2wingtips
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Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 6:37 pm

Been a while since we've heard from SUH, but here is an interesting article:

http://seattletimes.nwsource.com/htm...ngaerospace/2003623561_hazy18.html

Talks about eventual 787 requirement, the renegotiation of the 350 contract and Airbus' financial woes and what he would do.

The clear underlining implication here is that SUH and ILFC see a clear need for many 787s, indicating it's in demand and priced right for the market. There is still an air of cloudiness over what ILFC will do with the A350 and they have to renegotiate the XWB contract at the ole A350 price.
 
kaitak
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 6:58 pm

Interesting article; it talks of 24 787s ordered, but only 22 publicly announced. What happened to the other two?
 
Sangas
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 78

Sun Mar 18, 2007 6:59 pm

From the Seattle Times article linked by the threadstarter:

Quote:
...The re-negotiation of the A350 contract with ILFC is vital to Airbus.

The jet won't be taken seriously if Hazy doesn't buy the new model. It cannot win enough orders without his sales team drawing in airlines that don't have the cash to buy outright — he says Airbus is counting on ILFC to bring in 12 to 15 new airlines to fly the A350.

"We are the largest owner of wide-bodies between 200 and 350 seats, by far. And we're a major marketer of that category of jet," Hazy said. "They absolutely have to have us."

The sticking points are the price — "obviously, we have to keep the price [unchanged], otherwise we just say forget it," Hazy said — the new delivery schedule, and the clauses that account for inflation before delivery.

"Their target is to get it wrapped up by the Paris Air Show [in June] so they can tell the world, 'OK, we made peace with ILFC and it's firmly on board the A350,' " Hazy said, "Then we can go out and sign leases with airlines."

Hazy says he is sure they'll come to an agreement, but noted, "It's in their interest to get it wrapped up sooner" rather than later.

"Otherwise some of these airlines may be tempted to go with the 787..."

No hint from Mr. U-H that he has any qualms about Airbus' composite panel/shell design approach. Geoff Thomas reported in ATWonline in January that certain customers were insisting upon monolithic composite barrel construction, apparently Mr. U-H isn't among them.

[Edited 2007-03-18 12:01:25]
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2wingtips
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 7:02 pm

Quoting Sangas (Reply 2):
No hint from Mr. U-H that he has any qualms about Airbus' composite panel/shell design approach. Geoff Thomas reported in ATWonline in January that certain customers were insisting upon monolithic composite barrel construction, apparently Mr. U-H isn't among them.

No mention doesn't mean he doesn't have reservations and they can always use contract issues as an out clause.
I think ILFC will stick to the 350, but they will eventually order many more 787s than 350s. Time will tell.
 
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mariner
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 7:03 pm

I'm still confused by this modern tactic of negotiating through the press.

mariner
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RichardPrice
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 7:06 pm

Quoting Sangas (Reply 2):
The sticking points are the price — "obviously, we have to keep the price [unchanged], otherwise we just say forget it," Hazy said — the new delivery schedule, and the clauses that account for inflation before delivery.

So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?
 
2wingtips
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 7:16 pm

Quoting RichardPrice (Reply 5):
So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

Well Finnair have come out publicly and said they negotiated the old 350 pricetag for the XWB order, so aren't ILFC and all other original 350 orderers going to do the same. I think even Airbus admits this will be the case. Gets the XWB off to a very expensive start.
 
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mariner
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 7:19 pm

Quoting 2wingtips (Reply 6):
I think even Airbus admits this will be the case.

If they have, then what is Mr. Udvar-Hazy's point in going public?

mariner
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PEET7G
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 7:37 pm

Quoting Mariner (Reply 7):
If they have, then what is Mr. Udvar-Hazy's point in going public?

He is a Hungarian after all, he needs the shine and pride that shows everyone how important and big he is.... Big grin
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Rheinbote
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 8:04 pm

SUH puts his finger right to the spot
The sticking points are the price — "obviously, we have to keep the price [unchanged], otherwise we just say forget it," Hazy said — the new delivery schedule, and the clauses that account for inflation before delivery.

While there's constant bickering on A.net about seat comfort, payload-range and CASM, a major difference between the 787 and the 350XWB is in the price-tag, and presumably in cost of ownership as well. Even A350 Mk.I was already more expensive than the 787 in list prices, while I hear that street prices where consistently lower. Mind you, there has to be a business case not only for the airline, but for the OEM as well.

The offensive approach? To leapfrog ahead with technology. "To make such a progressive step in this new replacement airplane that no one can match it," Hazy said.

Like single-piece CFRP barrels and bleed-less systems? Or a level of design/manufacturing/support integration not even matched by the nearest incumbent player? Or very short development cycle times that allow to outmaneuver the competition in time-to-market?

"no one can match it"...is he referring to the 787? I'd love to know SUH's assessment of Power8...
 
Lumberton
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 78

Sun Mar 18, 2007 8:22 pm

Quoting Rheinbote (Reply 9):
While there's constant bickering on A.net about seat comfort, payload-range and CASM, a major difference between the 787 and the 350XWB is in the price-tag, and presumably in cost of ownership as well.

I've noticed an a.net tendency to downplay price as a factor--an almost indifference to deep discounting just to move the aircraft; sometimes it seems as if indirectly advocating a market share strategy. At some point, these companies must make a profit (at least om the market driven capital model!). Note SUH's recommendation to EADS to avoid more political interference by avoiding government cash injections. They are being told to avoid government assistance, yet told to discount the aircraft, "we want the original price", etc. I suspect at some level, "players" in the industry have a very good idea what an airline or lessor paid for their aircraft, and will want the same deal. Sometimes these things leak, like the Iberia deal on the A346s.

Isn't EADS on a "slippery slope" here? Given the dollar to euro imbalance, profitability "challenges", "Power 8", etc., can EADS afford to heavily discount the A350XWB?

[Edited 2007-03-18 13:24:27]
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Norcal773
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 8:35 pm

My question is, don't you think this 'price' factor will come back to bite Airbus at some point? If a bunch of airlines buy it at a considerably low price compared to how much it's being sold for just because they had ordered the old version, don't you think 'new order' airlines will b*tch about this when they go to the negotiating table? I would, especially if it's more expensive than the 787.
If you're going through hell, keep going
 
Lumberton
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 8:41 pm

Quoting Lumberton (Reply 10):
Isn't EADS on a "slippery slope" here?



Quoting Norcal773 (Reply 11):
don't you think this 'price' factor will come back to bite Airbus at some point?

Yes, Norcal773, I do. And by discounting the A350XWB to the original offering price of the previous version of the A350, doesn't EADS run the risk of setting a de facto price "ceiling" for the newer model?
"When all is said and done, more will be said than done".
 
Norcal773
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 8:42 pm

Quoting Lumberton (Reply 12):
doesn't EADS run the risk of setting a de facto price "ceiling" for the newer model?

Exactly my point, which is the last thing they need after the A380 debacle.
If you're going through hell, keep going
 
astuteman
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 9:18 pm

Quoting Lumberton (Reply 10):
Given the dollar to euro imbalance, profitability "challenges", "Power 8", etc., can EADS afford to heavily discount the A350XWB?

They've written off some E670m in 2006 against the "losses" on the first 100 frames, so as to allow "pricing normality" to resume.

Quoting Norcal773 (Reply 11):
don't you think 'new order' airlines will b*tch about this when they go to the negotiating table? I would, especially if it's more expensive than the 787.

At the end of the day, new customers will ONLY compare the price, and therefore economics of the A350XWB against its competitor, the 787.
Whatever early frames sold for will be utterly meaningless.
If they determine that it's more economic for them, they will buy it.

Regards
 
EI321
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 9:30 pm

Quoting RichardPrice (Reply 5):
Quoting Sangas (Reply 2):
The sticking points are the price — "obviously, we have to keep the price [unchanged], otherwise we just say forget it," Hazy said — the new delivery schedule, and the clauses that account for inflation before delivery.


So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

That says more about Mr UH than the old or new A350s!
 
kaitak
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 9:51 pm

Quoting EI321 (Reply 15):
So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

Isn't that what all the other operators wanted - Finnair etc; ok, maybe Finnair didn't ask for the redesign, but they still got the airplane at the same cost (I think). I don't think it's unreasonable for ILFC not to want to pay any more. Ultimately, it was Airbus's choice to change the airplane design, so I don't see why ILFC should have to pay more.
 
EI321
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 9:55 pm

Quoting Kaitak (Reply 16):
Quoting EI321 (Reply 15):
So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

Isn't that what all the other operators wanted - Finnair etc; ok, maybe Finnair didn't ask for the redesign, but they still got the airplane at the same cost (I think).

Its important to separate the ILFC order from the rest as they did not ask for a change. It was Hazy that was complaining about the old A350 but still ordered it anyway. He wants to have his cake and eat it too.
 
Lumberton
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 10:18 pm

Quoting Astuteman (Reply 14):
They've written off some E670m in 2006 against the "losses" on the first 100 frames, so as to allow "pricing normality" to resume.



Quoting Astuteman (Reply 14):
At the end of the day, new customers will ONLY compare the price, and therefore economics of the A350XWB against its competitor, the 787.

In the long run, perhaps. In the short run, as Airbus tries to slow the 787 sales juggernaut, will the likes of EK want to pay more than Qatar or Finnair? "

Quoting Astuteman (Reply 14):
Whatever early frames sold for will be utterly meaningless.

"Utterly meaningless"? Yes, if EADS can can convince the customers that the aircraft will be on time and will perform
"a little bit better" as Mr. Leahy promised. In the meantime, and especially at this point in the game, I submit that the original pricing will be very much relevant, and on the tableas an issue for the short term.
"When all is said and done, more will be said than done".
 
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Stitch
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 10:29 pm

Remember that ILFC is just the "front man" here. Udvar-Hazy doesn't care what the A350XWB looks like or is made of, provided it appeals to customers at a lease rate that makes him money. So when he comments on the A350XWB, he's speaking for his potential customers far more then for himself. I am sure he has his own ideas of what sells and what doesn't, but in the end his customers call the shots on that end, not him.

It is also in his best interests to get customers to lease the A350XWB to keep his own acquisition costs down by buying from both manufacturers. So if his customers are gravitating to the 787, instead, he needs to find a way to make the A350XWB more appealing to them. Price is one way to do that. Performance is another.

The trick is, Airbus doesn't have performance numbers to offer because they're not in a position to do so. And the 787 is mere months away from starting to prove her numbers in the real world. So price is probably the best option at the moment.
 
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scbriml
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 10:36 pm

Quoting Lumberton (Reply 18):
will the likes of EK want to pay more than Qatar or Finnair?

In fact QR are in the same boat as EK, since they never placed a firm order for the original A350. I don't think a lapsed LOI will carry the same weight as AY's firm order.

Obviously both QR and EK would like to get the A350XWB for the price of the old A350, who wouldn't? But since neither of them signed on the dotted line, they'll only get the "real" price (less suitable discount for placing rumoured orders of 80 and 100 each!)
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Rheinbote
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 10:40 pm

Quoting Lumberton (Reply 10):
I've noticed an a.net tendency to downplay price as a factor--an almost indifference to deep discounting just to move the aircraft; sometimes it seems as if indirectly advocating a market share strategy.

I think Airbus just found out that their cost structure never really allowed for the levels of discounting as sanctioned off by Leahy/Forgeard for the sake of attaining 'market leadership'. Boeing has adressed the pressure in prices with their lean efforts ongoing for years now.The threat A is facing now is a competitor aircraft that not only has an edge in performance, but is more attractive in price on top. That's why I think that something like Power8 would have been needed at A regardless of the A380 mess or a weak dollar.
 
RichardPrice
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 10:48 pm

Quoting Rheinbote (Reply 21):
I think Airbus just found out that their cost structure never really allowed for the levels of discounting as sanctioned off by Leahy/Forgeard for the sake of attaining 'market leadership'.

Up until the A380 payouts last year, Airbus was turning over a healthy net profit, so I think their cost structure was entirely up to the task.
 
Poitin
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 10:54 pm

Quoting Lumberton (Reply 10):
Isn't EADS on a "slippery slope" here? Given the dollar to euro imbalance, profitability "challenges", "Power 8", etc., can EADS afford to heavily discount the A350XWB?

You have nailed the real issue here, which is EADS is not a viable commercial airframe manufacturer -- too much nation pride and politics. SUH did touch upon this with is comment:

Quote:

As for Airbus' broad structural problems, as it faces political pressure and labor unrest in Europe, Hazy said he'll advise Gallois to avoid further political interference by eschewing government launch aid for the A350 and instead go with private risk-sharing partners, as Boeing has done on the 787.

Airbus has to reorganize completely into a commercial enterprise. Will that happen -- probably not.
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osiris30
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:06 pm

I'm always ammused when people say things like 'Well they didn't have a contract for the old price so they have to pay the new price'. The simple fact of the matter is that they don't. Furthermore if the CEOs of airlines trying to order the 350 don't try and get the best possible price they know is available they are likely in breach of their fudiciary duty and should be fired immediately.

This is business. It's not about technically right or wrong, it's about dollars and cents. The sooner people on this forum wake up to that reality the happier many of them will be. If I'm running an airline and I know Airbus has sold a product to another customer for $x, it's my JOB to try my damnedest to also get the same aircraft for $x. I'm not going to sit there and say 'Oh, well I guess since I didn't have a contract for a plane that will never be built I shouldn't ask for pricing of $x'.

Airbus made a real issue for themselves, simply out of the fact they couldn't swallow their pride long enough to cancel the 350 project and call the new jet a 370 or 360. Don't for a minute think any major airlines are going to let Airbus off the hook simply because they didn't sign a contract like Finnair. They are going to beat up Airbus on pricing as much as they can. They may not get the planes for $x, but it will certainly be less than they would have paid if a deal for $x hadn't existed.
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Rainmaker
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:07 pm

Quoting EI321 (Reply 15):
Quoting RichardPrice (Reply 5):
Quoting Sangas (Reply 2):
The sticking points are the price — "obviously, we have to keep the price [unchanged], otherwise we just say forget it," Hazy said — the new delivery schedule, and the clauses that account for inflation before delivery.


So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

That says more about Mr UH than the old or new A350s!

I would add it says more about his profession. He's a trader after all. At the end of the day what matters is "buy low, sell high". And there is nothing wrong about advocating better conditions to improve his company's profitability. The problem comes when people take his comments as unbiased.

Cheers!
 
Lumberton
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:14 pm

Quoting Osiris30 (Reply 24):
If I'm running an airline and I know Airbus has sold a product to another customer for $x, it's my JOB to try my damnedest to also get the same aircraft for $x.

I'd take it a step further, Osiris30. If I were negotiating, I'd be asking for "$x-$y"!
"When all is said and done, more will be said than done".
 
zanl188
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:20 pm

Quoting RichardPrice (Reply 5):
So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

Mr UH points out a major problem with the design, saves Airbus' bacon, and he should pay more? Airbus should pay him .....
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EI321
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:26 pm

Quoting ZANL188 (Reply 27):
Quoting RichardPrice (Reply 5):
So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

Mr UH points out a major problem with the design, saves Airbus' bacon, and he should pay more? Airbus should pay him .....

Airbus did not change the A350 solely on the comments of one customer!
 
Rheinbote
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:26 pm

Quoting RichardPrice (Reply 22):
Up until the A380 payouts last year, Airbus was turning over a healthy net profit, so I think their cost structure was entirely up to the task.

How much of that profit was from hedging contracts, and how much was from operations? Why was 'Route 06' put in place, and did it succeed?
 
jacobin777
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 78

Sun Mar 18, 2007 11:37 pm

Quoting Lumberton (Reply 10):

I've noticed an a.net tendency to downplay price as a factor-

...actually, I've been saying this about the A380, even though many A.netters state that "Airbus will do anything to get BA on board (no pun intended) the A380 program"....

at some point in time, a manufacturer has to increase prices to improve profit margins and get a decent ROI....

Quoting Astuteman (Reply 14):
At the end of the day, new customers will ONLY compare the price, and therefore economics of the A350XWB against its competitor, the 787.
Whatever early frames sold for will be utterly meaningless.
If they determine that it's more economic for them, they will buy it.

 checkmark .....if this wasn't a case, none of the manufacturers would have a decent ROI....and even though carriers get "discounts"...they are based on increased MRSP (for example, Airbus increased the price tag of the A380 from $280 million to $300 million...so even a discount on it will still be more expensive than the original price tag)....

Quoting Rheinbote (Reply 21):
That's why I think that something like Power8 would have been needed at A regardless of the A380 mess or a weak dollar.

 checkmark ....

Quoting RichardPrice (Reply 22):
Up until the A380 payouts last year, Airbus was turning over a healthy net profit, so I think their cost structure was entirely up to the task.

Airbus/EADS had a lot of things going for it.....such as lower Euro, lower tax structure, planes which were in higher demand, etc.....most of those are gone......add that to the current A380 problem.
"Up the Irons!"
 
Poitin
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:41 pm

Quoting Rheinbote (Reply 29):
Quoting RichardPrice (Reply 22):
Up until the A380 payouts last year, Airbus was turning over a healthy net profit, so I think their cost structure was entirely up to the task.

How much of that profit was from hedging contracts, and how much was from operations? Why was 'Route 06' put in place, and did it succeed?

I agree with Rheinbote -- there is no evidence beyond what EADS says as to how much money Airbus was or was not making -- and I submit that EADS is not to be trusted to so much as tell you the correct time of day if they thought it was to their advantage.

When Airbus is a publicly traded company with quarterly and annual reports like Boeing has to issue under strict governance, just about any statements regarding Airbus profits are so much smoke.
Now so, have ye time fer a pint?
 
manni
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:42 pm

Quoting Osiris30 (Reply 24):
If I'm running an airline and I know Airbus has sold a product to another customer for $x, it's my JOB to try my damnedest to also get the same aircraft for $x.

Do you suggest that Jet Airways, who ordered 787s at the end of 2006 got them for the same price as All Nippon Airlines did in 2004? Or did ALAFCO get them for the same price as Air New Zealand? Not only got NH and more then likely Air New Zealand a launch discount, at that time the listprice of a 787 was said to be about US$120 million. That's far less then they're priced now.

Quoting Osiris30 (Reply 24):
I'm always ammused when people say things like 'Well they didn't have a contract for the old price so they have to pay the new price'.

Last November I booked a ticket from ICN to HKG for december, the price for the ticket was great. In December my wife decided to acompany me. I booked the same ticket on the same airline, the seats next to each other. Those bandits charged me double. I didn't make a reservation for 2 in november, should I pay the going rate in december when making a reservation in december?

Note: Above story didn't happen.

Quoting Osiris30 (Reply 24):
They are going to beat up Airbus on pricing as much as they can.

Wich has nothing to do with the A350XWB. Airlines will always trying to beat up the manufacturer on pricing as much as they can. If they don't, those responsible for purchasing should, as you put it, be fired immidiately.
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RichardPrice
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:53 pm

Quoting ZANL188 (Reply 27):
Mr UH points out a major problem with the design, saves Airbus' bacon, and he should pay more? Airbus should pay him .....

He requested the change, and lets face it Airbus had a 100 orders for the A350 pre XWB, and another 100 to be firmed. Did he really 'save Airbus' bacon'?

Quoting Poitin (Reply 31):
there is no evidence beyond what EADS says as to how much money Airbus was or was not making -- and I submit that EADS is not to be trusted to so much as tell you the correct time of day if they thought it was to their advantage.

When Airbus is a publicly traded company with quarterly and annual reports like Boeing has to issue under strict governance, just about any statements regarding Airbus profits are so much smoke.

Yet another person that thinks the EU financial rules are meaningless. EADs is a publically traded company, so it can hardly lie about anything.
 
astuteman
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Sun Mar 18, 2007 11:59 pm

Quoting Osiris30 (Reply 24):
If I'm running an airline and I know Airbus has sold a product to another customer for $x, it's my JOB to try my damnedest to also get the same aircraft for $x.

It's without doubt an airliine CEO's job to negotiate the best possible price for his aircraft. But you only paint half the picture.

Quoting Osiris30 (Reply 24):
It's not about technically right or wrong, it's about dollars and cents.

Absolutely right. So no CEO in his right mind is going to turn down a price that could be substantially higher than the "$x" being paid by the existing customers if it is STILL the best overall price.
You think they'll go running to the other manufacturer and pay an even higher price just because Airbus say "Sorry, but you have no existing conract and are therefore not entitled to price "$x"?"  no 

Quoting Rheinbote (Reply 21):
I think Airbus just found out that their cost structure never really allowed for the levels of discounting as sanctioned off by Leahy/Forgeard

That's very much overly simplistic

Quoting RichardPrice (Reply 22):
Up until the A380 payouts last year, Airbus was turning over a healthy net profit, so I think their cost structure was entirely up to the task.

And so is this.

Quoting Rheinbote (Reply 29):
How much of that profit was from hedging contracts, and how much was from operations? Why was 'Route 06' put in place, and did it succeed?

Airbus's cost structure was just fine for the family of aircraft they were designing, building and selling up to about 2003. The aircraft were modern (i.e. well production engineered), and all based around standard cross-sections/tooling.
By chance, or deliberately, Airbus chose to err on the side of low manufacturing cost vs higher weight/fuel consumption when trading off their production engineering options.
Result, the aircraft were cheaper to build (and buy) than their Boeing counterparts, but risked being heavier/slightly less fuel efficient.

When fuel was a small cost proportion, this strategy worked just fine.
The strong dollar, and the engineering strategy that was in place meant that Airbus could underbid Boeing, and still make better margins, and airlines would like this as their overall cost was lower.

Today, the dollar is weak. This has eroded Airbus's cost advantage. Fuel is expensive, and therefore it's less efficient models, now no cheaper than their Boeing counterparts, are struggling in the market.
Enter the A350XWB, and now Airbus HAVE to make VERY efficient aircraft, just as Boeing do.
Look what's happened to the list price of the -XWB.
The old strategy of simplifying the product to reduce production cost, at the expense of a potentially less optimal operational airframe no longer works.

In reality, Airbus didn't do as well as it has looked in the last 10 years. They've done a good job of taking advantage of favourable economic conditions.
In contrast, Boeing actually haven't done as badly as it has looked. They've navigated their way through highly disadvantageous economic conditions successfully, and are now reaping the benefits.

I'm quite content that, until recently, the discounts being offered by Airbus were extremely commercially viable.
Today, the weak dollar will be eating into this, and it's going to have to learn how to engineer its new "ultra-efficient" products as cheaply as Boeing can.

Enter Power8.

Regards
 
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scbriml
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:09 am

Quoting Osiris30 (Reply 24):
I'm always ammused when people say things like 'Well they didn't have a contract for the old price so they have to pay the new price'. The simple fact of the matter is that they don't.

Of course they do.

Airbus's list price for the A350XWB will the starting point for the negotiations, at which the CEO for the airline will do his job and get the best price he can, while the Airbus salesman's job is to get the best price he can.

I really don't think that you believe just because customer X gets product Y at a certain price, that every other customer gets it at the same price. Of course they don't.

If, for example, EK does order the A350XWB, they will have to pay whatever their discounted A350XWB price is. They won't get it for the price of a different plane (which is what you're suggesting will happen). Does Boeing sell a 748 for the same price that PanAm paid for their first 747? I think not!
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zanl188
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:25 am

Quoting RichardPrice (Reply 33):
Did he really 'save Airbus' bacon'?

Apparently Airbus thinks so....... they made the changes requested....
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astuteman
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:36 am

Quoting ZANL188 (Reply 36):
Apparently Airbus thinks so....... they made the changes requested....

It was suggested by Gustav Humbert that Airbus had already started down the -XWB route after losing (IIRC) the Air India order (on 9-abreast ability), and then the QF order.
I think it's over-simplifying to say "S U-H said "jump" and Airbus "jumped".

Regards
 
atmx2000
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:38 am

Quoting RichardPrice (Reply 22):
Up until the A380 payouts last year, Airbus was turning over a healthy net profit, so I think their cost structure was entirely up to the task.



Quoting Jacobin777 (Reply 30):
Airbus/EADS had a lot of things going for it.....such as lower Euro, lower tax structure, planes which were in higher demand, etc.....most of those are gone......add that to the current A380 problem.

And they had currency hedges to damp the short term effects of the dollar returning from stratospheric heights.

Quoting Astuteman (Reply 34):
In reality, Airbus didn't do as well as it has looked in the last 10 years. They've done a good job of taking advantage of favourable economic conditions. In contrast, Boeing actually haven't done as badly as it has looked. They've navigated their way through highly disadvantageous economic conditions successfully, and are now reaping the benefits.

Bingo. Airbus also benefited from coming to the market in the middle of the 767's life with the A332. Boeing wasn't willing to spend the money to upgrade that product significantly to make it more competitive.

Quoting Astuteman (Reply 34):
I'm quite content that, until recently, the discounts being offered by Airbus were extremely commercially viable. Today, the weak dollar will be eating into this, and it's going to have to learn how to engineer its new "ultra-efficient" products as cheaply as Boeing can.

The thing is the dollar isn't that weak. Based on historical trading ranges against the Euro/ECU, the dollar has been averaging something in the range of $1.18 per Euro. The dollar's most recent peak was something like <$0.85 per Euro, which is a much further from the average than the current value. Also if you look at per capita GDP numbers, the US is still well ahead of the UK, France, Spain, and Germany on both a nominal and PPP basis. You expect these numbers to converge in the long term to some number corresponding to the productivity difference.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
EI321
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:42 am

Quoting Atmx2000 (Reply 38):
Bingo. Airbus also benefited from coming to the market in the middle of the 767's life with the A332. Boeing wasn't willing to spend the money to upgrade that product significantly to make it more competitive.

They did spend money on the 767 to make it more competitive. But the 767-400 was still not as good as the A330-200 the it was intended to rival. Even ILFC canceled theirs.
 
atmx2000
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:51 am

Quoting EI321 (Reply 39):
Quoting Atmx2000 (Reply 38):Bingo. Airbus also benefited from coming to the market in the middle of the 767's life with the A332. Boeing wasn't willing to spend the money to upgrade that product significantly to make it more competitive.
They did spend money on the 767 to make it more competitive. But the 767-400 was still not as good as the A330-200 the it was intended to rival. Even ILFC canceled theirs.

Keyword: significantly

They tried to compete on the cheap.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
Cruiser
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:55 am

Quoting Astuteman (Reply 37):
It was suggested by Gustav Humbert that Airbus had already started down the -XWB route after losing (IIRC) the Air India order (on 9-abreast ability), and then the QF order.
I think it's over-simplifying to say "S U-H said "jump" and Airbus "jumped".

Also, the AC order around the same time as AI hurt! They wanted to replace 767's, and didn't need the extra capacity that Airbus was offering. Robert Milton went out of his way to say that the 787-9 was the 'sweetspot' for AC, and unfortunately, there was nothing offered at that time around that size. It is now just a matter of time before we see AC firm up some more 787 options. I think that the AC campaign had a deep impact with Airbus - because they had bought Airbus for the last 20 years exclusively. AC replacing the A340's with 777's probably influenced the move to try to replace both models with the one.

James
Leahy on Per Seat Costs: "Have you seen the B-2 fly-by at almost US$1bn a copy? It has only 2 seats!"
 
astuteman
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:57 am

Quoting Atmx2000 (Reply 40):
They tried to compete on the cheap

I believe this to be correct. FWIW, though, I also believe it was an appropriate strategy for the time.
Airbus's meteoric growth would appear to confirm this.
HOWEVER, Airbus unfortunately, in recent years, chose to ignore the warning signs that their economic "model" was about to become obsolete, and are now paying the price.
They became complacent
The A380 fiasco just adds to the problem.

Regards
 
Rheinbote
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 12:59 am

Quoting Astuteman (Reply 34):
Airbus's cost structure was just fine for the family of aircraft they were designing, building and selling up to about 2003. The aircraft were modern (i.e. well production engineered), and all based around standard cross-sections/tooling.

Up to the A3456, Airbus' aircraft were competitive in fuel burn and operating economics, so nobody cared about a slightly inferior structural efficiency.
In the mid 90s, Boeing's manufacturing landscape was decidely outdated as compared to Airbus, a fact that was openly admitted by Boeing. It seems Airbus may have had a real advantage in manufacturing cost back then so maybe they could afford a cut-throat competition with Boeing on prices. I don't think so, nevertheless.

Quoting Astuteman (Reply 34):
By chance, or deliberately, Airbus chose to err on the side of low manufacturing cost vs higher weight/fuel consumption when trading off their production engineering options.

The 3456 never was a compromise between low manufacturing cost and weight/fuel burn. It's just a bad design that ended up being heavy, overcomplicated, and expensive. As we all know Leahy offered to compensate airlines for the disadvantage in fuel burn vis-a-vis the 777 in cash! To me at the time that was yet another strong indicator that Airbus management had their heads in the clouds.
In the meantime, Boeing has revamped its complete design & manufacturing landscape and has effectively overtaken Airbus in production efficiency (amongst other indicators). I think buying market share through aggressive pricing - if ever it was - is really no longer an option for Airbus. So no way to compensate for being late to the market or being vaguely competitive in performance. A real challenge that is not going to be solved by Power8 alone.

Quoting Astuteman (Reply 34):
In reality, Airbus didn't do as well as it has looked in the last 10 years. They've done a good job of taking advantage of favourable economic conditions.
In contrast, Boeing actually haven't done as badly as it has looked. They've navigated their way through highly disadvantageous economic conditions successfully, and are now reaping the benefits.

 checkmark  Fully agreed. A sober assessment of the past 10 years is quite revealing (with or without hindsight)
 
EI321
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 1:01 am

Quoting Atmx2000 (Reply 40):
Quoting EI321 (Reply 39):
Quoting Atmx2000 (Reply 38):Bingo. Airbus also benefited from coming to the market in the middle of the 767's life with the A332. Boeing wasn't willing to spend the money to upgrade that product significantly to make it more competitive.
They did spend money on the 767 to make it more competitive. But the 767-400 was still not as good as the A330-200 the it was intended to rival. Even ILFC canceled theirs.

Keyword: significantly

They tried to compete on the cheap.

How much did it cost? I
 
BoomBoom
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 78

Mon Mar 19, 2007 1:20 am

Quoting RichardPrice (Reply 5):
So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

Why not? He wants an A350 that matches the 787 in every way, including the price, "otherwise we just say forget it," Hazy said".

Quoting Manni (Reply 32):
Those bandits charged me double. I didn't make a reservation for 2 in november, should I pay the going rate in december when making a reservation in december?

If you were their most important customer spending billions buying their products, and had the ability to influence others to do the same, they'd be willing to bend on the price of your wife's ticket.

The jet won't be taken seriously if Hazy doesn't buy the new model... he says Airbus is counting on ILFC to bring in 12 to 15 new airlines to fly the A350.

"We are the largest owner of wide-bodies between 200 and 350 seats, by far. And we're a major marketer of that category of jet," Hazy said. "They absolutely have to have us."


Do you have that kind of clout?

This is what caught my eye:

Hazy thinks Gallois has only a limited time to begin his reshaping of Airbus — probably not much beyond the Paris Air Show.

"They've got to get this under control. If there's a few months of turmoil and agony, I think people will look at that as part of a structural change," he said. "But if it goes much longer than that, you could have customers saying ... 'We are going with the more reliable source' (Boeing)."


Yet Power8 still appears to be very much up in the air:

Quote:
Daniel Friedrich, a spokesman for the powerful German union IG Metall, said support from the German federal government would be necessary to force Airbus bosses to rescind Power8.

He added that it was now up to Airbus management to unveil the fine points in the plan, after which "we will be able to propose better solutions, which will takes weeks or months."

http://news.yahoo.com/s/afp/20070316...franceeuropeaerospace_070316195049
Our eyes are open, our eyes are open--wide, wide, wide...
 
flydreamliner
Posts: 1928
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 1:25 am

Quoting RichardPrice (Reply 5):
Quoting Sangas (Reply 2):
The sticking points are the price — "obviously, we have to keep the price [unchanged], otherwise we just say forget it," Hazy said — the new delivery schedule, and the clauses that account for inflation before delivery.

So he wanted the A350 design changed in a fundamental way, very publically, and now he wants to reap the reward of that design change but not pay the extra?

And we wonder how he is worth 3b USD? It's smart negotiation. From his standpoint, he wants the most plane at the lowest dollars, its how you make a profit. Udvar-Hazy's job isn't to worry about giving airbus a fair deal, that's airbus' job.

Quoting Lumberton (Reply 18):
Quoting Astuteman (Reply 14):
At the end of the day, new customers will ONLY compare the price, and therefore economics of the A350XWB against its competitor, the 787.

In the long run, perhaps. In the short run, as Airbus tries to slow the 787 sales juggernaut, will the likes of EK want to pay more than Qatar or Finnair? "

No, this giving the XWB's at Mk. 1 A350 prices is dangerous because while you can say list price is where negotiations start from, the prices Qatar, Finnair, and ILFC are paying will have a bearing on what other airlines will pay too.

Quoting EI321 (Reply 39):
Quoting Atmx2000 (Reply 38):
Bingo. Airbus also benefited from coming to the market in the middle of the 767's life with the A332. Boeing wasn't willing to spend the money to upgrade that product significantly to make it more competitive.

They did spend money on the 767 to make it more competitive. But the 767-400 was still not as good as the A330-200 the it was intended to rival. Even ILFC canceled theirs.

A332 and 764 had their respective benefits. CASM was lower on 764, A332 had longer range and better cargo capacity. The big problem 764 had was that all of Boeing's 767 customers had not waited and just bought A330s by the time 764 finally came out. The market was more or less satisfied. Also, 764 was part of an older family, as opposed to the mostly new A330.

As for A350 coming out after 787, it should be an advantage, except that Airbus will still not be incorporating all of 787s innovations, largely due to managerial incompetence at airbus. They didn't take 787 seriously till it was too late, and now they are trying to put an all new plane together as quickly as possible and don't have the time to do all the innovation. It's too bad.
"Let the world change you, and you can change the world"
 
BoomBoom
Posts: 2459
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 1:44 am

Quoting Astuteman (Reply 37):
It was suggested by Gustav Humbert that Airbus had already started down the -XWB route after losing (IIRC) the Air India order (on 9-abreast ability), and then the QF order.
I think it's over-simplifying to say "S U-H said "jump" and Airbus "jumped".

At the time of the SUH speech there was a lot of speculation that there was a power struggle within Airbus over what to do with the poorly selling A350. A few people suggested that SUH was doing Leahy's bidding by calling for an all new plane.

Others speculated that the decision was already made and the SUH speech was just a way to prepare the public for the news.

Granted it was all a.net speculation, but it was intriguing.
Our eyes are open, our eyes are open--wide, wide, wide...
 
EI321
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 2:02 am

Quoting FlyDreamliner (Reply 46):
As for A350 coming out after 787, it should be an advantage, except that Airbus will still not be incorporating all of 787s innovations, largely due to managerial incompetence at airbus. They didn't take 787 seriously till it was too late, and now they are trying to put an all new plane together as quickly as possible and don't have the time to do all the innovation. It's too bad.

As quickly as possible? It wont EIS until 2012! Thats a longer development cycle than the 787.
 
MCOflyer
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RE: Udvar-Hazy: Ilfc To Eventually Acquire 100+ 787s

Mon Mar 19, 2007 2:07 am

Mr. Hazy is speaking on behalf of several customers including EI. If EI orders the A350 they'll lease through ILFC.

MCOflyer
Never be afraid to stand up for who you are.

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