jayunited
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Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:12 am

http://www.aviationweek.com/Article....l/AW_05_20_2013_p38-578739.xml&p=1

This article in Aviation Week seems to suggest that as the A350 gets closer to first flight a few more airlines are taking notice and perhaps we could see a few more orders for the A350 in the coming mouth. The article also mentions that Airbus is now seeing some interest from airlines in the A350-1000 variant and that that interest could be taking potential sales from the A380. Although no decision has been made according to this article Airbus is mulling a cut in A380 production because they are seeing a lot more interest from the airlines in the A350 than the A380.

First of all how much stock would you put in this article and secondly is the A350 both the 900 and 1000 variants taking orders that could potentially go to A380 program? And lastly could the A350 program do to the A380 what the 777 did to the 747?
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:19 am

Quoting jayunited (Thread starter):
First of all how much stock would you put in this article and secondly is the A350 both the 900 and 1000 variants taking orders that could potentially go to A380 program?

I would place very little faith in it. In a typical three class config the A388 offers 150-200 seats more than the A351. Two completely different markets IMO.


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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:29 am

Two different markets, agreed. However, the smaller sized market has a greater demand than the larger sized market.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:47 am

I guess one could argue that the economy means that the A350 is eating into orders that Airbus would have originally hoped would go to the A380, but I don't see that a being a negative thing. If those orders didn't go to the A350 then they'd be going to the 777.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:58 am

In that some airlines have been choosing the 777-300ER to replace their 747-400s (in whole or in part) instead of the A380-800, those airlines (or new airlines) moving to the A350-1000 instead of the 777-300ER...

But in either scenario, the A380-800 was out of the running so as qf002 notes, Airbus securing that order with an A350-1000 vs. Boeing with a 777-300ER would still benefit Airbus.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 2:27 am

Quoting Prost (Reply 2):
Two different markets, agreed. However, the smaller sized market has a greater demand than the larger sized market.

As it always has.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 3:16 am

Quoting jayunited (Thread starter):
And lastly could the A350 program do to the A380 what the 777 did to the 747?

There's not much doubt that both the A380 and the B748 are having increasing trouble securing orders, and probably production of both types will have to be phased out within a very few years, jayunited. This press story shows that both the 'big fours' are in trouble orders-wise:-

"Airbus brought in only four new orders for the A380 last year, compared with a target of 30, and the company hasn’t booked a purchase for the airliner this year, on a goal of 25 contracts. The company has cut back output plans as it works through changing the wing structure, eating into sales growth that EADS reiterated will be “modest” in 2013.

.....................

"Boeing Co. (BA) said last month it is cutting the production rate of its 747-8 model to 1.75 planes a month from two, citing dwindling demand."


http://www.bloomberg.com/news/2013-0...rs-for-delivery-slots-in-2015.html

It's just 'evolution,' really. Led by the B777, the 'big twin' with ETOPS capability has finally 'arrived.'
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 6:58 am

Quoting jayunited (Thread starter):
And lastly could the A350 program do to the A380 what the 777 did to the 747?

Probably not as bad as the 77W is pretty close to the 748 in capacity, wheras a significant gap for the 3510 and 380.

Still, big 4's have risk and operational challenges that are magnified relative to the new big twins.

I think in two years we'll know pretty much for sure.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 7:10 am

Quoting jayunited (Thread starter):
First of all how much stock would you put in this article

Firstly, we've already done this interview with Harald Wilhelm to death on this thread

Not Enough Customers For A380 (by katekebo May 14 2013 in Civil Aviation)

just over a week ago, although the OP article in this case was from Bloomberg.

Nowhere in the article is there any comment from Airbus that even hints at a production cut.

Quoting NAV20 (Reply 6):
Airbus brought in only four new orders for the A380 last year,

It was nine actually

Quoting justloveplanes (Reply 7):
I think in two years we'll know pretty much for sure.

Correct

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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 7:38 am

I suppose we could think of the A380 as two twins stuck on top of each other, needing half the number of pilots. When you look at the airports where they work, the A380 seems to be quite at home. Where are all the slots for the phenomonenal number of smaller twins going to come from?
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 7:46 am

http://leehamnews.wordpress.com/ 5/24/2013

Tim Clark from Emirates states in this interview very clearly that Emirates will buy more A380 and replace old A380 with new A380 from 2020.
So I would wait before declaring the A380 dead.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:34 am

Quoting mjoelnir (Reply 10):
Tim Clark from Emirates states in this interview very clearly that Emirates will buy more A380 and replace old A380 with new A380 from 2020.
So I would wait before declaring the A380 dead.

I would suggest at this point in time a used A380 will displace a new order. That is unless the resale value is little above scrap price. Why? You are not going to save much compared to just buying new and having that 10years more lifetime on the frame *AND* all the improvements since these used frames were built. Which means the total cost of ownership is going to be better for the new frame unless the used price is quite low.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 9:09 am

Quoting XT6Wagon (Reply 11):
I would suggest at this point in time a used A380 will displace a new order.

I don't really see it - a new 2020 A380 will be significantly better than an early one that EK has flogged for 12 years. Having a customer roll over their (expected) fleet of 130 A380s is hardly bad news for Airbus, is it?
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 11:49 am

Most airlines ordering A3510 have already ordered A380.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 11:57 am

The past few years new world carriers have captured large market shares against big carriers. Maybe it's a transition period with the biggest carriers therefore not growing, and many new world carriers not yet being big enough yet to operate aircraft the size of the A380.
The maximum impact of this transition period certainly belongs to the past, there are now too many competitors losing money. It's getting too difficult now for new entrants to be successful and gain market shares. So growth should from now be shared entirely by the existing carriers.

[Edited 2013-05-27 05:00:17]
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 12:12 pm

Quoting XT6Wagon (Reply 11):
Quoting mjoelnir (Reply 10):
Tim Clark from Emirates states in this interview very clearly that Emirates will buy more A380 and replace old A380 with new A380 from 2020.
So I would wait before declaring the A380 dead.

I would suggest at this point in time a used A380 will displace a new order. That is unless the resale value is little above scrap price. Why? You are not going to save much compared to just buying new and having that 10years more lifetime on the frame *AND* all the improvements since these used frames were built. Which means the total cost of ownership is going to be better for the new frame unless the used price is quite low.


I am just tiered of the talk about the A380 dying. It does not really matter what will happen to the used birds of EK. They fly their aircraft a certain time and than they are renewed. As they do not own those planes, but lease them, the price of used 12 year old planes has little influence on there calculation.

If the old A380 from EK will be a problem to the used market why than should all the at the same time retired B777 not be a problem for that used market?

It seems to me that the same people talking about the big possibilities of the B 777-X9 have to realize that in the regards to Emirates the A 330, later the 350, is the small frame, the B 777 the medium and the A380 the big frame.

It is strange this one set of arguments for the A380 and than a different set of arguments for the B 777-XX.
If you do not believe Emirates to buy A380 in the future, you should stop believing them buying the B777-XX, if smaller is better they would end with A350 only.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 12:25 pm

Quoting JerseyFlyer (Reply 13):
Most airlines ordering A3510 have already ordered A380.

   

I'm not sure it's much of a statistical base to go on.

Asiana   
British Airways   
Cathay Pacific   
Emirates   
Etihad   
Qatar   

And that's it so far - six airlines.

Still, you're correct as far as it goes.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 12:28 pm

Quoting Prost (Reply 2):

Two different markets, agreed. However, the smaller sized market has a greater demand than the larger sized market.

Agreed but qf002 has a valid point. Airbus have both bases covered.

Quoting qf002 (Reply 3):

I guess one could argue that the economy means that the A350 is eating into orders that Airbus would have originally hoped would go to the A380, but I don't see that a being a negative thing. If those orders didn't go to the A350 then they'd be going to the 777.


        

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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 12:41 pm

Quoting astuteman (Reply 8):
Quoting NAV20 (Reply 6):Airbus brought in only four new orders for the A380 last year,
It was nine actually

Misunderstanding, I think, astuteman - it wasn't me saying that, I was quoting a Bloomberg press story?

And the story also said, "...and the company hasn’t booked a purchase for the airliner this year, on a goal of 25 contracts."

Only too possible that Bloomberg got it wrong. But, if so, please post evidence for the 'nine new orders' last year, and for any orders received this year?
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 12:48 pm

Quoting NAV20 (Reply 18):
But, if so, please post evidence for the 'nine new orders' last year

Just check the Airbus Orders Excel sheet, it's all in there.

> Transaero: 4
> Singapore Airlines: 5

Quoting NAV20 (Reply 18):
I was quoting a Bloomberg press story?

It's always good to check the facts before quoting the media; the media has it often wrong.

[Edited 2013-05-27 05:50:48]
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 12:57 pm

Quoting mjoelnir (Reply 15):
I am just tiered of the talk about the A380 dying.
I also feel like any talking of the A380 ceasing to be produced is premature. However, I have not been reading too many people speculating that it will happen. Not sure what comment you are responding to. Maybe people are speculating that production will slow. There is clearly demand for at least 2/month for a number of years to come.

[quote=mjoelnir,reply=15]It does not really matter what will happen to the used birds of EK. They fly their aircraft a certain time and than they are renewed. As they do not own those planes, but lease them, the price of used 12 year old planes has little influence on there calculation.

It absolutely does matter and it matters for the reason you have. EK likes to lease their birds and lease rates will go way up if resale values are low, which changes the dynamics of the new purchase decision. Which means less new aircraft are purchased. Look at Ryan Air dumping 737s as an example.

Quoting mjoelnir (Reply 15):
If the old A380 from EK will be a problem to the used market why than should all the at the same time retired B777 not be a problem for that used market?

I think you are comparing two dissimilar situations. If you compare the A380 situation with the B747 that will be closer (still not the same) situation. The 777 has 65 operators of 1400 frames while the 380 has 9 current operators. If you are trying to resell a used frame into a small market it is much more difficult then selling a frame into a used market. How many current A380 operators buy used aircraft? Also, as EK is the largest operator of A380 (40%+?) by definition, there are not a lot of other operators out there that will be anxious to bid for that many especially as most airlines will have their A380s for longer than 12 years and can get a new model in less than three years (currently) Do not get me wrong, they will definitely find a good home but the discount off of original list price will certainly be higher than that of a 777 which will effect new lease rates. I repeat: the A380 will be around for a long time. Great aircraft.

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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:07 pm

Quoting NAV20 (Reply 18):
Misunderstanding, I think, astuteman - it wasn't me saying that, I was quoting a Bloomberg press story?

No misunderstanding.
I'm perfectly aware from the last dreary thread on this interview that Bloomberg effed up.
If you'd have done your homework you'd have known that.

Quoting NAV20 (Reply 18):
Only too possible that Bloomberg got it wrong. But, if so, please post evidence for the 'nine new orders' last year,

Yes they did.

Me post the evidence? You're having a laugh.
All you've got to do is check the Airbus orders page.
It's all Bloomberg had to do, too

Quoting KarelXWB (Reply 19):
Just check the Airbus Orders Excel sheet, it's all in there.

> Transaero: 4
> Singapore Airlines: 5

Let him do his own homework. He's old enough

Rgds
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:12 pm

Fair enough, guys!  

Were Bloomberg also wrong about no orders so far this year - or is that bit true?
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:31 pm

Quoting NAV20 (Reply 22):
or is that bit true?

That is correct, but it should be noted that Lufthansa got board approval last February to buy 2 more A380s (together with a bunch of A320 aircraft).
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:38 pm

Quoting NAV20 (Reply 22):
Were Bloomberg also wrong about no orders so far this year - or is that bit true?

It is to this point of the year. However, LH has approved an additional two and I suspect that EK alone will comfortably beat Airbus's target for the year (but you'll probably have to wait until November for that one!)   
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:45 pm

I think the A350-1000 and the A380-800 are already wide enough apart that they serve different markets.

On the other hand, 7810,3510 and 779 will have economics that are already near to those of todays A388, so Airbus has to investigate carefully how to proceed with the A380 familiy, and when to bring the A389 powered with XWB engines - which again would have the 20% advantage the current A388 has over the 77W today.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:51 pm

Quoting NAV20 (Reply 6):
and probably production of both types will have to be phased out within a very few years

First of all the Boeing B747-8i/F will be in production at-least until the USAF orders its Air Force One replacement as we know full well that the USAF will never order a Airbus plane or a twin-jet. Second of all I have problems imagining that Airbus will stop the Airbus A380 production any time soon, they invested simply to much money in the program to just kill it because of the current financial troubles, if CEO's where thinking like you are (AKA short term) no business would be successful...

Quoting mjoelnir (Reply 10):
So I would wait before declaring the A380 dead.
Quoting mjoelnir (Reply 15):
I am just tiered of the talk about the A380 dying.

You guys just know how die hard Boeing fans and Airbus/Airbus A380 haters love to say this nonsense...
If only more people understood the pure beauty of the Airbus A320 and A330 family's...
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 1:56 pm

Quoting NAV20 (Reply 22):
Fair enough, guys!  

Were Bloomberg also wrong about no orders so far this year - or is that bit true?

Lufthansa 2 frames on the 3/14/2013

http://www.airbus.com/presscentre/pr...s-go-ahead-for-major-airbus-order/

For how many orders during 2013 I would wait for the end of the year, at least one should wait to talk about no orders for the conclusion of the Paris airshow. We also have the Dubai airshow this year.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 2:00 pm

Quoting mjoelnir (Reply 27):
For how many orders during 2013 I would wait for the end of the year January 17, 2014

Fixed  
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 2:01 pm

Quoting KarelXWB (Reply 23):
That is correct

Thanks, KarelXWB. So, basically, we have Airbus getting next to no orders for the A380, and Boeing reporting 'dwindling demand' for the B748.

Doesn't that strongly suggest that the airlines are already largely going for long-range 'big twins' - the B777, the B789, and the A351 - instead of either 'big four'? Meaning that both the B748 and the A380 will eventually be out of business (except maybe for freighter versions)?
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 2:06 pm

Quoting mjoelnir (Reply 15):
If the old A380 from EK will be a problem to the used market why than should all the at the same time retired B777 not be a problem for that used market?

Because there is a far larger market for used 777s than used A380s. Used 777s will find homes at secondary carriers that could never even hope to fly a 500+ seat plane, while the established/major carriers who can make A380s work are likely to be the airlines retiring their old planes for new ones.

Airbus then has multiple reasons to be concerned. For starters, demand for OEM parts (which is where the manufacturers make the the bulk of their profit) drops because there are scrapped aircraft that can be cherry picked for cheaper parts.

I'm not denying that it's not an issue that the 777 (and the A330 for that matter) will face, it's just accentuated in the A380 because it's such a niche aircraft and because the global fleet is heavily dominated by one airline.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 2:23 pm

Quoting NAV20 (Reply 18):
And the story also said, "...and the company hasn’t booked a purchase for the airliner this year, on a goal of 25 contracts."
Quoting mjoelnir (Reply 27):
For how many orders during 2013 I would wait for the end of the year, at least one should wait to talk about no orders for the conclusion of the Paris airshow. We also have the Dubai airshow this year.

One or more orders at Le Bourget would not be a surprise to me. No orders at Le Bourget would. Remember the speculation over the "significant" customer JL referred to near the start of the year? Then there may be top ups, too.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 3:14 pm

Quoting qf002 (Reply 30):

But Emirates is the biggest owner of the B 777-300 the biggest of the B777 and we can not expect first line airlines, except perhaps Delta, to buy those frames when they are 12 years old.
Emirates owns one of 4.6 produced B777-300 and if it is not the same situation, than it is a similar one.
We can not expect second tier airlines to fill even a B777-300 all the year around, so they only buy when they get them cheap.
I also thing that regarding the leasing firms the resale value is overrated in these discussions. If you lease out some equipment for a few years, the residual value is a big factor you do not expect the lessee to pay the airplane.
When you go for leasing contracts of ten years or more the leased equipment is usually about paid up for the lessor, any residual value is butter on the bread.
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 3:27 pm

Boeing and Airbus both need to figure out how to make a profit on fewer frames per month for the VLAs. And the airlines that need them may need to order a few frames a year more than the minimum of the new ones they absolutely need. No one was expecting the two big twins to get as much better as they are getting this fast. Midnight oil is likely burning already regarding these issues - A and B, suppliers, leasers, airlines using 4 holers.
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 3:53 pm

The article is kind of a 2 part article in that Airbus's CFO points out that they have a "single digit number" of slots available in 2015. If Airbus is to fill the remaining number of delivery slots they have left in 2015 when would an airline need to place their order, how long can a potential customer wait and still be able to take delivery of the aircraft on time in 2015?

From the comments I'm reading man of you seem to think that the CFO who is quoted in the article is (for lack of a better word) overreacting. But if we look at it long term from lets say 2017 on out does his concerns have merit. And while some have pointed out that the seating capacity of the A350-1000 is much lower than that of the A380 which in turn could shield if from the the fallout that the 747 experienced when the 77W came to market and while some have pointed out EK replacing their A380's with more A380's are those two factors enough to dismiss the concerns raised by the CFO of Airbus?

I'm NOT saying or suggesting that the A380 program will be killed by the A350-1000 and the article is not suggesting that neither but do you believe that one airline EK (although other airlines have orders they will be the largest A380 operators) has the power to keep this program PROFITABLE after lets say 2017-2018 onward? Because I think that is what the CFO is looking at he is not looking at the short term he is looking at the long term and he want to keep this program profitable. So look at it over the long term and keep in mind that there have been a few articles out stating that Airbus could be looking to stretch the A350 again ( I don't know if that is purely rumor or if there is any substance to those rumors).
 
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 5:04 pm

Quoting N821NW (Reply 26):
First of all the Boeing B747-8i/F will be in production at-least until the USAF orders its Air Force One replacement as we know full well that the USAF will never order a Airbus plane or a twin-jet. Second of all I have problems imagining that Airbus will stop the Airbus A380 production any time soon, they invested simply to much money in the program to just kill it because of the current financial troubles, if CEO's where thinking like you are (AKA short term) no business would be successful...

The military will replace the 747 with whatever is available to fly the president or whomever is in need of transport for the government. Just a note, the 747 that president flies on is know as a VC-25 is only called Air Force One when the president flies on it.

To bring this back to topic, the A350 is not being ordered instead of the A380. If the airline would want to order the A380 than they would order it and not the A350. The article is bunk. Airlines do not have that short a sight, they realize that the present economic downturn is temporary and ordering an aircraft has longer term goals.
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 5:49 pm

Quoting tortugamon (Reply 20):
The 777 has 65 operators of 1400 frames while the 380 has 9 current operators. If you are trying to resell a used frame into a small market it is much more difficult then selling a frame into a used market

Oon the assumption that EK keeps its frames for 12 years the extent of the "used A380" problem is:-

2020 - 4 frames
2021 - 3 frames
2022/23 - 13 frames

That's 20 frames in the next 11 years, with the first not due for another 7 years
Who knows what the used market for VLA's will be like then?

If Emirates have to order replacements about 3 years in advance, then that's a whole 4 orders "at risk" in 2017, and 3 more in 2018

Using the whole of the 777 production run is also probably not very representative IMO.
More than half of those frames are already older than the very first A380 into service and many will have already changed hands.
Comparing the 777-300ER specifically with the A380 would be more appropriate IMO as they have a not dissimilar lifecycle.

It is right to raise the fact that every frame runs into the competition from its own used siblings.
And nobody questions the fact that there will be more homes for 777-300R's.
Which is just as well though.
Because there will be an awful lot more of them to place in the second-hand market.
Are we really in a position to know for certain already that overall, the 777-300ER "used frame" issue is any easier or more difficult than the A380's?   

Quoting jayunited (Reply 34):
do you believe that one airline EK (although other airlines have orders they will be the largest A380 operators) has the power to keep this program PROFITABLE after lets say 2017-2018 onward?

EK have currently 34% of the overall orders for the A380. As you say, they are way the largest operator
Do you think this percentage is going to increase over time or decrease?

They also currently have 25% of the overall orders for the 777-300ER. Again though, they are way the largest operator
Do you think this percentage is going to increase over time or decrease?

At what percentage does this skew to a single operator become an issue?

Not for the first time on A-net there seems to be a magic cut-off, just around the actual numbers for the A380, at which the boundary of "problem situation" becomes defined (a bit reminiscent of the wingspan and length issue)
Outside this number, everything appears to be just dandy - especially if we're talking Boeings.
Maybe that's just me

Rgds
 
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EPA001
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 6:14 pm

Quoting astuteman (Reply 36):
EK have currently 34% of the overall orders for the A380. As you say, they are way the largest operator
Do you think this percentage is going to increase over time or decrease?

Good question. I would like to see that number coming down.

Quoting astuteman (Reply 36):
They also currently have 25% of the overall orders for the 777-300ER. Again though, they are way the largest operator
Do you think this percentage is going to increase over time or decrease?

I think it will decrease, especially since a competitor is glooming at the horizon, though is still 4 years away.

Quoting astuteman (Reply 36):
At what percentage does this skew to a single operator become an issue?

A percentage is a good way to measure this. However, some strangely enough apply different percentages to different airplanes or airline manufacturers.   

Quoting astuteman (Reply 36):
Not for the first time on A-net there seems to be a magic cut-off, just around the actual numbers for the A380, at which the boundary of "problem situation" becomes defined (a bit reminiscent of the wingspan and length issue)

Outside this number, everything appears to be just dandy - especially if we're talking Boeings.
Maybe that's just me

No, it is not just you. I can easily see the skewed comparisons on A-net to which you are hinting.  .

Unfortunately the A380 (or sometimes Airbus for that matter) is still seen by some in such ways.  .
 
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7BOEING7
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 6:21 pm

Quoting astuteman (Reply 36):
EK have currently 34% of the overall orders for the A380. As you say, they are way the largest operator
Do you think this percentage is going to increase over time or decrease?

If EK orders another 30 this year that takes them to 41%.
 
Motorhussy
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 6:45 pm

Quoting NAV20 (Reply 29):
Meaning that both the B748 and the A380 will eventually be out of business (except maybe for freighter versions)?

Continued: global population growth; exponential increase in volume of people flying; congestion at major global airports; slot restriction at airport hubs like LHR, and; improvements in the A380's economics - all go to suggest that your assertion is wrong when it comes to the A380, however the 748 has been sacrificed by Boeing with the launch of the 77X.

Back to the question: the A35J ensures that Airbus has an economically superior option to the 77W when airlines are considering a smaller option than the A380 - or for that matter a larger option than the 77E, 77L, A333 - or 77W, A346 replacement.
come visit the south pacific
 
spink
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 7:12 pm

Quoting mjoelnir (Reply 15):
I am just tiered of the talk about the A380 dying. It does not really matter what will happen to the used birds of EK. They fly their aircraft a certain time and than they are renewed. As they do not own those planes, but lease them, the price of used 12 year old planes has little influence on there calculation.

It really does matter what will happen to the used birds of EK. In order for EK to replace those birds on a cost competitive basis there needs to be a market to off load the old planes at a reasonable price. And it doesn't matter if they own them or lease them because the economics of the decision effects them either way. If the use 380 market is depressed or non-existent then the lease rates will rapidly reflect that. Leasing companies are not known for giving out free money. The leasing company has to cover the full cost of the 380. If the price they can get for the used 380s is below the fractional cost then they are going to charge more for any leases of new 380s to reflect this cost increase. So it in effect shifts the costs of a 12 year 380 lease from a basis of ~50% of value to 60-70-80% of value. That in turn significantly increases the costs to EK and lowers the economic incentive to replace frames.

Quoting mjoelnir (Reply 15):
If the old A380 from EK will be a problem to the used market why than should all the at the same time retired B777 not be a problem for that used market?

The market for the B777 is many times larger than the market for the 380. There are both significantly more B777 in the market and almost an order of magnitude more operators of the 777. Both these contribute to a much more stable market for the 777 vs the 380. Its rather simple, who is going to buy used 380 frames? For the 777 there are a number of airlines every year that will do the cost benefit analysis and pick up decent used 777 frames with plenty of life left in them because they already operate the 777. For the 380, this market largely doesn't exist.

Quoting mjoelnir (Reply 32):
But Emirates is the biggest owner of the B 777-300 the biggest of the B777 and we can not expect first line airlines, except perhaps Delta, to buy those frames when they are 12 years old.
Emirates owns one of 4.6 produced B777-300 and if it is not the same situation, than it is a similar one.
We can not expect second tier airlines to fill even a B777-300 all the year around, so they only buy when they get them cheap.

Both the number of operators and number of 77W in the world is significantly larger than the numbers for the 380. Therefore there are many more possible and likely destinations for used 77W in the world than 380s.

Quoting mjoelnir (Reply 32):
I also thing that regarding the leasing firms the resale value is overrated in these discussions. If you lease out some equipment for a few years, the residual value is a big factor you do not expect the lessee to pay the airplane.
When you go for leasing contracts of ten years or more the leased equipment is usually about paid up for the lessor, any residual value is butter on the bread.

The resale and re-lease value are the only thing that matter to the leasing firms. It is what they basis their entire economic existence on. And leasing companies do expect original lessees to pay for residual value, it is fundamentally built into the initial equipment lease rates. Its why the lease rates for cars with higher demand and higher resale values have a lower lease rate margin.

If the 10-12 year 380 leasing contracts actually paid off the equipment then no one would actually sign the lease contracts. The whole point of leasing a plane vs buying it is to only pay an amount equal to the factional value of the plane you are using or plan to use. If your 50% fractional lifetime lease rates covers full cost + interest for the underlying product completely then you would be making a rather bad economic decision. Esp when you can get a much lower marginal rate for a secured debt contract than you can get for a lease contract. The only time when you would enter into a full cost+interest lease contract is when you lack the money or the access to money via a debt contract to buy or when you want to raise money or access to money.
 
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Stitch
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 7:53 pm

Quoting spink (Reply 40):
If the 10-12 year 380 leasing contracts actually paid off the equipment then no one would actually sign the lease contracts....The only time when you would enter into a full cost+interest lease contract is when you lack the money or the access to money via a debt contract to buy or when you want to raise money or access to money.
SQ and EK are two customers who appear to operate this way.

Doric Nimrod Capital, which has bought a number of A380s from customers like SQ, LH and EK, leases them back to those carriers with a time period and monthly rent that covers the original capital cost of the purchase.

Per financial reports, Singapore Airlines / Airbus sold MSN 003 (9V-SKA), MSN 004 (9V-SKB) and MSN 005 (9V-SKC) to Doric for $198.6 million each. SQ then leased them from Doric on a 10 year term and the monthly rent is $1.7 million. So Doric will be collecting $204 million in rents over the life of the contract.

Doric also paid $234 million for MSN 077, which is being leased to EK as A6-EDP on a 12-year term at a rental rate that will repay the loan to buy the plane in 10 years. To recover $234 million in 10 years would require a monthly rent of $1,950,000. Over the 12 year lease term, that would be a total collection of almost $281 million - $47 million more than the purchase price.

Of course, that assumes EK would pay cash for the delivery, which is unlikely. And by investing that cash, they are likely to generate a rate of return greater than the $47 million. So as you indicated towards the end of your post, airlines likely enter sale-and-leaseback contracts to conserve capital for other uses at an RoI greater than the additional costs leasing vs. buying entails.

[Edited 2013-05-27 12:55:31]
 
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Heavierthanair
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:02 pm

G'day

Quoting mjoelnir (Reply 32):
But Emirates is the biggest owner of the B 777-300 the biggest of the B777 and we can not expect first line airlines, except perhaps Delta, to buy those frames when they are 12 years old.

With high fuel costs, crewing costs and in particular high maintenance costs for those aging planes I see a very limited market for these aircraft, be that B 773's, A 380's or B 748's. Smaller airlines will simply not be able to afford them, besides these aircraft are likely far too big for their needs anyhow. So who will be the takers? I doubt even for the likes of Delta used large widebodied aircraft will be attractive, even though with the few potential takers prices are likely to be VERY attractive. While capital costs may be low operating costs for small carriers will be prohibitive.

Long range low cost carriers may be potential takers, but we have yet to see one of those surviving. I am not trying to be pessimistic on this, but I see the used market for the big widebodies to be nonexistant, that market will be covered by the likes of the A330, B 787 and the smaller versions of the A 350.


Cheers

Peter
"Two things are infinite: the universe and human stupidity; and I'm not sure about the universe." (Albert Einstein, 1879 - 1955)
 
sunrisevalley
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:11 pm

[

Quoting motorhussy (Reply 39):
however the 748 has been sacrificed by Boeing with the launch of the 77X.

To use a rather mixed metaphor they appear to have pulled their head out of the sand and smelt the roses.  
 
spink
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:41 pm

Quoting Stitch (Reply 41):
SQ and EK are two customers who appear to operate this way.

Doric Nimrod Capital, which has bought a number of A380s from customers like SQ, LH and EK, leases them back to those carriers with a time period and monthly rent that covers the original capital cost of the purchase.

Per financial reports, Singapore Airlines / Airbus sold MSN 003 (9V-SKA), MSN 004 (9V-SKB) and MSN 005 (9V-SKC) to Doric for $198.6 million each. SQ then leased them from Doric on a 10 year term and the monthly rent is $1.7 million. So Doric will be collecting $204 million in rents over the life of the contract.

You have to take into account that these deals are at prices below the realistic discount rate for the actual frame as well.

And 200 mil at 3% for 10 years is ~270 mil total cost. i.e. the residual cost for DNC is still ~70 mil at end of contract.

Quoting Stitch (Reply 41):
Doric also paid $234 million for MSN 077, which is being leased to EK as A6-EDP on a 12-year term at a rental rate that will repay the loan to buy the plane in 10 years. To recover $234 million in 10 years would require a monthly rent of $1,950,000. Over the 12 year lease term, that would be a total collection of almost $281 million - $47 million more than the purchase price.

And the cost of 234 mil at 3% over 12 years is 334 mil or a residual of 53 million.

Quoting Stitch (Reply 41):
Of course, that assumes EK would pay cash for the delivery, which is unlikely. And by investing that cash, they are likely to generate a rate of return greater than the $47 million. So as you indicated towards the end of your post, airlines likely enter sale-and-leaseback contracts to conserve capital for other uses at an RoI greater than the additional costs leasing vs. buying entails.

The math works out for the leasing companies that the amount they make from the leasing contract + residual value is greater than the cost of capital. Since the cost of capital is almost always higher than the return on capital, they generate interest from people with money to fund their biz, by offering higher nominal returns than other options. The airline however ends up losing overall money. Some of this can be mitigated by the cost of borrowing for a large financial interest being lower than for a large non-financial interest. The net effect that it is unlikely that EK can get a better ROI on the open market than they will be losing with a sale-and-leaseback arrangement. It however does free up effective capital for expansion which is their goal. As expansion slows however, they are much better off buying than leasing.

The rub becomes if several leasing companies have trouble clearing their residual cost after the end of the leasing contract which will increase the initial leasing costs in the future and make the sale-and-leaseback option less attractive. So the question once again becomes, how much residual value is left in a 12 year old 380 frame that needs costly maintenance?
 
tortugamon
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:45 pm

Quoting NAV20 (Reply 29):
Meaning that both the B748 and the A380 will eventually be out of business

Sorry mjoelnir, apparently there are people speculating that the A380 is going out of business. I was wondering why you were so quick to suggest it but now I see an instance. I stand corrected. NAV20, come on really? Eventually ok, but are you really speculating that the 748i and the A380 have a similar expected longevity?

Quoting mjoelnir (Reply 32):
We can not expect second tier airlines to fill even a B777-300 all the year around, so they only buy when they get them cheap.

Who do you call second tier: Eva Air (15 77W), AI (12), Jet, EgyptAir, PR, TAM, Aeroflot (All with at least 5)?

Quoting mjoelnir (Reply 32):
When you go for leasing contracts of ten years or more the leased equipment is usually about paid up for the lessor, any residual value is butter on the bread.

This is an incredibly inaccurate statement.

Quoting astuteman (Reply 36):
Who knows what the used market for VLA's will be like then?

Yes, very difficult to speculate on that. Lots of variables for sure. Especially for a new model.

Quoting astuteman (Reply 36):
3 more in 2018

Yes, all of the A380s will not be hitting the market at once. And leasing companies will be marketing the frame years before they are coming off lease as well. They will have a much better idea of the 'previously owned' market come 2015 and they will update their lease pricing as they are collecting more information.

Quoting astuteman (Reply 36):
Comparing the 777-300ER specifically with the A380 would be more appropriate IMO as they have a not dissimilar lifecycle.

True. So 30 customers with about 400 in operation and probably another 350 /- or so to go before the used market comes around and competes in full force. Please disregard my earlier figures. However, I speculate that a 77E operator would be much more willing to bring on a 77W then any other operator bringing on a new A380 so the 777 market is relevant to the discussion below.

Quoting astuteman (Reply 36):
Are we really in a position to know for certain already that overall, the 777-300ER "used frame" issue is any easier or more difficult than the A380's?

We do not ever know anything for certain this far in advance, so no. But the smart money says Yes. I will try to locate the information but I just read something on IBA/Ascend I believe that showed the lease rates for all frames by age of aircraft. The 77W was by far the highest retainer of its original lease values and it would follow then that it would better retain its resale value relative to list. Why else would GECAS, ALC, BOC, and ILFC be such large customers of the 77W (100) vs the A380 (0)? A used A380 will have a higher tendency to be sold to a new A380 customer which would require more discounts relative to list price than a product that could go to existing 77W/77L customers and to a lesser extent 77E operators.

Quoting astuteman (Reply 36):
At what percentage does this skew to a single operator become an issue?

I actually do not think its the single operator situation that is the issue. It has to do with the size of the market. It is easier if you are an airline with 5 trying to sell into a market with 150 than if you are an airline with 90 trying to sell into that same market. The guy with 90 cannot sell to himself! So that makes the market smaller which and makes it more difficult. All of EKs 90 will not go on the market at the same time and it will get more and more clear what they value is after every passing year. The smaller the market the higher the risk/beta, the higher the WACC the higher the lease rate and the lower the expected resale value relative to list price. Its not that 'its 40% so therefore its an issue' its 'there are only X customers and X already said no and therefore we have an issue'.

I am not saying that the 77W will not be hard to resell, just that the A380 will be hard relative to other airframes in general and it will become easier with every additional frame they sell (especially to a new customer). The 748 will be crazy hard and would have very high lease rates as a result probably with residual value guarantees. Good thing the lone operator has a penchant for buying these frames outright because the lease rates would be tremendous.

Quoting EPA001 (Reply 37):
I can easily see the skewed comparisons on A-net to which you are hinting.

I too hate the double standard. However, recently, I have become more disappointed at rereading the countless posts about this hypocrisy. The uniformed lead to the first problem, the well informed lead to the second. I have a higher expectation from the second group and I go out of my way to read what they have to say which makes it frustrating to know these members can offer so much value but choose instead to discuss a different type of rant. I am impressed with those that stay above the fray; a status, I recognize, I am not currently embracing myself    .

tortugamon
 
sunrisevalley
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:47 pm

Quoting sunrisevalley (Reply 43):
The math works out for the leasing companies that the amount they make from the leasing contract + residual value is greater than the cost of capital

In most jurisdictions they would get the benefit of the CCA which helps on an after tax basis.
 
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Stitch
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 8:53 pm

Quoting spink (Reply 44):
So the question once again becomes, how much residual value is left in a 12 year old 380 frame that needs costly maintenance?

So far, the A380 seems to be very stable in terms of valuation. 9V-SKA has consistently had a projected value of $170 million since 2009 and a 2009 delivery is worth about the same now as it was at delivery (between $187-190 million).
 
spink
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 9:03 pm

Quoting Stitch (Reply 47):
So far, the A380 seems to be very stable in terms of valuation. 9V-SKA has consistently had a projected value of $170 million since 2009 and a 2009 delivery is worth about the same now as it was at delivery (between $187-190 million).

Which unfortunately doesn't tell us anything about the value of a 12 year old frame in need of both a home and a long and costly and rare upgrade overhaul. And if the projected value has remained the same as the years have piled on, I would seriously question the projection in this case as we aren't talking about a product in high demand let alone high secondary demand. AKA, the projection is probably worth about as much as the paper it is printed on.
 
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KarelXWB
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RE: Is The A350-1000 Taking Orders From A380?

Mon May 27, 2013 9:10 pm

Quoting spink (Reply 40):
It really does matter what will happen to the used birds of EK. In order for EK to replace those birds on a cost competitive basis there needs to be a market to off load the old planes at a reasonable price. And it doesn't matter if they own them or lease them because the economics of the decision effects them either way. If the use 380 market is depressed or non-existent then the lease rates will rapidly reflect that. Leasing companies are not known for giving out free money. The leasing company has to cover the full cost of the 380. If the price they can get for the used 380s is below the fractional cost then they are going to charge more for any leases of new 380s to reflect this cost increase. So it in effect shifts the costs of a 12 year 380 lease from a basis of ~50% of value to 60-70-80% of value. That in turn significantly increases the costs to EK and lowers the economic incentive to replace frames.

The biggest problem I currently see for second-hand A380s are the huge costs for cabin outfitting. Unless an airline is willing to accept the EK cabin, I don't see them spending a lot of money to re-configure the whole cabin.
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