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N328KF
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WSJ: A380 Break-even Has Risen -Gallois

Fri May 04, 2007 11:39 pm

I don't know if this means more than the 420 target, but this article from The Wall Street Journal points out that Gallois was deliberately non-specific (brief fair-use excerpt):

Quote:
AMSTERDAM (Dow Jones)--The break-even point for Airbus' problem-plagued A380 airplane program has risen following recent difficulties, the planemaker's Chief Executive Louis Gallois said at the annual shareholder meeting of parent company European Aeronautic Defence & Space Co. (5730.FR) Friday.

"Clearly because of the difficulties of the A380, the break-even point has increased," Gallois said. EADS now isn't giving specific targets on the number of A380s it needs to sell to break even on the project, he said.

Airbus has currently sold 156 A380s. Last year it said it needed to sell around 420 of the planes to break even. This break-even guidance was given before Airbus unveiled a major cost-cutting program known at Power8.

Gallois is also joint CEO of EADS.

http://online.wsj.com/article/BT-CO-20070504-707821.html?mod=hps_us_my_companies

[Edited 2007-05-04 16:47:30]
When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' -Theodore Roosevelt
 
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clickhappy
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RE: Gallois: A380 Break-even Has Risen

Fri May 04, 2007 11:43 pm

Who is surprised, really?

Lack of regulatory control over Airbus is the only thing saving them, and by them I mean the share price of EADS, from going into a complete freefall.
 
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zeke
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RE: Gallois: A380 Break-even Has Risen

Fri May 04, 2007 11:46 pm

Nothing new RE: 420 A380 Units To Break Even (by SEPilot Jan 20 2007 in Civil Aviation), been discussed before
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
cfalk
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RE: Gallois: A380 Break-even Has Risen

Fri May 04, 2007 11:46 pm

I'm sure he's not counting the fact that if the project does not break even in the next 12 years or so (which it won't), the multi-billion Euro loans that were provided by the EU will be forgiven.

Around here, that's called a scam.
The only thing you should feel when shooting a terrorist: Recoil.
 
NYC777
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RE: Gallois: A380 Break-even Has Risen

Fri May 04, 2007 11:47 pm

If the breakeven has increased I wonder what the RoI on the A380 is projected to be. Certainly not as good as when Airbus ventured down this path in 2000. They're projecting to sell 700-750 of these and with break even IMO closer to 500 the RoI is not going to be good compared to a true 787-type aircraft had they not putzed around for 3 years.
That which does not kill me makes me stronger.
 
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RE: Gallois: A380 Break-even Has Risen

Fri May 04, 2007 11:48 pm

Quoting Zeke (Reply 2):
Nothing new RE: 420 A380 Units To Break Even (by SEPilot Jan 20 2007 in Civil Aviation), been discussed before

That's easy for you to say, but WSJ is suggesting that this may be a further increase in break-even. That's why they mentioned that the 420 number was from last year, where Gallois' comments use the term "recent."

[Edited 2007-05-04 16:50:08]
When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' -Theodore Roosevelt
 
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zeke
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:24 am

Its the EADS annual meeting from the 4th May 2007 in AMS, anything that was reported in the past 12 months will get a mention, including the announcement made last October of the increase to 420.

Nothing new IMHO, just reporting to the shareholders the previous years activities, the report is available online from EADS http://www.eads.com/xml/content/OF00000000400004/8/46/41589468.pdf
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
Logos
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:25 am

Quoting NYC777 (Reply 4):
I wonder what the RoI on the A380 is projected to be

I would assume some non-positive number.

Cheers,
Dave in Orlando
Too many types flown to list
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:28 am

Quoting NYC777 (Reply 4):
If the breakeven has increased I wonder what the RoI on the A380 is projected to be. Certainly not as good as when Airbus ventured down this path in 2000. They're projecting to sell 700-750 of these and with break even IMO closer to 500 the RoI is not going to be good compared to a true 787-type aircraft had they not putzed around for 3 years

I imagine that the ROI on the A380 project will be NEGATIVE for the life of the program.
 
pygmalion
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:29 am

Last year Airbus said is was in the range of 420... this year they "are no longer giving specific targets"

If it is the same as Zeke says... they would say it was still the same instead of refusing to discuss it. Not talking about it means its higher.

Should be no big surprise to anyone.
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:37 am

Quoting Pygmalion (Reply 9):
Should be no big surprise to anyone.

Actually, from what I have been reading on the various threads over the past couple of months, this is going to be a complete SHOCK to all of the A380 cheerleaders. Last year when they made the 420 break-even assessment, I along with others stated that we wouldn't be surprised if it was even more and got hammered for simply expressing our opinions without proof.  Yeah sure
 
Joni
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:42 am

Quoting Clickhappy (Reply 1):

Lack of regulatory control over Airbus is the only thing saving them, and by them I mean the share price of EADS, from going into a complete freefall.

Would you care to elaborate on this "lack of regulatory control"? EADS is a listed company and it has to publish audited books regularly.

Quoting Cfalk (Reply 3):
I'm sure he's not counting the fact that if the project does not break even in the next 12 years or so (which it won't), the multi-billion Euro loans that were provided by the EU will be forgiven.

It's a long time since I last saw this (incorrect) claim on A.net.
 
aerosol
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:46 am

Who cares - Airbus is non-profit state supported socialist organisation anyway . Europe created the biggest thing you can fly in - although it might have been cheaper to resurrect the HINDEBURG.

A believer and EADS shareholder  Wink
 
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clickhappy
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:49 am

Would you care to elaborate on this "lack of regulatory control"? EADS is a listed company and it has to publish audited books regularly.

Sure thing.

We can start with this:

"Clearly because of the difficulties of the A380, the break-even point has increased," Gallois said. EADS now isn't giving specific targets on the number of A380s it needs to sell to break even on the project, he said.
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 12:52 am

Quoting Aerosol (Reply 12):
EADS shareholder

I am sorry for you. My Boeing shares did the same a few years ago, so I know your pain. But I held on to it and look, I am very happy now. Hang on, things have got to turn around at both Airbus and EADS, don't you think? However as you say that division is a non-profit organization, so maybe things won't get better for your shares! So sorry...  Wink
 
cfalk
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 1:02 am

Quoting Joni (Reply 11):
It's a long time since I last saw this (incorrect) claim on A.net.



Quote:
UNEQUAL ASSISTANCE. Launch aid, by contrast, shifts risk away from the market. Airbus has been able to tap into $15 billion in government loans since its inception in 1970, including $3.2 billion for the mega A380. That government money has shielded Airbus from the same market risks that face Boeing and any other commercial competitor. One of the many benefits of European launch aid is that Airbus isn't required to pay back the loans if the aircraft program is unsuccessful.

However, if sales of Boeing's 787s flop, Boeing loses billions and faces the risk of going out of business. If A380 sales falter, Airbus doesn't have to repay the $3 billion in loans.

(emphisis is mine)

source: http://www.businessweek.com/bwdaily/.../mar2005/nf20050321_4418_db046.htm

Since then, the US Government says that the loans directly related to the A380 launch have grown:

Quote:
The EU provided further loans and infrastructure that has pushed the total amount of A380 subsidies to approximately $6.5 billion. Airbus is now preparing to launch another competitor (A350) to the recently-launched Boeing 787, and it has requested $1.7 billion for that aircraft as well, even though it has stated publicly that it could easily finance the project itself.

source: http://www.ustr.gov/Document_Library...Step_in_Airbus_WTO_Litigation.html

Do you have any sources that say that, short of bankruptcy, Airbus must repay those loans no matter what (as Boeing would have to)?
The only thing you should feel when shooting a terrorist: Recoil.
 
magyar
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 1:43 am

Quoting Cfalk (Reply 3):
I'm sure he's not counting the fact that if the project does not break even in the next 12 years or so (which it won't), the multi-billion Euro loans that were provided by the EU will be forgiven.

Around here, that's called a scam.

No, actually, it is called war spending. And it is safe to say that more money was "redirected" from you to
private pockets than what worth several dozen A380.

I am not thrilled by what happening around the A380, but if it is possible cut this "lectury, moral high ground"
stuff. It is quite disgusting.
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 1:46 am

Last time I checked EADS is a defense contractor, are they not? What is your point?
 
David_itl
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 3:33 am

This extract from this article which descrbes about the funding that's received:

"After four years of public sniping, the European Commission and America's trade officials agreed a deal in 1992 that ruled out production subsidies (the British and German governments wanted that too) and limited refundable launch aid to Airbus to 33% of the development cost of a new model. The Europeans agreed that support would go only to projects likely to repay the money within 17 years; and that the interest rate for the first 25% of refundable loans would be at government rates, but the rest would be at one percentage point above that. Furthermore, repayments would be by a royalty on sales (to continue even after full repayment), rather than only at the end of the loan period."


Found a couple of "interesting" articles to read:
Measures affecting Trade in Large Civil Aircraft>

and

Airbus v Boeing revisited: international competition in the aircraft market
 
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Stitch
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 3:52 am

We know that Airbus has to pay royalties for the life of the program, and it has been shown that, at least for the British Government, the A320 program has not already paid it's RLA in full via said royalties, but continues to bring in a not-so-insignificant chunk of change annually thanks to strong sales and deliveries.

What nobody (to my knowledge) has yet to show is how the French, German and Spanish have done by the A320 program (in other words, are they getting royalty payments?), nor any data on royalty payments for the A330 and A340 program deliveries (I excuse the A380 program as it is yet to have a delivery) and how those payments are tracking to the original RLA investment.
 
ikramerica
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 3:57 am

Quoting David_itl (Reply 18):
The Europeans agreed that support would go only to projects likely to repay the money within 17 years

Notice this statement. REPAY within 17 years. Not reach the projected ROI in 17 years. What this means is that they are getting "free" money in that all they need to do is present a reasonable case that they could repay the "loan" in 17 years and they can get it. Obviously, it is owed, but compared to having to secure the equity on the open market, getting a 17 year non-equity loan at or near government rates is less risk than a company needing to secure 100% of the money from people expecting a market rate of return.

Further, after the debacle that is the A380, one would expect that if Airbus were completely privately funded, they would have more trouble getting launch funds for the A350. But with this government allowance, no matter how bad they screw up the A346 or A380, they can still get the same 33% at the same low interest rate with the same low burden of proof of profitability. And with the government sharing 1/3rd of the risk, other investors will be less nervous about any project. That is the unfairness argument.

The agreement was reached back when Airbus was not the "biggest" company, but now that it effectively killed off McD, Fokker and BAe/Avro, and passed Boeing in sales and deliveries, why on earth do they need this sort of deal? Why do they need this protection? It's no different than the BA argument at LHR, protected status for no valid reason in 2007. Sure, these companies needed "help" 15-30 years ago, but that day has passed.

Airbus is a big boy now. Take off the training wheels from the bike...
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cfalk
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:11 am

Quoting Stitch (Reply 19):
What nobody (to my knowledge) has yet to show is how the French, German and Spanish have done by the A320 program (in other words, are they getting royalty payments?), nor any data on royalty payments for the A330 and A340 program deliveries (I excuse the A380 program as it is yet to have a delivery) and how those payments are tracking to the original RLA investment.

Without question, the A320 program has been a stellar success for Airbus and the EU governments which supported its development. No question that success has been well earned. Solid mainstream market, and a well-built plane to fill it.

However,

Quoting Ikramerica (Reply 20):
Further, after the debacle that is the A380, one would expect that if Airbus were completely privately funded, they would have more trouble getting launch funds for the A350. But with this government allowance, no matter how bad they screw up the A346 or A380, they can still get the same 33% at the same low interest rate with the same low burden of proof of profitability. And with the government sharing 1/3rd of the risk, other investors will be less nervous about any project. That is the unfairness argument.

As Ikramerica very well put it, launch aid is something that is unique. Both Airbus and Boeing enjoy tax holidays on new plants, military contracts etc. But the US government (nor any other government) is not about to loan Boeing billions of dollars at rock-bottom rates and say, "If the project flops, that's OK, you don't need to pay us back." That's what gets up people's noses.
The only thing you should feel when shooting a terrorist: Recoil.
 
cygnuschicago
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:12 am

Quoting Cfalk (Reply 3):
the multi-billion Euro loans that were provided by the EU will be forgiven. Around here, that's called a scam.

No, around here, that's called "Chapter 11 bankcruptcy protection"
If you cannot do the math, your opinion means squat!
 
David_itl
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:17 am

Quoting Cfalk (Reply 21):
US government (nor any other government) is not about to loan Boeing billions of dollars at rock-bottom rates and say, "If the project flops, that's OK, you don't need to pay us back." That's what gets up people's noses.

Umm...can we say how much Japanese companies are paying back to the Japanese government for the non-repayable subsidies afforded to them in their contribution to the 787?
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:17 am

Quoting CygnusChicago (Reply 22):
No, around here, that's called "Chapter 11 bankcruptcy protection"

What do you know about Chapter 11 protection CygnusChicago? I have now bought two (2) companies that were in Chapter 11. Let me tell you, there is not a lot of protection for the shareholders of the company. Yeah sure
 
pygmalion
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:22 am

Quoting David_itl (Reply 23):
Umm...can we say how much Japanese companies are paying back to the Japanese government for the non-repayable subsidies afforded to them in their contribution to the 787?

I have seen lots of posts that the Japanese government gave money to suppliers... but never any sources or data. I do know that the J gov built infrastructure, roads, taxiways etc... but cash???

Does anyone have any source for this unsubstantiated rumor of money? What subsidies?
 
cfalk
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:25 am

Quoting CygnusChicago (Reply 22):
No, around here, that's called "Chapter 11 bankcruptcy protection"

In Ch 11 Bankruptcy is not that easy. All it does is prevent your creditors from immediately liquidating your company to get their money back. While under Ch 11, nobody will lend you money (certainly not at government rates). Nobody trusts you - your credit is shot. And a judge appoints someone to oversee your every move.

As it's supposed to be. Ch 11 is supposed to be the last-ditch option to try to save the company. If Airbus renigs on several billion Euros of debt, there should be consequences (such as to EADS's credit rating), but according to existing rules, it does not.
The only thing you should feel when shooting a terrorist: Recoil.
 
cygnuschicago
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:32 am

Quoting Cfalk (Reply 21):
But the US government (nor any other government) is not about to loan Boeing billions of dollars at rock-bottom rates and say, "If the project flops, that's OK, you don't need to pay us back." That's what gets up people's noses.

Two things:

1) Government rates, and government rates+1% are not rock-bottom rates. By using launch aid, Airbus actually incurs two penalities. Firstly, they pay a PREMIUM over market rates. Secondly, they have to continue paying royalties, which basically means they an additional penalty payment for taking launch aid. In return for that rate premium and royalty penalty, they get a reduced risk. Airbus makes a simple business decision.

This is market economics at it's best: Do we take cheap market money and have higher risk, or do we take more expensive government money, but decrease the risk?

2) With the exception of the A380 and the A345/6 programs, which are relatively young, ongoing programs, EVERY Airbus program has reached the point of repayment of government loans to the best of my understanding and they are liable for the loans on those programs, at the premium rates AND the ongoing royalties.

Now granted, the A345/6 breakeven is basically not going to happen, and neither is the A380 (by the way breakeven at current selling prices is just shy of 800, by my quick calculation). These will be the first programs funded by launch aid that do not reach repayment in the 17 year period.


So, I guess it depends on your point of view. Now, unlike the US, Europe does not have that non-market system called Chapter 11, so If there wasn't launch aid, the A380 would probably have sunk Airbus, and we'd be left with only Boeing, meaning incredibly pricey 787's for AA, DL and UA, and no 748i.

In my opinion,
- Airbus is purchasing the reduced risk (Boeing can probably do the same from private sources, if they wanted), and deserves it
- Is funding it with EU taxpayer money, which so far has turned out to be a pretty good investment for EU taxpayers, and much more lucrative than pouring it into, say, farming subsidies
- It provides a protection mechanism for Airbus similar to Chapter 11, which enables them, like Boeing, to take big bets

I know there are many, many of my fellow countrymen that would dearly love to see Airbus bankrupt - and quite a few of them have already posted to this thread. I'm not going to join those.
If you cannot do the math, your opinion means squat!
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:36 am

Having watched 2 companies plod through the US Bankruptcy Code - Chapter 11, I can tell you one thing, many more companies do not make it out than actually get back to business. The first thing that is required is a BUNDLE of CASH. And I mean a BUNDLE. You are not going to be paying your Attorneys, Accountants and employees with IOU's. Never mind all of the suppliers you need to keep operating. If you don't have the cash ON HAND, you will not make it out. So for all of the posters that think that somehow, the US Bankruptcy Code - Chapter 11 is some form of subsidy, you might want to watch a company go through it up close and personal before making such claims.
 
bigjku
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:37 am

Quoting CygnusChicago (Reply 22):
No, around here, that's called "Chapter 11 bankcruptcy protection"

That comment is very ignorant and shows a very limited understanding, at best, of the law in regards to a company. Not to mention it is not related to the discussion at hand. Honestly if you think Chapter 11 is at all comprable to launch aid then you really do not undestand the situation at all.
 
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Tugger
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:39 am

Quoting Aerosol (Reply 12):
Who cares - Airbus is non-profit state supported socialist organisation anyway . Europe created the biggest thing you can fly in - although it might have been cheaper to resurrect the HINDEBURG.

A believer and EADS shareholder

THAT is FUNNY!

Quoting CygnusChicago (Reply 27):
Do we take cheap market money and have higher risk, or do we take more expensive government money, but decrease the risk?

Exactly what are the dollar/euro rates that they are having to pay? I generally know "government rates" to be the lowest bench-mark setting rate that the rest of the industry follows. Just curious for the actually numbers please.

Quoting CygnusChicago (Reply 27):
I know there are many, many of my fellow countrymen that would dearly love to see Airbus bankrupt - and quite a few of them have already posted to this thread.

I think you are horribly wrong and encouraging a poor mindset that many people here seem to have, that one side wants the other side to fail. I do not think that is the case here at A.net at all.

Tug

[Edited 2007-05-04 21:48:23]
I don’t know that I am unafraid to be myself, but it is hard to be somebody else. -W. Shatner
 
XT6Wagon
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:40 am

Quoting CygnusChicago (Reply 27):
1) Government rates, and government rates+1% are not rock-bottom rates. By using launch aid, Airbus actually incurs two penalities. Firstly, they pay a PREMIUM over market rates.

Government rates are FAR lower than market rates. Market rates are based on government rates + a certain % dependant on type of loan and risk.
 
TeamAmerica
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:46 am

Searching for something significant to discuss here....failed.

Breakeven is so distant it is nothing more than an exercise in financial forecasting. Simple observation of the US/€ exchange rate deterioration tells us that the Airbus forecast breakeven must have similarly deteriorated. On the other hand we have some talk of accelerating the A380 delivery schedule, which would improve the situation.

That's about it. Any calculation of a new breakeven number would be nothing more than a point of argument. airplane 
Failure is not an option; it's an outcome.
 
flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:48 am

Quoting CygnusChicago (Reply 27):
- Airbus is purchasing the reduced risk (Boeing can probably do the same from private sources, if they wanted), and deserves it
- Is funding it with EU taxpayer money, which so far has turned out to be a pretty good investment for EU taxpayers, and much more lucrative than pouring it into, say, farming subsidies
- It provides a protection mechanism for Airbus similar to Chapter 11, which enables them, like Boeing, to take big bets

# 1 The EU probably has some of the most subsidized farming industry in the world! What are you talking about?!? Yeah, nice investment return for EADS shareholders last year! Thank God you are not a fund manager...are you?  Wink
Quit talking about the Chapter 11 code unless you know what you are talking about. Right now, you are coming across as the southern end of a northbound horse!
 
agill
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:56 am

Quoting Flysherwood (Reply 33):

# 1 The EU probably has some of the most subsidized farming industry in the world! What are you talking about?!?

THat was exactly what he said. Better to spend it on planes than farming subsidies.
 
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zeke
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 4:58 am

Quoting Stitch (Reply 19):
What nobody (to my knowledge) has yet to show is how the French, German and Spanish have done by the A320 program (in other words, are they getting royalty payments?), nor any data on royalty payments for the A330 and A340 program deliveries (I excuse the A380 program as it is yet to have a delivery) and how those payments are tracking to the original RLA investment.

The info would be out there, e.g.

"It is sometimes argued that the UK aerospace industry receives preferential treatment because of ready access to Launch Aid. However, such funding is not a grant; it is a loan which has to be paid back with interest. Between 1995-2002 Launch Aid will return a net surplus to the UK government of ~£900M. From 1995-2002, Launch Aid will return a net surplus to UK government of ~£900M.[DTI Sci., Eng. & Technology (SET) Statistics. www.dti.gov.uk/ost/setstats/] Between 1998 and 2002, RR will receive £170M for aeroengine development and will return £124M from previous investments. [DTI: Gov. Expenditure Plans: www.dti.gov.uk/COMMS/expenditure]"

from http://www.iom3.org/foresight/nac/R_D_Priorities/appendix.htm
We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
 
David_itl
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:08 am

Quoting Pygmalion (Reply 25):
Does anyone have any source for this unsubstantiated rumor of money? What subsidies?

Doing my best to find evidence for you:

http://www.buffalo.edu/reporter/vol3.../vol35n21/articles/Dreamliner.html

"The reason for the two sizes, the UB researchers maintain, is that Japan wants the shorter-haul version for its own domestic airlines. Japan, they add, is providing an estimated $1.5 billion subsidy for the production of the wing and fuselage, despite the fact that the country's aerospace industry has limited experience in manufacturing composite structures for large commercial aircraft.

The Japanese support to Boeing for the 7E7 program%u2014and potentially, launch purchases by ANA, All Nippon Airways Co., Ltd., and JAL, Japan Airlines%u2014hinges on Boeing's use of Japanese manufacturers for a significant portion of the airframe.

That fact alone could classify the Japanese subsidy as "prohibited" under World Trade Organization rules, say the UB researchers. "

http://www.europeanaffairs.org/curre...ue/2007_spring/2007_spring_15.php4
"The Japanese government is also subsidizing, apparently heavily, a significant part of the 787 being produced in Japan"

http://www.econstrat.org/index.php?o...content&task=view&id=193&Itemid=46
"For instance, Boeing is outsourcing much of the 787's construction to Japan in part because an overly strong dollar reduces yen-based costs, and in part because the Japanese government will provide production subsidies unavailable in the United States while "encouraging" Japanese airlines to buy the planes if the work is done in Japanese factories."

http://seattlepi.nwsource.com/business/243719_airbus07.html
"The Japanese government has promised more than $1 billion in support to Japanese contractors who are providing about 35 percent of the content on the 787."

http://www.asil.org/insights/2005/06/insights050607.html
"Third, the wing section of the Boeing’s ambitious 787 Dreamliner will be built by Japanese companies which are subsidized by Japan."
 
aminobwana
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:12 am

Quoting N328KF (Thread starter):
WSJ: A380 Break-even Has Risen -Gallois

USER PROFILESEND INSTANT MSGADD TO RESP MEMBERSSUGGEST DELETIONQUOTE SELECTED TEXT

N328KF From United States, joined May 2004, 4356 posts, RR: 4
Posted Fri May 4 2007 08:39:36 your local time (5 hours 22 minutes 55 secs ago) and read 1944 times:

I don't know if this means more the 420 target, but this article from The Wall Street Journal points out that Gallois was deliberately non-specific (brief fair-use excerpt):

I HAVE FILED A SIMILAR REPLY UNDER THE TOPIC " Eads (AIRBUS' Parent): Shareholder Meeting 2007"

Even if Power 8 succedes and reduces cost, what I see as a long stretch given its diluted content,
the 420 figure was stated before the real extent of the A380 concessions was known.

aminobwana
 
DAYflyer
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:13 am

Quoting Cfalk (Reply 3):
I'm sure he's not counting the fact that if the project does not break even in the next 12 years or so (which it won't), the multi-billion Euro loans that were provided by the EU will be forgiven.

Around here, that's called a scam.

Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.
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flysherwood
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:17 am

Quoting DAYflyer (Reply 38):
Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.

Let's not forget just how controversial that was! And Mr. Iacoca made sure that the loan was paid back EARLY!!!
 
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N328KF
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:19 am

Quoting DAYflyer (Reply 38):
Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.

Actually, the part most people forget is that the U.S. government wound up with a big stake in Chrysler, which it sold for a tidy profit. Sort of like the PBGC incidents with the airlines.
When they call the roll in the Senate, the Senators do not know whether to answer 'Present' or 'Not guilty.' -Theodore Roosevelt
 
bigjku
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:22 am

Quoting DAYflyer (Reply 38):
Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.

A bailout and a risk-free loan are different things. A bailout will only have the same effect if it is known that the company would not be allowed to fail.

The important distinction is this, so long as there is no assured bailout for a company, there is an incentive to make more sound and less risky decisions. The forces associated with capital drive up the cost of risky business decisions and thus encourage companies to take risk only when they are reasonably sure it will payoff.

Bailouts do not change the decision making, they only mitigate the consequences of tht decision making.

Launch aid does change that process. Ventures such as the A380 that would be deemed too risky, and were by those who had to rely on the captial markets for financing, are far less likley to be undertaken in such an environment of no-risk or very low risk borrowing.

That is the reason launch aid distorts the market to an extent that bailouts and tax break do not.
 
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 5:50 am

Quoting CygnusChicago (Reply 27):
Government rates, and government rates+1% are not rock-bottom rates. By using launch aid, Airbus actually incurs two penalities. Firstly, they pay a PREMIUM over market rates.

This is not correct. Market interest rates for any borrower consist of a base rate determined by the supply and demand for capital plus a default risk premium (as well as other risk premia, i.e. liquidity, inflation, etc.). Since governments have the power to levy taxes and print currency to pay down their debts, government debt (or government-guaranteed debt) is almost without exception "safer" than private debt and therefore carries a lower default risk premium. If Airbus is able to borrow at government rates, it has access to cheaper capital than Boeing.

For example, according to Bloomberg, Boeing bullet bonds due in 2043 are yielding 5.75% today. 30-year French government bonds are yielding 4.40%. That is a significant spread.

--B2707SST
Keynes is dead and we are living in his long run.
 
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Stitch
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 6:07 am

Quoting CygnusChicago (Reply 27):
Government rates, and government rates+1% are not rock-bottom rates. By using launch aid, Airbus actually incurs two penalities. Firstly, they pay a PREMIUM over market rates. Secondly, they have to continue paying royalties, which basically means they an additional penalty payment for taking launch aid. In return for that rate premium and royalty penalty, they get a reduced risk. Airbus makes a simple business decision.

Airbus receives RLA at the official Discount Rate, which is what the European Central Banks charge their non-state-owned peers. This rate is a few points below the "Prime Rate" those banks then charge their best customers, and many points below what non-best customers are charged.

So Airbus is receiving at best a rate only a bank can get for the first part and, at worse, a rate a bank's best customer could get for the remainder, and probably they're getting the remainder at a better rate, as well. And that gives Airbus more leeway to pursue projects that funded at higher interest rates (and therefore would require higher rates of return) might not "pencil out".

Quoting Zeke (Reply 35):
The info would be out there, e.g.

I am aware of the UK House of Commons report (and referenced it in my original post), but would like to see a similar report to the French National Assembly, the German Bundestag and the Spanish Congress of Deputies. Not because I don't believe Airbus' claims they have repaid all the RLA plus interest already, but that the British report broke it down by model and, at least for the A320 programs, put the claims that RLA never had to be re-paid to rest and could hopefully do so for the A330 and perhaps the A340 programs, as well.

Quoting DAYflyer (Reply 38):
Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.

Depending on where the US Government fell on the list of creditors, it might have received some money back on liquidated assets, but kind of by definition when a company is forcibly-liquidated it's because it cannot meet it's debts...  Wink
 
deltadc9
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 6:27 am

Quoting CygnusChicago (Reply 22):
No, around here, that's called "Chapter 11 bankcruptcy protection"

No it is not.

Quoting Flysherwood (Reply 24):
Let me tell you, there is not a lot of protection for the shareholders of the company.

All it really does is prevent one creditor from taking everything before the others get there chance and provide a window of opportunity to right the ship and maybe preserve a little capital for the shareholders, maybe. I have never understood why people think it is somehow sleazy.

Quoting Flysherwood (Reply 39):
Quoting DAYflyer (Reply 38):
Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.

Let's not forget just how controversial that was! And Mr. Iacoca made sure that the loan was paid back EARLY!!!

Lets also not forget that is is not above the Federal Government to take a default on a federal bailout as a cue to feed on the carcass for all its worth. I am sure that the IRS would also pitch in.

Quoting N328KF (Reply 40):
Actually, the part most people forget is that the U.S. government wound up with a big stake in Chrysler, which it sold for a tidy profit. Sort of like the PBGC incidents with the airlines.

This weird idea that the Feds would give a corporation money, watch them default, and say oh well is mind boggling. They are nothing but a bunch of Tony Sopranos with more guys and more ways to clean you out than Tony could ever imagine be you a corporation or an individual. Once you owe them, they own you.
Dont take life too seriously because you will never get out of it alive - Bugs Bunny
 
cfalk
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 6:29 am

Quoting DAYflyer (Reply 38):
Some of my US colleagues seem to forget the US Government bailout of Chrysler. Although they did have to pay the loans back with interest, if the company had failed it would been forgiven.

The Chrysler bailout was an exception. Very, very rarely does the US government step in like that. The ONLY reason it bailed out Chrysler was the fact that Chrysler employed, directly or indirectly, hundreds of thousands of jobs (perhaps over a million, once you count all the suppliers, dealerships, etc.). If all those people suddenly were out of a job, it would have been an economic catastrophe, coming in the late 70s when the economy was already in deep crap, that might have been enough to put the country into The Great Depression Part II.

But even knowing that, it was still very controversial and went well against the grain.
The only thing you should feel when shooting a terrorist: Recoil.
 
deltadc9
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 6:34 am

Quoting Stitch (Reply 43):
Depending on where the US Government fell on the list of creditors, it might have received some money back on liquidated assets, but kind of by definition when a company is forcibly-liquidated it's because it cannot meet it's debts...

Somehow I doubt the Feds would be anywhere but first in line drooling.
Dont take life too seriously because you will never get out of it alive - Bugs Bunny
 
Joni
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 6:43 am

Quoting Clickhappy (Reply 13):
Would you care to elaborate on this "lack of regulatory control"? EADS is a listed company and it has to publish audited books regularly.

Sure thing.

We can start with this:

"Clearly because of the difficulties of the A380, the break-even point has increased," Gallois said. EADS now isn't giving specific targets on the number of A380s it needs to sell to break even on the project, he said.

I'm sorry but what's your point? They don't suffer from lack of regulatory control if they don't publish separate accounts for each product. Boeing doesn't do that, no-one does that.

Quoting Cfalk (Reply 15):
Quoting Joni (Reply 11):
It's a long time since I last saw this (incorrect) claim on A.net.



Quoting Cfalk (Reply 15):
commercial competitor. One of the many benefits of European launch aid is that Airbus isn't required to pay back the loans if the aircraft program is unsuccessful.

However, if sales of Boeing's 787s flop, Boeing loses billions and faces the risk of going out of business. If A380 sales falter, Airbus doesn't have to repay the $3 billion in loans.

(emphisis is mine)

source: http://www.businessweek.com/bwdaily/.../mar2005/nf20050321_4418_db046.htm

Hm odd source that, but there are two points to be made about it: 1) it's a commentary and 2) the claim isn't true as Airbus does have to repay the loans.

Here are three sources (BusinessWeek, International Herald Tribune and the UK House of Commons) that should clarify the issue.

http://www.businessweek.com/bwdaily/...nflash/mar2002/nf20020326_2390.htm
http://www.iht.com/articles/2006/10/19/business/airbus.php
http://www.publications.parliament.u...05/cmselect/cmtrdind/151/15107.htm

As I noted earlier, it's been a while since I encountered the claim Airbus wouldn't have to repay the loans if the project isn't profitable. For clarity, Airbus _does_ have to repay, and with interest. It's Boeing that gets the free cash.

Quoting Cfalk (Reply 15):

Do you have any sources that say that, short of bankruptcy, Airbus must repay those loans no matter what (as Boeing would have to)?

See above.

Do you have any sources according to which Boeing would have to repay the support given by the State of Washington, under any conditions?

The EU will focus its WTO case against the subsidies granted to virtually all Boeing programmes and in particular on the unprecedented gifts from Washington State intended to help production of Boeing’s new B787 programme (these include tax exemptions, infrastructure and personnel subsidies worth more than US$7 billion). Boeing also continues, for an undefined period, to receive some $200 million each year through a US federal tax subsidy called the Foreign Sales Corporation Program, despite the fact that it has already been ruled illegal twice by the WTO and has been abolished for most other US companies. Since 1992, Boeing has also benefited from research and development grants worth well over $20 billion, mostly through NASA and the Pentagon.

http://www.eurunion.org/News/press/2005/2005056.htm
 
SeJoWa
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RE: Mr. Aboulafia's Advice To Eads On Power 8

Sat May 05, 2007 6:54 am

Quoting Tugger (Reply 30):
Quoting CygnusChicago (Reply 27):
I know there are many, many of my fellow countrymen that would dearly love to see Airbus bankrupt - and quite a few of them have already posted to this thread.

I think you are horribly wrong and encouraging a poor mindset that many people here seem to have, that one side wants the other side to fail. I do not think that is the case here at A.net at all.

Tug

Needed to be said. I sign here. Thank you Tug.

Airbus doesn't need subsidies, Europe's capital markets are quite big and sophisticated enough.

In my mind, it's more a matter of retaining an added measure of politlcal control over the company.

I well remember how the idea of EADS being politically constrained (the polite word for hamstrung) met with disdain here on anet just before the current imbroglio manifested itself. Only about a year ago!

Quoting David_itl (Reply 36):
Quoting Pygmalion (Reply 25):
Does anyone have any source for this unsubstantiated rumor of money? What subsidies?

Doing my best to find evidence for you:

Thank you David for the legwork, a very interesting subject. I've been wondering a long time about the exact nature of these subsidies and wish there were details available.

The Japanese companies do already provide 20% of the 777's body. One seeming reason that Boeing went looking overseas for risk sharing partners are the stringent American anti trust laws preventing domestic teaming (which are very contrary to the spirit of free enterprise in my opinion). That's an angle I've never read about on anet, though.
 
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Tugger
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RE: WSJ: A380 Break-even Has Risen -Gallois

Sat May 05, 2007 6:59 am

Quoting Joni (Reply 47):
It's Boeing that gets the free cash.
Equally incorrect and inflammatory, no real reason to make a statement like this other than to "get back at" other members making similar comments about Airbus. To quote you:

Quoting Joni (Reply 11):
It's a long time since I last saw this (incorrect) claim on A.net.
Neither company gets "free cash", but their are issues that each has with how the other obtains its financing and it is being sorted out in the courts of the WTO. Let's leave the resolution of these complaints and issues there and not stick our tongues out at each other while saying "Nah, nah, I am rubber and you are glue". That is all rather silly.

Discussion is what we need, just well presented discussion!

Quoting SeJoWa (Reply 48):
In my mind, it's more a matter of retaining an added measure of political control over the company.

Good point SeJoWa, I tend to agree with you on this. It's always a problem when politics (or should I say politicians) get involved. Can lead to less than optimum business decisions. That being said, I do think governmental incentives to "encourage" certain investments or industries development can be a good thing.

Tug

[Edited 2007-05-05 00:09:53]
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