columba
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Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 6:58 pm

Quote:
Fedex CEO says it may buy Airbus A380s in future as its market grows


Fedex CEO Frederick Smith said the company will consider buying Airbus
A380 freight version planes in the future as the market for its delivery services continues to grow, but he was not more specific.

In an interview with Les Echos, he said FedEx's recent cancellation of its order for ten Airbus A380s will help the EADS unit speed deliveries of the plane to other customers facing delays.



http://www.finanznachrichten.de/nach...ichten-2006-12/artikel-7435763.asp
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kc135topboom
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:04 pm

Now that just doesn't make any sense. Give up your business plan to help another company out? Then why order the B-777-200F?
 
dougbr2006
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:11 pm

Now that just doesn't make any sense. Give up your business plan to help another company out? Then why order the B-777-200F?

It does make sense for Fedex, the B777's will be delivered much sooner than the A380F could be.

Perhaps what we have here is a little bit of corporate dealing.

You scratch my back etc.

It is probably better for Airbus to lose this customer and gain production slots than have to pay compensation to Fedex as well as all the others. Perhaps Airbus will not lose so much especially if Fedex come back to buy at a later date.
 
jlbmedia
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:11 pm

It is good politics. Give something positive to Airbus and its customers, while adapting a new direction for their Company. It was all done with class if you ask me. John.
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bringiton
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:11 pm

They could have just deferred and asked for a bigger compensation . I think it may be a case of not ruling out anything at the moment as demand increases.
 
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:15 pm

Do you know the full package? Do we really know what FX and Airbus decided? No... FX clearly said they cancelled their order because of timing reasons, that they no longer had time to wait for the bird. They clearly stated that this decision was not based on technical or economical reasons, but on the timing. They clearly indicated that at one point they would re-consider their order.

So why cancel the order in first place?

1. Think about removing a postponed financial obligation from your balance sheet - your stock market will love it.

2. Think about the PR when you re-order the A380 - good for you, good for Airbus - everybody is happy. And you might get a couple of $$$ in addition for being a valuable customer, once again showing trust into the product.

3. You take out 10 firm orders for a yet-to-be developed product, which occupies extremly valuable space with the OEM. Airbus isn´t too unhappy about it as it helps to reduce the overall delay of the A380 deliveries. Count on a couple of extra $$$ taken off your next firm order.
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autothrust
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:26 pm

Quoting Dougbr2006 (Reply 2):
Now that just doesn't make any sense. Give up your business plan to help another company out? Then why order the B-777-200F?

It does make perfectly sense. Because Airbus issues with the A380 FX, was forced to buy the 772F (and only) as interim solution. That doesnt mean they aren't interested at the A380F wich will give them a lot more capacity then any other plane.

Quoting Flying-Tiger (Reply 5):
No... FX clearly said they cancelled their order because of timing reasons, that they no longer had time to wait for the bird.

 checkmark You're 100% right
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zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 7:46 pm

One problem with a duopoly is that if a customer states any aversion to one's supplier or its products, then the other supplier will not offer competitive prices. FedEx (like any airline) must say that they might buy Airbus or Boeing in order to get good prices.
 
WINGS
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 8:15 pm

Quoting Zvezda (Reply 7):
One problem with a duopoly is that if a customer states any aversion to one's supplier or its products, then the other supplier will not offer competitive prices. FedEx (like any airline) must say that they might buy Airbus or Boeing in order to get good prices.

Or they may actually see a need for the A380F in it's fleet in the future.

Regards,
Wings
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AirKorea
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 8:17 pm

Hey, Fedex CEO,

Don't do that. Stick to T7 and B747-8F.
 
WINGS
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 8:21 pm

Quoting AirKorea (Reply 9):
Don't do that. Stick to T7 and B747-8F.

Rather hard to stick with the B748F when they haven't committed to it yet.

Regards,
Wings
Aviation Is A Passion.
 
astuteman
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 8:37 pm

Quoting Dougbr2006 (Reply 2):
Now that just doesn't make any sense. Give up your business plan to help another company out? Then why order the B-777-200F?

One wonders if FEDEX were somewhat constrained by their ability to finance, and HAD to cancel the A380 in order to proceed with acquiring the lift they needed in the next few years.
Perhaps creditors were not keen to agree additional financing whilst there was a contractual commitment to the A380 still......
But FEDEX needed the lift........

Just a thought..

Regards
 
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HAWK21M
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 9:44 pm

Would the A380 be a better Freighter than the B748  Smile
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adriaticus
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 10:15 pm

Quoting Dougbr2006 (Reply 2):
It does make sense for Fedex, the B777's will be delivered much sooner than the A380F could be.



Quoting AutoThrust (Reply 6):
It does make perfectly sense. Because Airbus issues with the A380 FX, was forced to buy the 772F (and only) as interim solution. That doesnt mean they aren't interested at the A380F wich will give them a lot more capacity then any other plane.

Correct. It is all a matter of timing. Package volumes keep growing and simply put, there are not enough airplanes to fly them on, especially on the Asia routes...

Quoting WINGS (Reply 10):
Rather hard to stick with the B748F when they haven't committed to it yet.

And FX will hardly commit ot it... Its rounded, irregular shapes, especially the progressive reduction of the fuselage diameter to the aft, and the second floor, are impossible to fill with standard containers in an efficient manner, thus creating many empty, inefficient spaces that only turn into tare weights. Passengers, those you can cram everywhere a seat fits in, but it is not the same for containers... Remember FX does not carry bulk loads...

Quoting Astuteman (Reply 11):
One wonders if FEDEX were somewhat constrained by their ability to finance, and HAD to cancel the A380 in order to proceed with acquiring the lift they needed in the next few years.

Not!... You may want to check the finances of FX on the public yearly reports and you'll see the numbers and profits perfectly allow for FX's purchasing plans. FedEx's stock currently lingers at around US$115-117.

Quoting HAWK21M (Reply 12):
Would the A380 be a better Freighter than the B748

Undoubtedly. FX's engineers looked deeply into everything before deciding for this a/c. Loading and unloading of large standard containers can be done simultaneously in the two main decks as well as to/from the bellies; turnaround times are comparable to those of an MD10 or 11; fuel efficiency on effective cargo Lb/Mi is better than on any other aircraft, even the advanced B748F.

Quoting Zvezda (Reply 7):
FedEx (like any airline) must say that they might buy Airbus or Boeing in order to get good prices.

In despite of this cancellation, FX is still Airbus' best wide-body customer worldwide. And Boeing, obviously, loves FX at themoment. That means something?

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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Mon Dec 11, 2006 10:53 pm

Quoting Zvezda (Reply 7):
One problem with a duopoly is that if a customer states any aversion to one's supplier or its products, then the other supplier will not offer competitive prices. FedEx (like any airline) must say that they might buy Airbus or Boeing in order to get good prices.

 checkmark   checkmark   checkmark 


The FedEx CEO would be irresponsible to say anything different. The same could be said of their evaluation of the 747-8F. The significance of the switch from the A380F to the 777F can not be underestimated. It's simplistic to say that the only reason FedEx canceled the A380 and ordered the 777F because of the delivery dates. That was a FACTOR, but certainly not the only consideration. Their who business plan had to be adjusted for the change.
The 777F will become the flagship of their fleet, but as was said, there is no reason that it will not be supplemented in the future by the A380 or any other aircraft.
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slz396
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 12:38 am

Quoting Astuteman (Reply 11):
One wonders if FEDEX were somewhat constrained by their ability to finance, and HAD to cancel the A380 in order to proceed with acquiring the lift they needed in the next few years.
Perhaps creditors were not keen to agree additional financing whilst there was a contractual commitment to the A380 still......
But FEDEX needed the lift........

Good thought, me thinks.

Not every airline can afford nor is willing to spend billions from its own money on interim lift like SQ or EK are doing.

It is not because a company makes profits or has money in the bank, they want to spend it on additional interim lift. FedEx likes to keep investment costs as low as possible to give higher dividends to its shareholders and in this perspective it makes sense for them to cancel the delayed A380 order to free up the money reserved for it and use it on the interim 777Fs, rather than having to 'invest' several additional billions on these...

[Edited 2006-12-11 17:02:35]
 
OldAeroGuy
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 12:45 am

He'll probably be very happy to take some A380 passenger to freighter conversions at a future date.
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dank
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 12:49 am

Quoting KC135TopBoom (Reply 1):
Now that just doesn't make any sense. Give up your business plan to help another company out? Then why order the B-777-200F?

It doesn't say that they changed their order to help Airbus out. He could easily mean that an effect of the cancellation is that it helps Airbus out.

But more importantly, I stand by the the analysis that the reason that Fed Ex changed their orders was not that their business plan, but the fact that they needed lift sooner than Airbus could deliver with the 380. If Airbus was on time, there would have been no cancellation. The press they used at the time was to put the best spin on the cancellation (and like any company they are going to tailor their business plan to what is feasible).

I won't be shocked if Fed Ex does reorder 380s at some point later.

Cheers.
 
leelaw
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RE: Fedex CEO Says It May Buy Airbus A380s In Futu

Tue Dec 12, 2006 1:02 am

Quoting Dank (Reply 17):
I won't be shocked if Fed Ex does reorder 380s at some point later.

Perhaps, or FX may bide their time and see if there isn't an adequate, even ample supply of redundant A380s to mine for conversions in the mid-term, a la the MD-11. A lot will depend on how the impending A380 dogfight on the constituent segments of the "Kangaroo Route" turns out.
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zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:16 am

Quoting Leelaw (Reply 18):
FX may bide their time and see if there isn't an adequate, even ample supply of redundant A380s to mine for conversions in the mid-term, a la the MD-11.

I was thinking the same thing, but figured I'd be flamed to a crisp if I posted it. If the B787 and A350 have the CASM I expect them to have, then a lot of WhaleJets will soon be converted to freighters or parked in the desert.
 
slz396
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:21 am

Quoting Zvezda (Reply 19):
If the B787 and A350 have the CASM I expect them to have, then a lot of WhaleJets will soon be converted to freighters or parked in the desert.

How many traffic rights does EK or SQ have on a weekly basis to for instance Australia?

Even if the A350/787 beats the A388 in CASM, replacing it with A350s/787s is not an option to them, unless they decide to seriously cut their capacity (we're talking about slashing by more than half!!! Sorry but that's just not going to happen.)

[Edited 2006-12-11 17:24:54]
 
zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Futu

Tue Dec 12, 2006 1:30 am

Quoting Slz396 (Reply 20):
Even if the A350/787 beats the A388 is CASM replacing it with A350s/787s is not an option to them, unless they decide to seriously cut their capacity (we're talking about slashing by more than half!!!

Cutting capacity while maintaining frequency and cutting CASM is a great way to increase profits and reduce risk. RASM goes up as capacity goes down, so long as frequency is maintained. Lower CASM together with higher RASM results in much higher profit per seat, most likely increasing total profit.

That's my perspective as a real-life CEO.
 
CosmicCruiser
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:31 am

Quoting OldAeroGuy (Reply 16):
He'll probably be very happy to take some A380 passenger to freighter conversions at a future date.

According to some folks I've spoken to there is a diff between skin thickness on the pax jet vs. the freighter(higher max gross) ver and when asked about that possibility Airbus didn't have an answer.
I think it's a little presumptous to sit here and thimk anyomne one's really got the definitive answer. I've been here over 20 yrs. and I sure don't know except from what I've seen in the past if the time schedule got dorked up Fedex will move on without blinking an eye. After that nobody knows.
 
TeamAmerica
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:42 am

I'm willing to bet that FedEx reassessed their plans given the A380 delays, and revised accordingly. Nothing more. No grand conspiracy with (or against) Airbus, no extraordinary financial concerns...nothing like that. Just business.

FedEx will periodically reassess in the future. Such reassessment will consider the A380F (if it exists) or A380ACF. I tend to agree with Zvezda that such conversions may be seen sooner rather than later. A lightweight conversion might well be an even better package carrier than the A380F would have been.

Quoting Flying-Tiger (Reply 5):
You take out 10 firm orders for a yet-to-be developed product, which occupies extremly valuable space with the OEM. Airbus isn´t too unhappy about it as it helps to reduce the overall delay of the A380 deliveries. Count on a couple of extra $$$ taken off your next firm order.

Airbus isn't too unhappy? That can only be so if Airbus desires to drop the A380F altogether without facing additional compensation to customers. Can you picture anyone at Airbus smiling when they heard of the FedEx cancellation? I can't. This is an irrational attempt to find a silver lining in the clouds. Airbus needs about 450 frames sold in continuous production just to break even on this project. Any step backward is a significant blow.
Failure is not an option; it's an outcome.
 
PlaneHunter
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:52 am

Quoting Zvezda (Reply 22):

Cutting capacity while maintaining frequency and cutting CASM is a great way to increase profits and reduce risk. RASM goes up as capacity goes down, so long as frequency is maintained. Lower CASM together with higher RASM results in much higher profit per seat, most likely increasing total profit.

So much for the theory - the question is when some major A380 customers actually put that into practice...


PH
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zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 2:16 am

Quoting PlaneHunter (Reply 24):
So much for the theory - the question is when some major A380 customers actually put that into practice...

So far, just FedEx.
 
jacobin777
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 2:32 am

Quoting Astuteman (Reply 11):
One wonders if FEDEX were somewhat constrained by their ability to finance, and HAD to cancel the A380 in order to proceed with acquiring the lift they needed in the next few years.
Perhaps creditors were not keen to agree additional financing whilst there was a contractual commitment to the A380 still......
But FEDEX needed the lift........

 checkmark .....FX doesn't have the best credit rating, so it would not have been a wise decision to order the 777F and keep the deposit money for the A380...as well as have to pay for the A380's when they were delivered...

If they need the A380's, they can order them later.

On a side note...I finally didn't have to spend 3-4 days reading your post... biggrin 

Quoting CosmicCruiser (Reply 22):

According to some folks I've spoken to there is a diff between skin thickness on the pax jet vs. the freighter(higher max gross) ver and when asked about that possibility Airbus didn't have an answer.

FX's CEO Smith did mention there was the possibility of some A380 pax planes being converted to freighter models, especially when (if) some A388 customers go to the A389 model.....
"Up the Irons!"
 
slz396
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 3:54 am

Quoting Zvezda (Reply 21):
Cutting capacity while maintaining frequency and cutting CASM is a great way to increase profits and reduce risk. RASM goes up as capacity goes down, so long as frequency is maintained. Lower CASM together with higher RASM results in much higher profit per seat, most likely increasing total profit.That's my perspective as a real-life CEO.

Real life CEO or not, your perspective lacks long term vision...

The weak points in your nice theory are:

1- the increase in RASM from cutting capacity must be at least equal to the drop in revenue you'll suffer from offering only half (or less) the number of seats or otherwise your airline is going to see much reduced cash flows and profits and is going to have its possibilities to finance future investments from this cash basis threatened in the long run and won't be able to keep pace with the competitors. Allow me to say I doubt the increase in RASM will (entirely) offset the revenue drop (see point 2 for reasoning) and I suppose you know financing from own cash flow is the cheapest way to fund any investment, so unless your aim is to shrink your airline into niche status over time (20 years), this NOT a good business strategy to follow as it will ultimately increase your borrowing costs when the next huge fleet renewal is due!

2- the theory of yours can only work if ALL operators would act according to the same logic; if YOU decide to cut capacity on your flight in an effort to raise RASM on the route, yet the competitor(s) on the route do not do the same but decide to increase theirs to cover your capacity reduction, all you will achieve is lower revenue from your smaller capacity, NOT spectacularly higher RASM....

Given the fact it only takes 1 or 2 rebels to reck this nice theory of yours by NOT following its logic of cutting capacity and aiming on higher RASM to increase profits, yet alternatively opt for the 'lower RASM yet higher volumes' approach to generate more revenue and profits, it is a given reality in the air will not fall in line with your theory... Besides, it has been shown already not all airlines will follow it, hence the continuous demand from airlines like EK, QR etc for always bigger planes.
 
zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 4:12 am

Quoting Slz396 (Reply 27):
the increase in RASM from cutting capacity must be at least equal to the drop in revenue you'll suffer from offering only half (or less) the number of seats or otherwise your airline is going to see much reduced cash flows and profits and is going to have its possibilities to finance future investments from this cash basis threatened in the long run and won't be able to keep pace with the competitors. Allow me to say I doubt the increase in RASM will (entirely) offset the revenue drop

You would certainly get a drop in revenue if there is no increase in frequency, but the drop in costs would be larger, much larger.

Quoting Slz396 (Reply 27):
it will ultimately increase your borrowing costs when the next huge fleet renewal is due!

That doesn't follow.

Quoting Slz396 (Reply 27):
the theory of yours can only work if ALL operators would act according to the same logic; if YOU decide to cut capacity on your flight in an effort to raise RASM on the route, yet the competitor(s) on the route do not do the same but decide to increase theirs to cover your capacity reduction, all you will achieve is lower revenue from your smaller capacity, NOT spectacularly higher RASM....

No, your competitor ends up with a lot of marketshare buy poor yields and high risk.

Quoting Slz396 (Reply 27):
so unless your aim is to shrink your airline into niche status over time (20 years)

That would only be the case if most or all airports were slot restricted and frequency couldn't be increased. Such is not the case in the real world.
 
slz396
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 4:38 am

Quoting Zvezda (Reply 28):
You would certainly get a drop in revenue if there is no increase in frequency, but the drop in costs would be larger, much larger.

Assume you do as you suggest and thus almost halve your revenue and manage to cut your costs even further: what does that do to the profit you think? It will indeed grow in percentage, but it very likely shrinks in real value!

Quoting Zvezda (Reply 28):
That doesn't follow.

If you sell 100 tickets a day and make 1,000$ profit on them each, and I sell 1,000 tickets a day making only 200$ profit on each, which of us has earned the most money at the end of the day? Which of us will be able to invest the most in expansion, in publicity, in fighting the other? If you want to fight me, you'll have to use more of your profit (in percentage) to catch up with me and who knows if I spend enormous sums in an effort to push you out of the market all together, you'll even be forced to borrow money or let go of me...

Quoting Zvezda (Reply 28):
your competitor ends up with a lot of market share buy poor yields and high risk.

Not more risk than you have as niche player really, quite on the contrary because remember he'll have no problems filling his extra seats as the market for them was there before you decided to give it up!

Quoting Zvezda (Reply 28):
That would only be the case if most or all airports were slot restricted and frequency couldn't be increased. Such is not the case in the real world.

What governs the Kangaroo route? Bilateral agreements (with frequency restrictions) or an open sky environment (without frequency limitations)?

Sorry to say, but you just pick randomly from different models in order to create your own theory, which sadly doesn't match any given situation and is thus pure fiction...
 
A350
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 6:49 am

What happend exactly to theit order? Did they make tabula rasa? I wonder if it wouldn't have been better to convert the firm orders to options, that would have been a better solution for both. FX would have kept the possibility to purchase the WhaleJets at fixed price and A would have had a better PR.

A350
 
zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 10:14 am

Quoting Slz396 (Reply 29):
Assume you do as you suggest and thus almost halve your revenue and manage to cut your costs even further: what does that do to the profit you think? It will indeed grow in percentage, but it very likely shrinks in real value!

Sorry, the drop in revenue would be much, much less than 50%.

Quoting Slz396 (Reply 29):
If you sell 100 tickets a day and make 1,000$ profit on them each, and I sell 1,000 tickets a day making only 200$ profit on each, which of us has earned the most money at the end of the day?

Your numbers have nothing to do with the case I suggested.

Quoting Slz396 (Reply 29):
Sorry to say, but you just pick randomly from different models in order to create your own theory, which sadly doesn't match any given situation and is thus pure fiction...

 rotfl 
 
ComeAndGo
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 11:14 am

Quoting TeamAmerica (Reply 23):
I'm willing to bet that FedEx reassessed their plans given the A380 delays, and revised accordingly. Nothing more. No grand conspiracy with (or against) Airbus, no extraordinary financial concerns...nothing like that. Just business.

I bet airbus got fedex to drop the order. Fedex had considerable investments linked to the loading and unloading of the upper-deck of the A380. Airbus is facing massive financial problems related to the A380 delay. I bet you that Airbus made some deal with Fedex on future a380 orders.
 
TeamAmerica
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:48 pm

Quoting ComeAndGo (Reply 32):
Fedex had considerable investments linked to the loading and unloading of the upper-deck of the A380

Did FedEx actually buy equipment in 2006 for an aircraft they did not expect to receive until 2008 (prior to the delays)? I doubt it.

Quoting ComeAndGo (Reply 32):
Airbus is facing massive financial problems related to the A380 delay.

Which are in no way relieved by subtracting the revenue they would have received from the sale of 10 more A380's. By your logic Airbus should urge all their customers to cancel.

Quoting ComeAndGo (Reply 32):
I bet you that Airbus made some deal with Fedex on future a380 orders.

So Airbus volunteered to take the bad publicity of a cancellation rather than just deferring the order as Virgin did? Note that ILFC both deferred and converted their freighter orders, leaving only UPS as an A380F buyer. Will Airbus urge UPS to cancel as well?

On financial grounds, your argument only makes sense if Airbus intends to cancel the A380F, saving the development costs. If that is so, your suggestion that there is an agreement with FedEx for a future order is nonsensical. I bet you're wrong.
Failure is not an option; it's an outcome.
 
zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 1:54 pm

Quoting TeamAmerica (Reply 33):
By your logic Airbus should urge all their customers to cancel.

While I don't agree with ComeAndGo and the rest of your critique is sound, your logic doesn't hold here. Just because a little of something is good, doesn't mean more is better. Consider, you might want a pinch of salt in your soup. That doesn't mean a kilo of salt in your soup is better.
 
jacobin777
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 2:12 pm

Quoting Zvezda (Reply 34):
That doesn't mean a kilo of salt in your soup is better.

There won't be any soup left to drink... Smile
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steeler83
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 2:23 pm

Quoting USAF336TFS (Reply 14):
The FedEx CEO would be irresponsible to say anything different. The same could be said of their evaluation of the 747-8F. The significance of the switch from the A380F to the 777F can not be underestimated. It's simplistic to say that the only reason FedEx canceled the A380 and ordered the 777F because of the delivery dates. That was a FACTOR, but certainly not the only consideration. Their who business plan had to be adjusted for the change.
The 777F will become the flagship of their fleet, but as was said, there is no reason that it will not be supplemented in the future by the A380 or any other aircraft.

It's probably a little bit late for me to say this, but I will pitch it anyway. FedEX needs the necessary aircraft NOW, and probably cannot afford the wait for the A380. They have looked at the 748F apparently and decided it would not fit their business model/approach. The 777Fs are currently in production, are of high quality, and are of, and will be of higher value to FedEX in the future. Why WOULDN"T FX go with the 777F in place of the A380.

I am sure that FX will eventually order the A380 when the time is right. The 777 is the better plane for them in the current term, so they are going with that bird for right now...
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lightsaber
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 3:41 pm

Quoting CosmicCruiser (Reply 22):
what I've seen in the past if the time schedule got dorked up Fedex will move on without blinking an eye. After that nobody knows.

Exactly. It amazes me how many people don't understand a numbers run company.

Not to mention Fedex has their new Shanghi hub opening up IIRC in 2008! They *must* have planes for that opening that can travel to Europe and Trans-Pacific. Again I will note that the only two freighters that can do Shanghi to OAK direct (with high loads) are the A380F and the 772F. Thus, due to time pressure, FedEx switched horses given no choice for the 2008 hub opening.

Quoting Flying-Tiger (Reply 5):
1. Think about removing a postponed financial obligation from your balance sheet - your stock market will love it.

 checkmark  But lets not forget bond rating. If FedEx were to order the 772F while the A380F remained on the balance sheet their bonds would drop to junk. Obviously FedEx couldn't afford the associated increase in borrowing costs. They aren't like UPS (who has a AAA bond rating). There are more expenses in business than just the aircraft costs... Due to their debt, FedEx must be senstitive to preserving their bond rating.

Not that I disagree with theory toward managing stock price... they go hand in hand. I just think that the bond rating decision probably played an equal if not greater role in the A380F cancellation.

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jjbiv
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 4:48 pm

Quoting Lightsaber (Reply 37):
checkmark But lets not forget bond rating. If FedEx were to order the 772F while the A380F remained on the balance sheet their bonds would drop to junk.

From where does your assumption that FedEx had a use for both the Airbus and Boeing ships (in the ordered quantities) come? FedEx needs a certain capacity over a certain range; packages could care less what they are riding on. Is there any evidence to support the notion that the Boeing purchase didn't entirely crowd out the Airbus purchase? Both aircraft fill the same operational need; there would be no need for the quantities of each that were ordered independent of each other. Hence, very little impact on the company's debt level.

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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 5:16 pm

Quoting Lightsaber (Reply 37):
Obviously FedEx couldn't afford the associated increase in borrowing costs

I am not familiar with FDX financial position but at least this contrasts with other threads where Chapter 11 pax airlines and other pax airlines that have already ordered a gazillion worth of jets, are seen as completely renewing their fleets in a matter of weeks.
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Curmudgeon
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 5:37 pm

Quoting Slz396 (Reply 29):
What governs the Kangaroo route? Bilateral agreements (with frequency restrictions) or an open sky environment (without frequency limitations)?

Neither. Bilaterals are awarded based on number of seats per week. Its up to the airline to parse that out the best way based on their fleet. It's interesting that the typical city pair route gets a number of seats smaller than daily A380 service provides. I shall endeavour to provide details in the coming days.
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leelaw
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 5:40 pm

Quoting Zvezda (Reply 19):
Quoting Leelaw (Reply 18):
FX may bide their time and see if there isn't an adequate, even ample supply of redundant A380s to mine for conversions in the mid-term, a la the MD-11.

I was thinking the same thing, but figured I'd be flamed to a crisp if I posted it.

Thanx for so eloquently developing my hypothesis further despite the rather vocal consternation of perhaps the most pretentious "Airbusier" on A.net.
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WINGS
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 5:49 pm

Quoting Leelaw (Reply 41):

Thanx for so eloquently developing my hypothesis further despite the rather vocal consternation of perhaps the most pretentious "Airbusier" on A.net.

Leelaw, if one is to follow Zvezda's logic in regards to the A380 program then their won't be any ample supply of redundant A380´s.

Don't forget that it was just a few months ago that Zvezda was supporting the opinion of cancelling the A380 program.

While I don't have a link wasn't it the CEO of FedEx, that could see his company operating something like 200 A380's in the future?

FedEx got out of the A380 contract because they did not have the cash, to opt for the B772F and the A380 simultaneously.

They made the correct decision for the short term of cancelling their order in favour of the B772F, as they were in great need of extra capacity.

Regards,
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 5:50 pm

Quoting KC135TopBoom (Reply 1):
Now that just doesn't make any sense. Give up your business plan to help another company out? Then why order the B-777-200F?

Nothing more than a good faith gesture to Airbus from Fred. We are happy with AB6F and the most current order: 777F.
 
leelaw
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 6:20 pm

Quoting WINGS (Reply 42):
While I don't have a link wasn't it the CEO of FedEx, that could see his company operating something like 200 A380's in the future?

No, it wasn't Fred Smith, it was David Sutton (managing director of aircraft development acquisitions and sales in FedEx’s A380 programme office), and he actually predicted “a fleet of 200 A380 freighters in the marketplace over the next 20 years,” not that FX would be operating 200 A380Fs in the future.

See: http://www.flightglobal.com/Articles...380F+fleet+expansion+strategy.html

One wonders what Mr. Sutton's current forecast regarding the A380F is given recent events.
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Curmudgeon
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 6:28 pm

Quoting Leelaw (Reply 44):
One wonders what Mr. Sutton's current forecast regarding the A380F is given recent events

I'll bet its something like 159  Wink
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Curmudgeon
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 6:51 pm

Quoting Curmudgeon (Reply 40):
Neither. Bilaterals are awarded based on number of seats per week. Its up to the airline to parse that out the best way based on their fleet. It's interesting that the typical city pair route gets a number of seats smaller than daily A380 service provides. I shall endeavour to provide details in the coming days.

I was not correct on this piece of info. SOME Australian bilateral agreements specify the number of weekly seats (Typically 2800). Many others specify how many movements pwer week, and break down that by capacity.

The agreement with EK's home country allows for 53 weekly movements without limiting the seat capacity.
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zvezda
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 9:13 pm

Quoting WINGS (Reply 42):
Don't forget that it was just a few months ago that Zvezda was supporting the opinion of cancelling the A380 program.

As we've discussed before, that is a misleading characterization of my opinion. I clearly suggested that Airbus stop taking WhaleJet orders and then fulfill the order book. This would free management from the distraction and allow them to focus on more important projects.
 
slz396
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RE: Fedex CEO Says It May Buy Airbus A380s In Future

Tue Dec 12, 2006 9:36 pm

Quoting Zvezda (Reply 31):
Your numbers have nothing to do with the case I suggested.

The numbers were purely fictional to help you see the light. Sadly even that didn't do the trick...

I'd really love to see how you could stop revenue from being halved if you give up half of your capacity in an environment where the overall capacity won't drop as a consequence of you reducing yours because others will simply take over your lost capacity...

And I'd also like to hear your analysis of how your ticket prices won't suffer from an increased portion of the fixed overhead costs they'll have to cover, costs which will largely remain intact or even increase from less favourable suppliers contracts due to your smaller customer volume!

I've read many of your comments and each time it strikes me you see the costs of an airline as simply the sum of all the CASMs and you are strongly under the wrong impression airlines have the possibility to add as much frequencies to their routes as they please....

Quoting Curmudgeon (Reply 46):
I was not correct on this piece of info. SOME Australian bilateral agreements specify the number of weekly seats (Typically 2800). Many others specify how many movements per week, and break down that by capacity. The agreement with EK's home country however allows for 53 weekly movements without limiting the seat capacity.

Indeed and a big thumbs up to you for admitting you had it wrong there.

EK (and in fact also some other big A380 customers) only have a frequency limitation on their routes, but NO capacity limitation.

That's why they absolutely look for big planes and provided they come with a decent CASM, they will prefer them over any other smaller planes (regardless of their CASM) because in the end the balance always tips in favour of the A380, no matter how well-argued the theory of some others may sound...