Well this may be a perfect storm scenario for Airbus. Significant interest bearing loans from the governments for the A380, a huge hit to cash flow from the A380 delay, a huge hit on costs from the delay, a huge dip in stock price, and now a record high Euro. Also, with the WTO case coming to head next year, government bailout loans may not be an option. This really explains the dilemma that is facing Airbus/EADS in funding the A350 (a plane they have to build). Originally, Airbus was requesting 1-2 Billion Euros from the EU, however the A380 has affected their cash flows to the tune of 8-10B, which happens to be the lower end estimate of the A350 program. If anyone is wondering why the November board meeting at EADS was delayed, wonder no more. Airbus does not have the cash.
This also explains why Airbus has floated the idea of a longer development cycle on the A350. This may not be a bad thing for a number of reasons.
1. Cash flow is greatest at the end of the development cycle. So, a longer development cycle delays most of the cash expenditures until the A380 program is on its way.
2. The extra time would be used to do the research and development on technologies like composites.
3. Being late to market is not all that bad. Keep in mind Boeing beat Airbus to the market by many years with the 767 and 737. So being late to market can be overcome with a damn good plane. Airbus has proven with the A330 and A320 programs that its better to get the right plane to market vs getting a plane to market on time.
This is the only logical solution I see for Airbus. Comments or Thoughts? Does anyone else see other options? How would you handle this perfect storm?