2wingtips
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Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 6:48 am

According to this week's electronic version of FI, Finnair will officially order A350-900XWBs as a conversion of their old A350-900 order.
No surprise here. However, the article also mentions that although the XWB is a significantly better aircraft and has a 20% higher price tag, AY will get them for the same price as the 2005 A350-900 order, which I imagine was already substantially discounted.
Will this be the case for all existing A350 firm orders? I imagine it will be.
Article also mentions that 2014 is now the more likely EIS date for the A350-900XWB, putting it 6 years behind the 787.
Will Airbus make any profit on any carrier/lessor with a firm existing A350 order?
 
osiris30
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 6:58 am

Links, quotes, anything???

Not that I'm doubting you, but if what you are saying about pricing is true.. well I won't bother saying it because someone will flame me for being anti-Airbus for making a business based statement.

[edit]
Alright, I'll make the comment this way: The plane is going to cost several billion more to develop than the one that Finnair originally agreed to buy, yet they are going to get the same pricing. If this is true, it makes me wonder about two things:

How much is Airbus going to make/lose on these conversions?
Whatever happened to Leahy's "I'll give up customers over margins" comment.

With that said I'm going to await confirmation before I really rip into this matter.
[/edit]

[Edited 2007-02-12 23:09:16]
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keesje
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 7:08 am

Quoting 2wingtips (Thread starter):
Article also mentions that 2014 is now the more likely EIS date for the A350-900XWB, putting it 6 years behind the 787.

I think saying that 2014 is now the more likely EIS date for the A350-900XWB, putting it 20 years behind the 772 is more relevant for the A359.

http://www.eads.net/xml/content/OF00000000400004/7/33/41402337.jpg
its bigger..
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2wingtips
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 7:32 am

Quoting Osiris30 (Reply 1):
Links, quotes, anything???

Not that I'm doubting you, but if what you are saying about pricing is true.. well I won't bother saying it because someone will flame me for being anti-Airbus for making a business based statement.

No links because it is the electronic version of FI which I subscribe to. I imagine it will appear on their web-site within 24hrs.

Quoting Keesje (Reply 2):
I think saying that 2014 is now the more likely EIS date for the A350-900XWB, putting it 20 years behind the 772 is more relevant for the A359.

What is more relevant for the A358XWB? It's EIS will now be 2015/16 and I would imagine it's a direct 789 competitor some 5-6 years behind the opposition?
Boeing's Y3 proposal looks closer and closer to the XWB EIS by the day. I wonder whether Power 8 internal Airbus/EADS haggling will delay the XWB even further? The same article mentioned that Airbus hoped to have SQ's -900XWB LoI as a firm order "in a couple of months". Last December the line was they hoped to have it firmed in January 2007. Things appear to be quietly slipping with the XWB.
I guess next on the agenda will be some meaningful numbers for the airlines, which have seen little hard data presented to them. No doubt some hefty MTOW increases will be announced at some stage along with some more realistic range figures
 
andaman
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 7:40 am

The A350 deal was mentioned here (Full year report 2006):

http://www.finnairgroup.com/en/index.html
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Lumberton
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 7:51 am

Link to the FI article here.

Quote:
Finnair says that it "will receive the aircraft it ordered at the originally agreed acquisition price". It adds that its negotiations with Airbus are expected to reach an agreement "in the near future on compensation awardable to Finnair for the delay in the A350 production schedule".

The Finnish carrier is one of 11 customers that signed a firm contract for the A350 before the revamp - none of which have yet been migrated to the new version. Airbus has 102 firm A350 orders. Others holding firm contracts including Air Europa, Alafco, CIT, Eurofly, International Lease Finance, Kingfisher Airlines, Pegasus, TAM, TAP Portugal, and US Airways.

Meanwhile, original A350 launch customer Qatar Airways continues to discuss the future of its commitment for 60 aircraft with Airbus.

Airbus vice-president of marketing customer affairs Colin Stuart expects Singapore Airlines to firm up its commitment for 20 A350-900s plus 20 options "within the next couple of months. We're in the process of converting it to an order," he says.



Quoting 2wingtips (Thread starter):
AY will get them for the same price as the 2005 A350-900 order, which I imagine was already substantially discounted.
Will this be the case for all existing A350 firm orders? I imagine it will be.

I imagine you are correct! I can imagine that QR will try for a discount on top of the price cited for the old A350!
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flight152
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 7:53 am

How do order something with expectations of it changing next week?
 
EI321
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 8:29 am

Quoting Lumberton (Reply 5):
I imagine you are correct! I can imagine that QR will try for a discount on top of the price cited for the old A350!

They never actually ordered the original A350, so they may well have to renegoiate from scratch. No wonder its taking so long.

Quoting Flight152 (Reply 6):

How do order something with expectations of it changing next week?

?
 
Lumberton
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 8:32 am

Quoting EI321 (Reply 7):
They never actually ordered the original A350, so they may well have to renegoiate from scratch. No wonder its taking so long.

Of course it was never an order, but one presumes that there was at least a price "on the table". If the article on AY's "reparations" is accurate, this could well be a precedent for some serious squeezing on price by the customers.

Quoting Osiris30 (Reply 1):
Whatever happened to Leahy's "I'll give up customers over margins" comment.

Never heard this one, but I suspect he'll get a chance to make good on that boast in the near future.
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osiris30
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 10:27 am

Quoting Lumberton (Reply 8):
Quoting Osiris30 (Reply 1):
Whatever happened to Leahy's "I'll give up customers over margins" comment.

Never heard this one, but I suspect he'll get a chance to make good on that boast in the near future.

Well Leahy did say that (or something similar and meaning the same thing), but I don't have the patience to find it in the mountain of threads here with his name   It was said not too long ago though, and it was (as far as I could tell) specifically dealing with the 350 orders and rebooking them with [edit]-new/+existing[/edit] customers.

[Edited 2007-02-13 02:29:12]
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EI321
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 10:36 pm

The Story is now on Flights online version.

Quote:

Finnair expects to conclude shortly negotiations with Airbus centred on compensation for delays to the delivery of its A350 order, and says that it will not have to pay extra for the twinjet despite the fact that the new XWB version is significantly improved over the original design.

The Finnish carrier opted to acquire nine Rolls-Royce Trent-powered A350-900s, with options on four more, at the end of 2005 - a few months before Airbus redesigned the aircraft and unveiled it as the A350 XWB last year.

After adopting the XWB specification, Airbus revealed that it was pushing the catalogue prices up by over 20% because it is a "much more impressive aircraft". The sticker price for the original A350-900 was $171 million, while the XWB version (which has more range than the original design and is 5% bigger) is priced at $215 million.

http://www.flightglobal.com/articles...eal-on-a350-delay-reparations.html
 
astuteman
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 10:50 pm

Quoting Osiris30 (Reply 1):
How much is Airbus going to make/lose on these conversions?

IIRC a large part of the E1Bn A350 write-down in the EADS Q3 accounts was to cover "losses" which will now accrue on the 100 frames that were "firm" ordered.

I can only guess that the intent is to strip that out as part of the decision to abandon the "old A350", so that the "new A350" can start with a "clean sheet" in the accounting process.

Regards
 
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 10:58 pm

I wouldn't pay too much notice of the 2014 date as isn't this the date that FInair are getting their planes rather than EIS - this suggests to me that the EIS may still be 2013 and there's a launch order to take up early slots (SQ perhaps?)
 
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Stitch
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 11:00 pm

Quoting Keesje (Reply 2):
I think saying that 2014 is now the more likely EIS date for the A350-900XWB, putting it 20 years behind the 772 is more relevant for the A359.

It will help, but if Boeing gets the 787-10 out before the A359XWB enters service and it is capable of 772ER mission ranges with equal or greater payload, that's going to blunt a good bit of the A350XWB's momentum, especially with six years of 787 in service data available for airlines to use in their models.

Quoting Astuteman (Reply 11):
IIRC a large part of the E1Bn A350 write-down in the EADS Q3 accounts was to cover "losses" which will now accrue on the 100 frames that were "firm" ordered.

The one problem for Airbus, as someone else noted in another thread, is that Airbus is now setting somewhat of a "price ceiling" for the A350, especially if the 787 comes out strong in flight test and EIS.

Now, a strong EIS for the 787 will help Boeing a bit by allowing them to be a bit more firm on pricing, but airlines are going to be using that same data to try and knock Airbus down on price ("Boeing's numbers show we'll save $X on operating costs over our 767s/A330s. And their list is $Y cheaper. So you really need to make it worth our while to go with you over an established model.").
 
EI321
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 11:16 pm

Quoting Stitch (Reply 13):
Quoting Keesje (Reply 2):
I think saying that 2014 is now the more likely EIS date for the A350-900XWB, putting it 20 years behind the 772 is more relevant for the A359.

It will help, but if Boeing gets the 787-10 out before the A359XWB enters service and it is capable of 772ER mission ranges with equal or greater payload, that's going to blunt a good bit of the A350XWB's momentum, especially with six years of 787 in service data available for airlines to use in their models.

The 787-10 would not nessessarily have to come out before the A350-900, as many of the earlier A359 slots are filled. That buys Boeing about a year in extra time. But there are important questions around the -10 like will it equal the 772ERs capabilities with a 9 abreast load.
 
osiris30
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RE: Finnair To Sign For A350-900XWB.....FI

Tue Feb 13, 2007 11:43 pm

Quoting Stitch (Reply 13):
It will help, but if Boeing gets the 787-10 out before the A359XWB enters service and it is capable of 772ER mission ranges with equal or greater payload, that's going to blunt a good bit of the A350XWB's momentum, especially with six years of 787 in service data available for airlines to use in their models.

Don't forget that same inservice data will allow Boeing to tweak the derivatives. That's the real danger IMHO for Airbis. The 350XWB will be their first crack at this type of airliner, whereas Boeing will have gobs of key learnings already.

Quoting Astuteman (Reply 11):
IIRC a large part of the E1Bn A350 write-down in the EADS Q3 accounts was to cover "losses" which will now accrue on the 100 frames that were "firm" ordered.

Well seeing as Finnair is talking about a 20% discount (by way of holding the old price) and is seeking damages I can't help but wonder if 1B EU is too small? Using 'standard' 40% discounts Finnair is likely going be getting their 350XWBs for a paltry $108M each, not including penalties. Now seeing as Airbus and Boeing usually run 10% margins, I would *guestimate* the cost on the 350XWB (based on list price and standard discounts, etc.) to be around $114-$115M. Assume all said and done $10-$15M is lost on these conversion orders and that E1B will disappear very quickly. (Again don't shoot me for doing math LOL)

Quoting Scouseflyer (Reply 12):
I wouldn't pay too much notice of the 2014 date as isn't this the date that FInair are getting their planes rather than EIS - this suggests to me that the EIS may still be 2013 and there's a launch order to take up early slots (SQ perhaps?)

I would say that date doesn't mean anything one way or the other.. Seeing as 2014 is an entier year it could be a slip, or business as usual.. all depends on whether it's January or December LOL
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manni
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 12:07 am

Quoting Osiris30 (Reply 15):
Well seeing as Finnair is talking about a 20% discount (by way of holding the old price) and is seeking damages I can't help but wonder if 1B EU is too small? Using 'standard' 40% discounts Finnair is likely going be getting their 350XWBs for a paltry $108M each, not including penalties. Now seeing as Airbus and Boeing usually run 10% margins, I would *guestimate* the cost on the 350XWB (based on list price and standard discounts, etc.) to be around $114-$115M. Assume all said and done $10-$15M is lost on these conversion orders and that E1B will disappear very quickly. (Again don't shoot me for doing math LOL)

The original listprice was apparently US$171 million, assuming a 40% discount (which is not a given right, and the worst case scenario for Airbus), AY might have agreed to pay US$111 million.

The new listprice is apparently US$215 million (that's a lot more expensive then the 787!). US$111 million would represent 51,6% of the listprice. That's a 48,4% discount (worst case scenario). To calculate the production cost of the A350 is difficult, but 40% would be a very good guess. In that case Airbus would still be making a profit of 8,4%. Mr. Leahy's statement not to give up margins isn't far stretched. Obviously they're going to make less, but it doesn't look they loose on it.

I wouldn't count on an extra penalty yet. The penalty might be offered in the form of 'more aircraft for the same price'.
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osiris30
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 1:09 am

Quoting Manni (Reply 16):
The original listprice was apparently US$171 million, assuming a 40% discount (which is not a given right, and the worst case scenario for Airbus), AY might have agreed to pay US$111 million.

Manni, first of all thank you for taking my post as it was intended (i.e. a debate about costs and not an Airbus flame). Now the 40% discount is 'standard' based on some numbers that were floating around, but I will agree it's NOT a given. I do, however feel it's a good starting point. Your math is a bit off though. A 40% discount of $171 is $68.4 yielding a 'price' of $102.6M not $111M.

Quoting Manni (Reply 16):
The new listprice is apparently US$215 million (that's a lot more expensive then the 787!). US$111 million would represent 51,6% of the listprice. That's a 48,4% discount (worst case scenario). To calculate the production cost of the A350 is difficult, but 40% would be a very good guess. In that case Airbus would still be making a profit of 8,4%. Mr. Leahy's statement not to give up margins isn't far stretched. Obviously they're going to make less, but it doesn't look they loose on it.

Actually it's 47.7% of the 'new' list price. As for costs that's a bit less certain. I know that both Boeing and Airbus run around 10% margins, so one has to assume that a 40% discount on list is roughly around 10-15% margins (if one assumes 40% discounts are the norm.. move that figure around as you see fit). So assuming 15% margins on a 'normal' 40% discount you get a cost of: $113M ish.
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Stitch
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 1:15 am

Quoting EI321 (Reply 14):
But there are important questions around the -10 like will it equal the 772ERs capabilities with a 9 abreast load.

Well Boeing does have some "wriggle room" in that many carriers do not push a 777-200ER to max range. And those that do are starting to look at the 777-200LR (like DL). So even though Boeing has said they will launch the 787-10 with the same MTOW as the 787-9 (540,000lbs), with the 787-9 having a range between 8000 and 8500nm means that Boeing should be able to meet the mission performance the majority of nine-abreast 777-200ER operators are using the plane for and do so with better efficiency. And Boeing still has 20,000lbs of MTOW they can play with if they absolutely have to in order to try and meet any additional requirements some customers may have.

And Boeing also has six years to improve the 777-200LR and, failing that, lower her sale price to secure orders in combination with 787 models to blunt Airbus' attempts to sell the A350XWB-900.

Quoting Manni (Reply 16):
The new listprice is apparently US$215 million (that's a lot more expensive then the 787!). US$111 million would represent 51,6% of the listprice. That's a 48,4% discount (worst case scenario). To calculate the production cost of the A350 is difficult, but 40% would be a very good guess. In that case Airbus would still be making a profit of 8,4%. Mr. Leahy's statement not to give up margins isn't far stretched. Obviously they're going to make less, but it doesn't look they loose on it.

Agreed. I can't see Airbus launching this program just to loose money on the first 100 and set a precedent to lose it on the next 1000.

At that point, it would be better to kill the A350XWB program and just cut margins on the A340 to the bone and sell all you can.
 
dank
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 1:34 am

Quoting Stitch (Reply 18):
Well Boeing does have some "wriggle room" in that many carriers do not push a 777-200ER to max range. And those that do are starting to look at the 777-200LR (like DL). So even though Boeing has said they will launch the 787-10 with the same MTOW as the 787-9 (540,000lbs), with the 787-9 having a range between 8000 and 8500nm means that Boeing should be able to meet the mission performance the majority of nine-abreast 777-200ER operators are using the plane for and do so with better efficiency. And Boeing still has 20,000lbs of MTOW they can play with if they absolutely have to in order to try and meet any additional requirements some customers may have.

And Boeing also has six years to improve the 777-200LR and, failing that, lower her sale price to secure orders in combination with 787 models to blunt Airbus' attempts to sell the A350XWB-900.

Hey Stitch, while I agree with this to a bit, I think the issue is that just because airlines are moving 772LRs to 772ER routes, and using 772ER at less than max range, that doesn't mean that a 787-9 that can do what these shorter 772ER routes are doing at max capabilities of the 787-9 means that a 787-9 is a good replacement. I believe that airlines are seeing that pushing a frame to it's ranges is less financially desirable, so a 787-9 stretched is not a good replacement for these 772ER routes (i.e. a 772LR at less than max range is more profitable, even given the higher acquisition costs, than a 772ER at max range).

On a topic that was brought up earlier, while Airbus may take longer to recoup development costs because they will have to sell some a350XWBs at the original 350 prices, keep in mind that Airbus clearly believes that they are going to sell a substantial number more planes by spending the extra development $s, which means that they can get away with lower margins.

cheers.
 
manni
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 1:40 am

Quoting Osiris30 (Reply 17):
A 40% discount of $171 is $68.4 yielding a 'price' of $102.6M not $111M.

I'm sorry, you're absolutely right. I'll use a calculator next time.

Quoting Osiris30 (Reply 17):
So assuming 15% margins on a 'normal' 40% discount you get a cost of: $113M ish.

Add 40% discount to a margin of 15% and it would result in a cost of about 45% listprice. That would be US$96,75 million.

How much does it cost Airbus to build a widebody aircraft? Let us first agree that Airbus (and Boeing) do not sell aircraft at a loss, initially. Reportedly (take the report for what it's worth) Intrepid will be paying about US$75 million for their A330F (that's a 55% discount, the A330F lists at US$165 million). There's little doubt that Airbus will still be making money on that deal, afterall they're going to increase production to keep up with the demand. I'd say a 45% cost is far to much, and the cost (atleast for widebodies) is likely a lot lower then our estimates.
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Stitch
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 2:50 am

For an "established" program like the 767 and A330, discounts approaching or even exceeding 50% probably do not result in a revenue-negative transaction. Especially since there are so many "intangibles" (training, parts, spares, etc.) that are factored into these deals that we generally don't have any hard data on.

So UPS getting a huge discount to keep the 767F line going and Intrepid getting a huge discount to get the A330F line started are not untoward in such cases.
 
osiris30
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 3:28 am

Quoting Manni (Reply 20):
Add 40% discount to a margin of 15% and it would result in a cost of about 45% listprice. That would be US$96,75 million.

Why. If they have 15% margins (being generous there) on a 40% discounted price, why are you discounting the margin? Remember Airbus has booked money aside for losses resulting from existing 350 orders.

Thus a normal selling price would be $129M (assuming 40% discount or $86M on list). 15% margins on that number would be around $19.35M (ish), yielding a cost of approximately $109.65M (again these are all really rough number).

Ofcourse actualls may be higher or lower, but based on what we've seen published are not unreasonable IMHO.
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glideslope
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 5:59 am

Quoting Keesje (Reply 2):
I think saying that 2014 is now the more likely EIS date for the A350-900XWB, putting it 20 years behind the 772 is more relevant for the A359

I still say first taxi tests in 2015. This is going to be painful for EADS .  dollarsign 
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XT6Wagon
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 7:59 am

I agree with Mani, that it is likely Airbus tossed out the "we can pay you for not taking the A350mk IV you ordered since we will not be building it, or I guess we can just park a few A350 mk VI infront of your HQ instead for the same cost"

Airbus put in one of their statements that they were setting aside $800 million for compensation for the canceling of the A350XNB. Doing the math, that is ALOT of millions perframe and thus is "cheaper" for Airbus to swap out the A350XNB for the A350XWB one for one for no extra cost. Airlines will be highly tempted to keep this deal if offered since 787 slots are hardly freely avalible, they keep thier prime A350 slots, and they might fish out a few more million a frame if it slips or changes configurations again. More importantly If a big name carrier wants its frames, and wants it now, a smaller carrier like Finair can make a good bit of money horse trading or selling slots.

The places that Airbus will have trouble now though is EK and the like. They will be demanding the same price as those "other guys" and when airbus informs them that they can't get first year slots, and the price is millions more.... More or less they will be driven right into boeings hands since there are plenty of slots in the A350's open production slot time period, and the 787 is already a cheaper plane than the A350 in terms of list price.

Interestingly I think russia will ALSO be a bad bit of trouble for the A350xwb. while its certain they have a lock on Areoflot's order, can you help but wonder how much the A330 bridging aircraft will cost airbus? How much trouble the A320F conversion program can cause them, and lets not forget the ink isn't dry. What will the russians demand next? While russia had a top notch areospace industry and they are still capible of it, I would question any move airbus makes to move any actual production of thier parts on a new design at this time. Plenty of stuff for existing lines to cut the russians teeth on the airbus way of doing things, and plenty of insulation on an existing program against budget nuking failures. So give the russians some production for the china A320 subassemblies if they want more and call it a day.
 
osiris30
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 8:29 am

Quoting XT6Wagon (Reply 24):
The places that Airbus will have trouble now though is EK and the like. They will be demanding the same price as those "other guys" and when airbus informs them that they can't get first year slots, and the price is millions more....

Well that is the real question isn't it.. whether or not Airbus can hold pricing now that pricing such as this is being made public.. Time and financial reports will be the only way to answer that one.

Boeing being sold out does help Airbus out though in that regard with new customers.
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EI321
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 9:25 am

Quoting Stitch (Reply 21):
For an "established" program like the 767 and A330, discounts approaching or even exceeding 50% probably do not result in a revenue-negative transaction

But they only occur when a sale is desperatly needed.

Quoting XT6Wagon (Reply 24):
and they might fish out a few more million a frame if it slips or changes configurations again.

Your not seriously suggesting that any airline will order an aircraft under the premise that they will hopefully get money if (and there is absolutly no reason to think that there will be) some sort of programme delay.

Quoting XT6Wagon (Reply 24):
The places that Airbus will have trouble now though is EK and the like. They will be demanding the same price as those "other guys" and when airbus informs them that they can't get first year slots, and the price is millions more....

Thats ridiculous. EK or any airline that have not even signed letters of Intent, are going to 'demand' the old A350 prices?? Cmon.

Quoting XT6Wagon (Reply 24):
Interestingly I think russia will ALSO be a bad bit of trouble for the A350xwb. while its certain they have a lock on Areoflot's order, can you help but wonder how much the A330 bridging aircraft will cost airbus?

Theres no reason to think that those A330s will be discounted any more than they would be if SU were not buying A350s.

Quoting XT6Wagon (Reply 24):
How much trouble the A320F conversion program can cause them, and lets not forget the ink isn't dry.

What are you on about?

Quoting Osiris30 (Reply 25):
Quoting XT6Wagon (Reply 24):
The places that Airbus will have trouble now though is EK and the like. They will be demanding the same price as those "other guys" and when airbus informs them that they can't get first year slots, and the price is millions more....

Well that is the real question isn't it.. whether or not Airbus can hold pricing now that pricing such as this is being made public..

Two different ordering situations, two different discount situations.

Quoting Osiris30 (Reply 25):
Boeing being sold out does help Airbus out though in that regard with new customers.

Boeing has less aircraft in its backlog than Airbus. This sold out term is simply a figure of speech. Both are sold out until solds are ready, which in the case of the 787/A350, the current earliest A350 slots are at least 2 years later than the current earliest 787 slots.
 
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 9:29 am

If the price becomes too onerous for Airbus, I guess they can always walk away.

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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 9:52 am

Quoting EI321 (Reply 26):
Two different ordering situations, two different discount situations.

Man if you don't think EK, QF and every other major tier 1 airline won't try and get the same pricing, I really don't know what else to say. The simple fact of the matter is 'You sold this to my competitor for X, sell it to me for the same thing or I'll take my business elsewhere' is a very hard statement to deal with. EK and QF are the ones with the power in this arrangement, NOT Airbus. If you don't think they will try that just read the press statements where 'we want the same compensation or better than you gave our competitor'.

Quoting EI321 (Reply 26):
Quoting Osiris30 (Reply 25):
Boeing being sold out does help Airbus out though in that regard with new customers.

Boeing has less aircraft in its backlog than Airbus. This sold out term is simply a figure of speech. Both are sold out until solds are ready, which in the case of the 787/A350, the current earliest A350 slots are at least 2 years later than the current earliest 787 slots.

Proof positive that you have a poor grasp on the sitaution. Boeing is sold out in that product category until the 350 is available. That means that some companies will go to Airbus just for the sake availability. The 787 has a MUCH deeper backlog than the 350. Customers who need planes soon rather than later will look to Airbus. This will help Airbus maintain some of it's pricing. It's supply and demand. Airbus has more supply available (ostensibly) than Boeing does in that time frame for a CFRP aircraft in those size ranges.
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 10:23 am

manufactuers was simply -

Quoting Osiris30 (Reply 28):
The simple fact of the matter is 'You sold this to my competitor for X, sell it to me for the same thing or I'll take my business elsewhere' is a very hard statement to deal with.

Every launch customer gets steeper discoutns than the follow up airlines and Emirates is not a launch customer for the A350. They've always been moderately negative about the aircraft. I remember Mr. Clark as one of "A350 not good enough" cabal.

If they placed a big order things might be different, but if they try to demand that Airbus sell them aircraft at a price which is harmful to Airbus, then I guess all that talk about wanting two viable aircraft manufacturers was just a thesis for the University of Bologna.

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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 10:46 am

What I am "on about" is that Airbus has a problem.

They are painting themselves into a bad corner.

1. They are trading lease deals and massively discounted planes to avoid cash compensation now. Both are a good way to reduce future income by a large value. Even worse is that they are setting examples that large airlines can throw in the airbus sales team face from the very START of negotiations. If I'm EK, and I'm looking at buying 50 A350XWBs to replace my older airbuses and 777's, I won't start at some normal spot, I'm going to demand Finnair's contract price per frame. Plus more side goodies since instead a small number I am buying 50. Can Airbus afford to go into every negotiation with a low price on these frames? Certainly heard alot from the Airbus faithful on can Boeing afford to discount the 748 so deeply for LH. Only in this case the 787 is ALREADY tens of millions cheaper at list prices, so its going to be a hard sell that you can only discount so far when you provide a brilliant example of just how far you CAN go.

2. Airbus recent trading orders for work. BAD BAD road to go down. It basicly ties you up on the production side, as whats next? no airbus orders from china unless those exact planes are assembled in china? Or will they ask for actual component production next. Same with russia. You pay them with the A320F conversion program, you get a order for leased 330's and bought 350xwb's. Whats next? Russia demanding that they make the A350 wings in exchange for a second 22 A350xwb order + A380 order? You open that door, and its all down hill. You don't control your production in a resonable fashion, and you lose sales control too.

Osiris30, I believe there is plenty of 787 slots left for just before the A350's delivery date and the first year of the A350 prduction... as long as you only want a couple of examples in that first year. The issue is that clearly Boeing isn't feeling pressured to roll out the bleeding edge numbers for people who want those slots at this time, and so I'm guessing you will see delivery time as a non-factor currently. Its obvious though that airbus has little to gain though by boeing being nearly "sold out" prior to the A350 delivery date. The reason is that the airlines are going to push both sides very hard for the best deal they have ever seen, and if airbus wins some, boeing looses little since they have a vast number of extra slots for 2013 compared to the A350. Simple to understand as the slots boeing is selling should be for a program that has been in production for 4+ years and at a full production rate for a couple of years. The A350 will still be in production ramp up and teething. Never mind Boeing can pull the trigger as late as 2010-2011 and still get a second line for the 787 going before the first A350 reaches customer hands. THAT is the danger of being 5 years late against a product that is going to change the face of aviation from now on. Just ask the companies that came 5years late to respond to the 707 how well they are doing.
 
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 10:50 am

Quoting Mariner (Reply 27):
If the price becomes too onerous for Airbus, I guess they can always walk away.

That's what Leahy was saying.. the question is, is it more onerous to walk away (i.e. penalties) or to keep it and eat it..
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 11:03 am

Quoting Osiris30 (Reply 31):
the question is, is it more onerous to walk away (i.e. penalties) or to keep it and eat it..

Certainly, that is a question. But it is Airbus who decide. There is no requirement that they must sell aircraft at a price that is "painful" to them.

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manni
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 11:30 am

Quoting Osiris30 (Reply 22):
Why. If they have 15% margins (being generous there) on a 40% discounted price, why are you discounting the margin? Remember Airbus has booked money aside for losses resulting from existing 350 orders.

The monies booked are for compensation purpose not to cover losses.

Quoting Osiris30 (Reply 22):
Ofcourse actualls may be higher or lower,

Which means we can exchange our estimates but to keep going back and forward on it is pointless until (likely never) all details and figures are known. I'm convinced, however, that the 100 aircraft currently on order are not loss making and that with the little details about the A350 known at that time generous discounts compensate for favorable conditions in case of a delay, change of specifications, cancellation etc.

Quoting Osiris30 (Reply 28):
Man if you don't think EK, QF and every other major tier 1 airline won't try and get the same pricing, I really don't know what else to say. The simple fact of the matter is 'You sold this to my competitor for X, sell it to me for the same thing or I'll take my business elsewhere' is a very hard statement to deal with.

No. Different times, different conditions, different deals. Launch customers always take risks, these risks are compensated with greater discounts. Reportedly QF was offered the 787 and A350 for the price of an A320. That's US$65 million (a discount of roughly 55% at that time)! Do you think EK is going to demand the same price from Boeing? Reportedly LH got a discount of 45% on their 748i's, do you think Boeing won't be able to sell 748i's with less discount in the future? If everyone is entitled to the same discount, why bother taking the risk of being a launch customer?
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 11:32 am

Quoting EI321 (Reply 26):
But they only occur when a sale is desperately needed.

Not necessarily. If the order can make them a profit, and space is available, they really have nothing to lose by agreeing to the order. I agree that the slower the line is, the more willing Boeing or Airbus will be to discount, along with the size of the order. Whomever picks up EK's 20 A346s (assuming someone does) will probably be getting a fantastic deal, as well, but Airbus isn't going to sell those planes at a loss any more then Boeing sold their last 60 767s these past two years.
 
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 11:41 am

Quoting Manni (Reply 33):
The monies booked are for compensation purpose not to cover losses.

Loss on an old order is compensation. Better to lose some on an order than pay more in compensation for cancelling it.

Quoting Manni (Reply 33):
Reportedly LH got a discount of 45% on their 748i's, do you think Boeing won't be able to sell 748i's with less discount in the future? If everyone is entitled to the same discount, why bother taking the risk of being a launch customer?

This isn't about that. Launch customer discounts are one thing. Finnair got those.. in addition to those they are getting more discounts by getting the new plane at the old price, furthermore they want additional compensation. You're comparing an apple to an orange grove.
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 12:40 pm

Quoting Osiris30 (Reply 35):
in addition to those they are getting more discounts by getting the new plane at the old price,

Because Airbus did not meet the obligations set out in the original contract. When EK starts negotations there is no such contract to begin with. No doubt, penalty arrangements will be taken up in the contract, just in case... But for now EK is not going to get their aircraft delayed, unlike AY. Really, it can't be that difficult to understand. Is it?

Here's a (perhaps easier to understand) example...

If you order a discounted pizza (with a US$5 coupon from a magazine), priced US$20 and the guy on the telephone tells you that they will deliver within 30 minutes. He also tells you that if they dont deliver on time, you get an additional US$5 discount. Next thing, the delivery man is late and you get your pizza for US$10 (half price, US$5 discount with the coupon and US$5 discount because not being delivered within 30 minutes). A week later, you want to order a pizza again. The promotion with the coupon is finished. Your pizza is now US$20, but if delivered late you get US$5 discount. The delivery guy manages to get the pizza to you on time... Good luck on getting your pizza for US$10!

You might get a stamp on your discount card, and after ten stamps you'll get a free one. That'd be a 10% discount, not in cash but pizza's!

Quoting Osiris30 (Reply 35):
Better to lose some on an order than pay more in compensation for cancelling it.

You don't really think that the compensation Airbus sets out in their contracts with customers exceeds the profit margin, do you? Especially since we talking here about launch customers, that already recieved a discount greater then ussual, for an aircraft that wasn't even completely specified.
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 12:54 pm

Quoting Manni (Reply 33):
Reportedly QF was offered the 787 and A350 for the price of an A320. That's US$65 million (a discount of roughly 55% at that time)!

Reportedly! Where? That's a ludicrous price. All I've ever seen reported on the QF tender, was that it was a very tough negotiation. Although, the contest was reported to be close, I believe the 787 won by a considerable margin. I actually thought you meant US$20m when you mentioned the price of an A320, because that's what they are going for these days!
 
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 1:44 pm

Quoting Manni (Reply 36):
Because Airbus did not meet the obligations set out in the original contract. When EK starts negotations there is no such contract to begin with. No doubt, penalty arrangements will be taken up in the contract, just in case... But for now EK is not going to get their aircraft delayed, unlike AY. Really, it can't be that difficult to understand. Is it?

Apparently it is.. because you seem to think aircraft and pizza follow the same market dynamics  Wink. In all seriousness, it's not the penalties that EK will be asking for.. it's the purchase price. Your example of pizza is flawed. A better one would be:

You sold my neighbour a pizza for $5, cheeze and pepperoni, but could only deliver a delux, but still only charged $5. If I heard about that I would likely at least *try* to get the same deal, and probably end up getting a $10 pizza for $8 instead..
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 3:22 pm

Quoting Osiris30 (Reply 28):
Man if you don't think EK, QF and every other major tier 1 airline won't try and get the same pricing, I really don't know what else to say. The simple fact of the matter is 'You sold this to my competitor for X, sell it to me for the same thing or I'll take my business elsewhere' is a very hard statement to deal with. EK and QF are the ones with the power in this arrangement, NOT Airbus. If you don't think they will try that just read the press statements where 'we want the same compensation or better than you gave our competitor'.

The key here is where else to go. (let's ignore all the complicating factors such as current fleet comonalities, date of availability, etc.). Airline X can say, but Airline Y got it for Z dollars. And Airbus can say, well we're offering it for some value greater than Z. Boeing is doing pretty well with the 787. They aren't going to be under as much pressure to take prices towards decreasing their own margins, so both A and B will be negotiating around another price point, in all likelihood, not what other planes went for. That doesn't mean that the airlines aren't going to try. But unless the orders are for a really large number of frames (EK would come to mind), i'm not so sure that the manufacturers are going to deal down that low.

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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 3:58 pm

clearly there is a big difference in how it affects others when you fail to decouple the compensation from the new order.

If airbus said... here is your $5mil a frame have a nice day and while that guy is walking out the back door the sales team is walking in the front door saying "hey for only $5mil more than your old order, you can get the new bigger and better A350xwb, and as a FREE BONUS, you get your old position in line back no questions asked!!!".

Thats a much different story to other airlines because they see A350xwb's being sold for X+5mil, not X. So Airbus has a stronger position to start with because they can then claim that finnair indeed got EXTRA discout for being an origional customer or other BS and they are starting at higher number. You run some risk of an airline spending your compensation money on a boeing plane, but in the end, keeping a firm grip on the sales price and margin is more important.

I think anyone who questions the fact that everyone and thier dog will try to get the A350XWB for Finnair's price, origional customer or not... has never tried to sell anything
 
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 5:30 pm

Quoting 2wingtips (Reply 37):
Reportedly! Where? That's a ludicrous price. All I've ever seen reported on the QF tender, was that it was a very tough negotiation. Although, the contest was reported to be close, I believe the 787 won by a considerable margin.

The offer QF got from Boeing and Airbus has been discussed several times. I looked around a bit in the various topics, have a look, it will keep you busy. There's plenty to read.

At that time the listprice for the 787 was on average US$130 million, a 50% discount for an order upto 115 aircraft is nothing out of the extrordinary.

http://seattlepi.nwsource.com/business/251934_quantas13ww.html

As far as the 787 won by a considerable margin, here's Mr. Dixon's take on it.

http://seattlepi.nwsource.com/business/251214_qantas08.html

"It's the closest contractual race I have ever seen in my time in the industry," Dixon said in a television interview last weekend.

"The tenders we have got are the best we have seen for a rollover case for aircraft in the history of Qantas," he added.

Quoting 2wingtips (Reply 37):
I actually thought you meant US$20m when you mentioned the price of an A320, because that's what they are going for these days!

Possibly. Keep in mind that that would be a 70% discount, and that availability is often understood to be the main reason to choose the A320 over the 737.

Quoting Osiris30 (Reply 38):
You sold my neighbour a pizza for $5, cheeze and pepperoni, but could only deliver a delux, but still only charged $5. If I heard about that I would likely at least *try* to get the same deal, and probably end up getting a $10 pizza for $8 instead..

No, my neighbour ordered a regular pizza. Fortunately for him, they ran out of them (the operator didn't realise and took his order) and giving him a deluxe instead. The next persons calling (the operator has been told 'no more regular pizza's) will be told that regular pizza's are no longer available and that he can only order a deluxe pizza. He might get some free chicken wings with it...  Wink
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 6:55 pm

Quoting Osiris30 (Reply 25):
Well that is the real question isn't it.. whether or not Airbus can hold pricing now that pricing such as this is being made public



Quoting Mariner (Reply 27):
If the price becomes too onerous for Airbus, I guess they can always walk away.



Quoting Dank (Reply 39):
both A and B will be negotiating around another price point, in all likelihood, not what other planes went for. That doesn't mean that the airlines aren't going to try. But unless the orders are for a really large number of frames (EK would come to mind), i'm not so sure that the manufacturers are going to deal down that low.

At the end of the day, the price an airline will be willing to pay will not be dependent upon what other EXISTING A350 customers pay, but it will be the price that makes the A350XWB the most competitive option. They may, or may not be the same thing.  Smile

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Stitch
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 10:21 pm

Quoting Astuteman (Reply 42):
At the end of the day, the price an airline will be willing to pay will not be dependent upon what other EXISTING A350 customers pay, but it will be the price that makes the A350XWB the most competitive option.

 checkmark 

Airlines will probably try to use similar deals as a starting point, but in the end, it has to make sense for them.

Even if you could get an A350XWB for $25 million, flying it on a route with an average 100-person load would be insane. You're far better off paying $30 million for an A320.
 
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 10:43 pm

Quoting Osiris30 (Reply 38):
it's not the penalties that EK will be asking for.

EK may not be the best example to use to support Airbus' ability to walk away from an A350 negotiation. They are probably Airbus' most important customer right now in that they can make or break the A380 program if the were to cancel. Of course, EK will link every Airbus negotiation to it's large A380 order! They'd be foolish not to use this leverage.

Quoting Astuteman (Reply 42):
At the end of the day, the price an airline will be willing to pay will not be dependent upon what other EXISTING A350 customers pay, but it will be the price that makes the A350XWB the most competitive option. They may, or may not be the same thing.

Agreed, but unfortunately all the numbers appearing lately would seem to set a price "ceiling" on the A350 as others have noted--at least for the customers who have firm orders or LOIs.
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RE: Finnair To Sign For A350-900XWB.....FI

Wed Feb 14, 2007 11:23 pm

Quoting Flight152 (Reply 6):
How do order something with expectations of it changing next week?

Well, if it was, at that time, the right bird for them and they could now have an even better one at the same price, I found it
pretty wise  

Quoting Stitch (Reply 43):
Even if you could get an A350XWB for $25 million, flying it on a route with an average 100-person load would be insane. You're far better off paying $30 million for an A320

Well, give me a couple of XWB at this price, and I will be able to trade them at least $60 million per unit over the day. I'm on the road to buy almost 3 A320 

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[Edited 2007-02-14 15:24:48]
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RE: Finnair To Sign For A350-900XWB.....FI

Thu Feb 15, 2007 12:58 am

Quoting Dank (Reply 39):
That doesn't mean that the airlines aren't going to try.

That was all I was trying to point out. Nothing more, nothing less.

Quoting Manni (Reply 41):
No, my neighbour ordered a regular pizza. Fortunately for him, they ran out of them (the operator didn't realise and took his order) and giving him a deluxe instead. The next persons calling (the operator has been told 'no more regular pizza's) will be told that regular pizza's are no longer available and that he can only order a deluxe pizza. He might get some free chicken wings with it...

[rotfl] Well done Manni  Smile (they need a tip of the cap icon here). As I said above it doesn't mean the pricing will give, but it does make like harder for the sales force to hold pricing.

Quoting Lumberton (Reply 44):
EK may not be the best example to use to support Airbus' ability to walk away from an A350 negotiation. They are probably Airbus' most important customer right now in that they can make or break the A380 program if the were to cancel.

The reason I point ot EK and the like is simple. There are relatively few airlines that can soak the number of planes that an EK and it's kind (tier 1) can. If you look back my original comment was with regards to 'tier 1' carriers. All I'm saying is this has likely lowered the bar of where they want their pricing to be.
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RE: Finnair To Sign For A350-900XWB.....FI

Thu Feb 15, 2007 1:03 am

The biggest pricing pressure on the A350XWB right now is the fact they've only sold a dozen or so. If they can convert all of their A350 orders over to an equal number of A350XWBs, even if at A350 prices, that will help Airbus improve their pricing as supply begins to be constrained.

With close to 500 orders on the books, Boeing can afford to be a bit less generous with the average deal because they have close to 500 orders on the books. It shows the market's confidence in the model. When an airline tells Boeing they can save $25 million per frame if they buy an A330, Boeing can respond "sure, but look at all your competitors who didn't take that same offer and instead paid more for the 787. Their models tell them that they'll earn more then that back operating the 787 instead of the A330."

When Airbus has 400+ orders for the A350XWB, it's going to offer them the same counter-argument to use when airlines come to them and note they can buy a 777 for tens of millions less and ask for deeper discounts.
 
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RE: Finnair To Sign For A350-900XWB.....FI

Thu Feb 15, 2007 8:46 am

Stitch, one of the "game changer" aspects of the 787 is that boeing being more firm on price, still leaves them with a fairly inexpensive plane compared to others. While I haven't checked their recent list prices, when launched the 787 was cheaper in list price than the 767. Which can only mean that Boeing has to discount less and can still keep a price advantage.

More to the point... I wonder how many airlines are taking A330 interim lift while waiting for the A350XWB that will find out that the 787 is a better "final solution" to replace the A330's and that the A350xwb is a whole different class of aircraft on the top end, and not small enough on the small end. While I am sure airbus is working hard to keep a high retention rate with their current customers, I wonder if that will have a factor. Certainly only a few people are silly enough to try and get A340 interim lift, but who knows Airbus might be making the kind of deals that you can't refuse. Certainly for many introduction of a 777 to the fleet incurs costs of its own, and if you can shave off enough millions to pay for the reduced resale and increased operating costs you can end up ahead. Unlike others I think the only danger in "firesale" pricing for the A340 is slots taken that could be used to build higher margin A330's. Which leads to the question are they firesale pricing A330's to get this recent spike in orders and sales. There *IS* a danger here, since firesale prices for your best widebody is a bad thing to get in the habit of. The danger for Airbus in not doing it is loss of key existing customers for a long period of time. Boeing sure learned that one, even if it took a few slaps across the face to do so.
 
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Stitch
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RE: Finnair To Sign For A350-900XWB.....FI

Thu Feb 15, 2007 9:22 am

As the 787 EIS approaches, there will be pricing pressure on the A330 line. Part of the blip in A330 sales is no doubt driven by advantageous pricing both in response to 787 RFPs and to A388 compensation agreements. But it's still a good plane and many A330 operators are going to want it to "top off" their fleets while they wait to see what the A350XWB brings to the table and they're probably not going to demand rock-bottom dollar.

LH, for example, doesn't operate the A332 (I understand the two leased birds have been or will shortly be returned) so the A332-sized 787-8 is not something they're going to be overly interested in. The 787-9 and 787-10 are what they're RFPing for and even thought they (supposedly) keep winning, LH has time to wait so they're not in any immediate pressure to order the 787 (though a prudent move would be to secure slots from 2012-onward should the A350XWB lose the final RFP).