 'ok' once the 380 screw up is over.

Hency mey comment in reply 13.... Wink

Quoting Jacobin777 (Reply 13):
The problem is that Airbus needs to keep a certain level of profit margins to stay profitable and competitive.

Airbus previous advantage was that they were much more efficient in manufaturing than Boeing was, but that has now swung to Boeing's favour..in fact, looking at the A380 imbroglio, it seems as if Airbus have become a model of inefficiency...
"Up the Irons!"
 
gbfra
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 8:36 am

Roughly 70 per cent of EADS-shares are owned by private investors.

How come some people think EADS is owned by governments? That's contradicted by facts.

Besides, the Spanish government does not plan to increase its stake in EADS. Some Spanish private companies envisage to enter into EADS but, afaik, no decision has been made yet.

The same goes for Germany where a group of private investors including Deutsche Bank and Commerzbank plan to take over the 7.5 per cent Daimler will sell in 2007.

There are also some false ideas going round about the financing of the A350 (if it will be launched).

First of all EADS/Airbus would not have to finance the total amount of 12 billion dollars due to the outsourcing of a substantial part of development/production. They did that already with the A380.

Also, the A350 does not see a battle France versus Germany on subsidies because four European governments, including France and Germany, have already agreed in principle to offer launch-aid last year.

The idea some European governments might fear a conflict with the US on subsidies is also misleading. The Europeans have never been scared of such a conflict because aerospace only marginally contributes to foreign trade between Europe and the US. No party on this or the other side of the Atlantic would risk a "trade war" because of some airplanes. You can see that from history.

Regards
gbfra
The fundamental things apply as time goes by
 
Shenzhen
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 8:41 am

Quoting Gbfra (Reply 47):
The idea some European governments might fear a conflict with the US on subsidies is also misleading. The Europeans have never been scared of such a conflict because aerospace only marginally contributes to foreign trade between Europe and the US. No party on this or the other side of the Atlantic would risk a "trade war" because of some airplanes. You can see that from history.

Isn't the US the largest market for commercial airplanes (won't even mention military)?

Cheers
 
PVG
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RE: $1B In A350 Penalty Payments In Q4

Thu Nov 09, 2006 8:43 am

Quoting Ikramerica (Reply 32):
It isn't Enron or Global Crossing, but it sure is another form of fraud to the shareholder, and the creditors (the EU citizens) and this scandal should be bigger than it seems to be so far...

Just wait! The restatement of earnings for past years announcement is on the way!

By the way, a billion here, a billion there, pretty soon you're talking about real money! Seems that this has something of a ponzi scheme, all with the goal of being able to boast about their greatness.