iowaman
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Almost One Year Since Last A380 Order Part 3

Tue Oct 15, 2013 11:00 pm

Due to length of part two here is part three.

Previous thread: Almost One Year Since Last A380 Order Part 2 (by iowaman Sep 23 2013 in Civil Aviation)
 
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Stitch
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RE: Almost One Year Since Last A380 Order Part 3

Tue Oct 15, 2013 11:16 pm

Quoting 2175301:

I tend to read a lot more than I post these days; but to me the real question is not is there an existing and future market for the A380; but can Airbus charge enough per plane to achieve a profit on assembly. Otherwise - there really is no reason to keep the production line open.

As for market: I have long held the belief that the A380's market was overhyped and smaller than originally stated. There are profitable routes; just not a lot of them.

My gut feeling is that the long term market is probably in the 15-20 planes per year; with 25 per year a stretch.

Airbus production facilities were based on a lot more than that (something like 40 per year); and it has oft been repeated that they need essentially 30 per year to achieve breakeven on assembly cost (based on the sales cost of the first several hundred planes).

I am not going to go back and count the number of projections for reaching break even on production cost. Currently it is 2015; but, I am skeptical based on past history. Until then - Airbus looses money on every plane they assemble (and no - maintenance and service contracts do not make up for that - no Mfr can stay in business if they cannot at least break even on the production cost of their primary product - demonstrably true in multiple industries - that also sell spare parts and service contracts).

It has been stated that once they reach break even in 2015 that magically somehow they will then be able to break-even with substantially fewer frames per year. As someone who has worked in and studied Manufacturing I have never seen such a thing. Incremental improvements yes - but somehow major changes: no.

Now Airbus can certainly charge more per A380 in the future to offset that; which affects the economics of the A380.

But, can Airbus and their long term potential customers come to an agreement on price that makes keeping the production line open for only 15-20 planes per year? That is the real question that I see.

With the amount of money Airbus have spent on the facilities, I would guess it may be better for them to just continue to take losses from the program at sub-optimal production rates if they believe that the market will eventually rebound and support a profitable production rate.

Boeing probably has lost money on every 747-8 delivered and yet they keep holding out hope that the market (at least for cargo) will turn and make the program profitable. And as they're far less in the hole on the 747-8 than Airbus is on the A380-800.
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 16, 2013 3:28 am

Quoting Stitch (Reply 1):
With the amount of money Airbus have spent on the facilities, I would guess it may be better for them to just continue to take losses from the program at sub-optimal production rates if they believe that the market will eventually rebound and support a profitable production rate.

Agreed, Stitch - and, in addition, it's important to 'keep faith' with their customers. They still have about 150 orders outstanding. I don't suppose they'd be awfully upset if some of their customers switched their orders to the A350-1000 (or 1100) though; which could very well happen.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 16, 2013 11:58 am

Quoting Stitch (Reply 1):
With the amount of money Airbus have spent on the facilities, I would guess it may be better for them to just continue to take losses from the program at sub-optimal production rates if they believe that the market will eventually rebound and support a profitable production rate.

Agreed, to keep them is much more sensilbe to do, especially if the program will be around for at least another 25 years.  .

Quoting NAV20 (Reply 2):
I don't suppose they'd be awfully upset if some of their customers switched their orders to the A350-1000 (or 1100) though; which could very well happen.

Well, the likes of VS could go this route as nobody is really expecting them to take up on their order. So in that respect it is a win for Airbus if they would switch to the A350-1000.  .
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 16, 2013 12:33 pm

Quoting EPA001 (Reply 3):
Quoting Stitch (Reply 1):
With the amount of money Airbus have spent on the facilities, I would guess it may be better for them to just continue to take losses from the program at sub-optimal production rates if they believe that the market will eventually rebound and support a profitable production rate.

Agreed, to keep them is much more sensilbe to do, especially if the program will be around for at least another 25 years.  .

I think an A380 refresh in the 2020's would coincide nicely with the change in market conditions towards VLA's. The money already lost on the program is lost, so moving forward the trick is how to obtain as much value as possible out of the A380 resources and infrastructure.
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 16, 2013 2:46 pm

Interesting article in Aviation Week on Transaero, with three important pieces of news:

- Transaero seems to have every intention of taking up the 4 B748i's for which it signed an MoU in 2011, starting in 2015. Even though this MoU has still not been firmed up in Boeing's order book...
- After trying out the A380 (the first delivery of which will take place in 2014) and the B748i, it will decide on further fleet renewal. I read this as Transaero being a candidate for further A380 and/or B748i orders...
- It intends to deploy the A380 on mass tourism routes, and the B748i on premium routes.

http://www.aviationweek.com/Article....d_10_16_2013_p01-01-627228.xml&p=1
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 12:53 am

And a little more related information from today's Aviation Daily:

- Boeing to reduce 747-8 production rate to 1.5 per month.
- Blames extended slowdown in cargo aircraft market, expects to recover in 2014
- Orderbook stands at 107, with 56 delivered.
- Forecasts VLA market (747/380) at 760 over the next 20 years
- Believes that 777X will impact forecast
-Remains committed to 747-8
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 2:26 am

Quoting glbltrvlr (Reply 6):
- Forecasts VLA market (747/380) at 760 over the next 20 years

Sounds impressive - but that works out at only 38 a year.............

Quoting glbltrvlr (Reply 6):
- Believes that 777X will impact forecast

And that, of course, points to even less than 38?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
2175301
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 2:45 am

Quoting NAV20 (Reply 7):
Sounds impressive - but that works out at only 38 a year.............

... and if half of that is freighters... That leaves a potential of 19 passenger planes per year.

Have a great day,
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 3:25 am

Quoting NAV20 (Reply 7):
And that, of course, points to even less than 38?

Yep... Eating the bottom of the pyramid.
 
travelhound
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 4:15 am

Quoting NAV20 (Reply 7):
Sounds impressive - but that works out at only 38 a year.............

... and if you take the 38 as the mean and use 3% growth in market you have 28 deliveries in 2013 and 48 deliveries in 2033.

The current rate of both A380 and 748i deliveries stands at 46 in 2013. Using Airbus forecast of 25 A380 deliveries per year and Boeings forecast of 18 748i deliveries per year, which I have again downgraded to 12 deliveries per year in 2016 we will have a fundamental oversupply of VLA's in the market up till 2021.

Of course this is totally prefaced on the market being linear and growing at 3% pa.

It could be the case demand for VLA's is higher at the start years of the forecast due to existing VLA's (747's) being retired and needing replacing. If this is the case, than once replacement of these aircraft has occurred demand for new build VLA's will drop off dramatically.

... but looking at who is currently operating 744's and who is purchasing A380's there seems to be a shift away from current VLA operators to new VLA operators.

So, from what I can see the forecast is based upon routes that require an A380 or 748i type aircraft and not who is currently operating the type.

If this is the case, than as a route grows it will reach an inflection point where an A380 or 748i type aircraft is needed resulting in sporadic demand for VLA's.

... or it could be the case airlines are holding off on purchasing VLA's until such time the number routes that require VLA's has reached a point where they can comfortably purchase a fleet of aircraft ensuring economy of scale economics.
 
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Stitch
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 4:17 am

Quoting NAV20 (Reply 7):
Sounds impressive - but that works out at only 38 a year....

That more than enough deliveries to keep the A380 profitable on a production basis, so...
 
art
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 6:32 am

Quoting Stitch (Reply 11):
Quoting NAV20 (Reply 7):
Sounds impressive - but that works out at only 38 a year....

That more than enough deliveries to keep the A380 profitable on a production basis, so...

No new A380 orders for about a year now. I don't see that it matters how many orders are received per 12 month peroid or per calendar year. More important to me is that orders over multi-year periods are sufficient to maintain production on a profitable basis. Assuming a production rate of 25 per annum there are sufficient "firm" firm orders (forgetting Virgin, Kingfisher etc) to maintain that rate for 5+ years. If orders for a further 50 are received over the next 5 years (a very conservative estimate, I believe) the line will be kept busy until 2020+.

It looks likely that EK will place substantial orders to start replacing its current A380's before then. SQ may re-order before then, too. Replacement orders from these 2 airlines alone would then keep the line busy until about 2024.

I wonder how much it would cost Airbus to do a MLU for delivery 2020 onwards.
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 5:15 pm

Quoting glbltrvlr (Reply 6):
- Forecasts VLA market (747/380) at 760 over the next 20 years

I did a little digging about this number on the Boeing Forecast site:

Yes; Boeing does forecast the need for 760 new 748 & A380's over 20 years (Passenger and freight markets detail - Large Widebody: with only the 748 & A380 currently in this catagory); but if you look at the Large Freighter Market Forecast you will see that 640 of those are Freighters (with the 748 being the only current Freighter in this catagory - and I do not foresee any other Freighter entering this catagory). That leaves a forecast of 120 A380's for the next 20 years.

However, if you also look at the "Passenger Large Widebody" segment you will see an estimate of 610 new deliveries over 20 years. The two numbers do not make sense unless Boeing is assuming that some other plane will enter the "Passenger Large Widebody" segment - and get the lions share of the orders over the next 20 years.

Currently, Boeing list all the current A350 models (including A350-1000) and all current 777 models in the "Passenger Medium Widebody" segment; a segment that Boeing estimates will more than double in size over the next 20 years.

I hope that clarifies the estimate over the next 20 years.

Have a great day,
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 6:15 pm

Quoting 2175301 (Reply 13):

Those Boeing estimates are a bit of a mystery to me. Over the next 20 years they foresee sales of 760 x A380/B748 of which 640 freighters. They seem to think that demand for the A380/748i has almost disappeared.

It looks like they think that EK will not replace their A380's with A380's. How likely is that when EK say they would double the size of their A380 fleet if the infrastructure to support them existed at Dubai?
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 7:08 pm

Quoting art (Reply 14):
Quoting 2175301 (Reply 13):

Those Boeing estimates are a bit of a mystery to me. Over the next 20 years they foresee sales of 760 x A380/B748 of which 640 freighters. They seem to think that demand for the A380/748i has almost disappeared.

It looks like they think that EK will not replace their A380's with A380's. How likely is that when EK say they would double the size of their A380 fleet if the infrastructure to support them existed at Dubai?

And a little more digging indicates that Boeing believes the 777x will indeed replace most of the 748i & A380s. IF EK is offered a reasonably large capacity plane with better overall economics than the A380 - why would they buy a lot more A380's?

Of course, Boeing still has to get the 777x off the ground; and Airlines will be able to get A380's quicker than 777x's at this time.

Have a great day.
 
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RE: Almost One Year Since Last A380 Order Part 3

Sat Oct 19, 2013 8:05 pm

Quoting 2175301 (Reply 15):
IF EK is offered a reasonably large capacity plane with better overall economics than the A380 - why would they buy a lot more A380's?

The 77X may indeed have better seat costs than EK's current A380s but their A380s represent more revenue and they need the traffic to feed their other routes at their increasingly strained airport. A gigantic airport full of 777X may indeed be more profitable but it is not realistic given airports constraints, saying nothing about the A380 improvements that will inevitably be coming down the pike. Also, customer feedback on EK A380s is said to be strong.

tortugamon
 
Scipio
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 5:11 pm

The Economic Times of India has a good article on A380 prospects, apparently coming from Reuters.

Highlights:

- Airbus will not produce white tails. If the remaining 2015 slots cannot be filled, it will rather cut production. However, some deliveries planned for later years may be brought forward to avoid a near-term production cut.
- Leahy remains confident of signing a number of deals before year-end, so as to end the year with a net positive change in the order book.
- The Doric order may be firmed up next month.
- Airbus may "review the situation and strategy" for the A380 at year-end, according to an anonymous industry source.
- Clark remains bullish on the A380 and confirms his interest in a stretched version, as a bigger plane would work quite nicely on most routes [presumably meaning current Emirates A380 routes].
- Doric's Lapidus also remains in the bullish camp. He reports that several airlines were going to take the A380 but didn't because of the global economic slowdown. He expects "significantly more orders" in the next 12 months, and expects the stretch to happen sooner or later, depending in part on how successful Doric will be in marketing the A380.
- Airbus is in no rush to change the A380's design, but it and some suppliers reportedly have started to "think" about what may be needed.


http://economictimes.indiatimes.com/...in-orders/articleshow/24614138.cms

In other news from India, the government is reported as looking into allowing A380 operations:

http://www.indianexpress.com/news/go...ibility-of-airbus-380-ops/1186092/

Finally, there is the trashy and factually challenged (production rate of "less than 17 per year"....) article in Time:

http://business.time.com/2013/10/23/...lds-fattest-most-expensive-turkey/

There is a separate thread on this last article, but I share the view of many others that we do not need a new thread for every (negative) press item on the A380's sales prospects.

[Edited 2013-10-23 10:30:34]
 
astuteman
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 5:27 pm

Quoting 2175301 (Reply 15):
IF EK is offered a reasonably large capacity plane with better overall economics than the A380 - why would they buy a lot more A380's?

Good question. But they have reinforced their long-term commitment to the A380 whilst at the same time seemingly closing in on a large 777X order.

So are you suggesting something about the 777X's overall economics relative to the A380?
Or am I reading something that isn't there?  

Rgds
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 6:25 pm

Quoting Scipio (Reply 17):
The Economic Times of India has a good article on A380 prospects, apparently coming from Reuters.

That's a good article, thanks for sharing.

Quoting Scipio (Reply 17):
- Airbus will not produce white tails. If the remaining 2015 slots cannot be filled, it will rather cut production. However, some deliveries planned for later years may be brought forward to avoid a near-term production cut.

Cutting production a bit (I believe we're talking about 2 open slots) is much cheaper than building white tails.

The 2015 slots must be taken up by an existing customer. If Doric takes them, they could place them with MH for example. I believe MH is looking at 2 more.

Quoting Scipio (Reply 17):
- Leahy remains confident of signing a number of deals before year-end, so as to end the year with a net positive change in the order book.

The 2013 sales target is 25 gross units, he only need another 5 if Doric signs for 20 units.

Quoting Scipio (Reply 17):
- The Doric order may be firmed up next month.

That's the second article claiming it will be firmed next month.

Quoting Scipio (Reply 17):
- Airbus may "review the situation and strategy" for the A380 at year-end, according to an anonymous industry source.

What does this mean, "situation and strategy"? Anyone?

Quoting Scipio (Reply 17):
- Doric's Lapidus also remains in the bullish camp. He reports that several airlines were going to take the A380 but didn't because of the global economic slowdown. He expects "significantly more orders" in the next 12 months, and expects the stretch to happen sooner or later, depending in part on how successful Doric will be in marketing the A380.

The A380 is a big risk in a slow growing economic time. Clearly a lessor will take many of those risks away. If this construction works, we might see more orders in the future.

Quoting Scipio (Reply 17):
- Airbus is in no rush to change the A380's design, but it and some suppliers reportedly have started to "think" about what may be needed.

I assume this means looking at ways to make the A380 more competitive around the end of the decade.

Quoting Scipio (Reply 17):
In other news from India, the government is reported as looking into allowing A380 operations:

Now Clark may rethink his 2-class A380 plans again.

Quoting Scipio (Reply 17):
Finally, there is the trashy and factually challenged (production rate of "less than 17 per year"....) article in Time:

The production rate is higher (25 this year, 28 next year).
Close, but no cigar http://vine.co/v/OjqeYWWpVWK
 
glbltrvlr
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 6:37 pm

Quoting KarelXWB (Reply 19):
What does this mean, "situation and strategy"? Anyone?

Airbus is currently writing a check with every A380 they deliver. Or said another way, they are receiving payment less than it costs to produce the aircraft delivered. No company can sustain that for any period of time.

My take is that if the order goal for 2013 isn't met and there is no confidence for 2014+, they will suspend A380 production and offer existing order positions incentives on other aircraft. It's also hard to see any serious engineering work being done on a refresh or stretch at this time.
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 6:45 pm

Quoting glbltrvlr (Reply 20):
they will suspend A380 production and offer existing order positions incentives on other aircraft. It's also hard to see any serious engineering work being done on a refresh or stretch at this time.

That would even cost more money. It's all about going forward, hence investments will be made in order to stay competitive. If the A380 doesn't receive any new orders in the next few years, than we will have another story.

[Edited 2013-10-23 11:46:06]
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tortugamon
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 6:58 pm

Quoting KarelXWB (Reply 19):
What does this mean, "situation and strategy"? Anyone?

I think this just means they will review and update the plan for the aircraft like they do with every product line before they give future guidance. I don't think this is anything out of the ordinary. I am sure they will look at their backlog and order interest and determine whether their production rate is sustainable and if there are alternate strategies to sell more, increase efficiency, or reduce production rate.

tortugamon
 
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Stitch
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 7:27 pm

Quoting KarelXWB (Reply 19):
What does this mean, "situation and strategy"? Anyone?

I assume it means they are considering lowering the production rate, as Boeing has recently done with the 747-8.


Quoting glbltrvlr (Reply 20):
My take is that if the order goal for 2013 isn't met and there is no confidence for 2014+, they will suspend A380 production and offer existing order positions incentives on other aircraft. It's also hard to see any serious engineering work being done on a refresh or stretch at this time.

My take is there is absolutely no chance of that happening.

[Edited 2013-10-23 12:28:18]
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 7:28 pm

Quoting Scipio (Reply 17):

In other news from India, the government is reported as looking into allowing A380 operations:

Well THAT would be good news for the A 380 programme. The A 380 was designed for countries like China and India and yet so far there is not a single A 380-connection to India. 
Quoting art (Reply 12):

No new A380 orders for about a year now. I don't see that it matters how many orders are received per 12 month peroid or per calendar year. More important to me is that orders over multi-year periods are sufficient to maintain production on a profitable basis.

You are correct, it doesn't matter how much they sell in 12 months. Problem is, even when looking back two years it doesn't look much better. I don't have my old database at hand right now so I cannot provide the exact numbers but IIRC the average of the last years was less than 20 and that does include the Hong Kong order.

Well, let's hope sales will go up again and in a few years the typical A 380 will sing that old Led Zeppelin song while taxiing on the tarmac "Good times, bad times, you know I have had my share..."   ... and all the 747s on the tarmac will turn around and say with hoarse voice "yes, it was the same with me"
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 7:42 pm

Quoting Scipio (Reply 17):
In other news from India, the government is reported as looking into allowing A380 operations
Quoting N14AZ (Reply 24):
Well THAT would be good news for the A 380 programme. The A 380 was designed for countries like China and India and yet so far there is not a single A 380-connection to India.

Well there is a cap on total seats for EK, so if they fly a A380, they have to cut number of flights. There is no way to win. LH can use it, but not sure how well even 748 is doing with ~100 premium seats.
 
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 9:37 pm

Quoting N14AZ (Reply 24):
Well THAT would be good news for the A 380 programme. The A 380 was designed for countries like China and India and yet so far there is not a single A 380-connection to India. 

Some more on this:

http://www.livemint.com/Companies/Nv...irbus-A380-impact-on-airfares.html

Unsurprisingly, Air India is opposed...
 
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Stitch
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RE: Almost One Year Since Last A380 Order Part 3

Wed Oct 23, 2013 9:47 pm

Quoting Scipio (Reply 26):
Unsurprisingly, Air India is opposed...

Air India would be opposed if they had A380s themselves, probably.  

[Edited 2013-10-23 14:47:39]
 
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N14AZ
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 6:42 am

Quoting DTW2HYD (Reply 25):

Quoting Scipio (Reply 17):
In other news from India, the government is reported as looking into allowing A380 operations
Quoting N14AZ (Reply 24):
Well THAT would be good news for the A 380 programme. The A 380 was designed for countries like China and India and yet so far there is not a single A 380-connection to India.

Well there is a cap on total seats for EK, so if they fly a A380, they have to cut number of flights. There is no way to win.

But there must be a reason why they ask for permission to send the A 380 to India. Quote from the link Scipio provided above:

Quote:
Lufthansa, Emirates and Singapore Airlines are the three international carriers, who have shown interest in operating the jumbo aircraft into India.

The other link includes some interesting information (in opposite of all the personal opinions we often discuss)

Quote:
Clark told Reuters. "We have 37 in operation today, and on most routes a bigger plane would work quite nicely."

Waow, that's really amazing.
 
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 7:19 am

Rumours are starting to brew about a possible EK order at the Dubai Air Show next month...

There are talks of 777X (and lots of them), and an A380 top up order (possibly several dozens).

Quoting glbltrvlr (Reply 20):
Airbus is currently writing a check with every A380 they deliver. Or said another way, they are receiving payment less than it costs to produce the aircraft delivered.

Are you talking about cost of purchase vs. strict cost of production alone or including the amortization of the development cost?

The former would surprise me.
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art
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 9:48 am

It would be interesting if EK ordered 2 for delivery in 2015 as part of a modest expansion of their fleet. Any chance of that happening?

Regarding a large order from EK, I thought Clark said that while he would like more, Dubai can't handle more.

[Edited 2013-11-12 09:41:32 by SA7700]
 
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 9:57 am

Quoting art (Reply 32):
It would be interesting if EK ordered 2 for delivery in 2015 as part of a modest expansion of their fleet. Any chance of that happening?

I would be surprised if the two openings in 2015 are not indicative of the more openings in 2016. Others will know better but I am not sure if selling just these two spots would dramatically change anything by anything more than a couple of months.

tortugamon
 
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 9:58 am

Quoting art (Reply 32):
Any chance of that happening?

Clark is always complaining about being short of airframes, there must be other reasons why he can't take those 2 slots.

Quoting art (Reply 32):
Dubai can't handle more.

They are studying multiple options to resolve this issue.
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 12:43 pm

Quoting DTW2HYD (Reply 25):
Well there is a cap on total seats for EK, so if they fly a A380, they have to cut number of flights.

EK is, as you say, capped at 54000. However, they use the A380 to extract a premium per seat, so may view the aircraft as a way to grow revenues in spite of the constraint.
Emirates are not the only middle eastern A380 operator serving India though. The Abu Dhabi bilateral has recently tripled the number of seats (with no increase in the 11? allowable destinations) up to about 45000, or 90000 if you include the Indian (i.e.Jet) side. If the restriction on A380's is removed, expect the Etihad order to increase from its current 10, and possibly a Jet order in the medium term.
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dtw2hyd
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 3:31 pm

Quoting BaconButty (Reply 36):
EK is, as you say, capped at 54000. However, they use the A380 to extract a premium per seat, so may view the aircraft as a way to grow revenues in spite of the constraint

There is no nationwide 54,000 number. Each station has a weekly seat restriction.

Quoting BaconButty (Reply 36):

Quoting DTW2HYD (Reply 25):
Well there is a cap on total seats for EK, so if they fly a A380, they have to cut number of flights.

EK is, as you say, capped at 54000. However, they use the A380 to extract a premium per seat, so may view the aircraft as a way to grow revenues in spite of the constraint.
Emirates are not the only middle eastern A380 operator serving India though. The Abu Dhabi bilateral has recently tripled the number of seats (with no increase in the 11? allowable destinations) up to about 45000, or 90000 if you include the Indian (i.e.Jet) side. If the restriction on A380's is removed, expect the Etihad order to increase from its current 10, and possibly a Jet order in the medium term.

All Indian bilaterals are rigged to prevent any creative practices, including use of a VLA when it is allowed.

EK-54000/EY-45000/9W-45000 numbers are just crude sums of entire bilateral deal. There are multiple layers of restrictions.

There are caps on seats and frequencies to each Indian city. It is not a blanket number for EY throughout the country. It is not that easy for EY to buy A380s for 9W.
 
glbltrvlr
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 3:31 pm

Quoting francoflier (Reply 29):
Are you talking about cost of purchase vs. strict cost of production alone or including the amortization of the development cost?

Amortization of development costs is off the table. Those costs are sunk and will never be recovered if you take into account the time value of money. Airbus has stated that they hoped to be revenue positive on production costs next year, but that was predicated on production levels of around 30 aircraft per year. Now that they are starting to look at reduced production levels, it becomes even harder to reach positive cash flow.
 
scouseflyer
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 4:05 pm

Quoting glbltrvlr (Reply 38):
Amortization of development costs is off the table. Those costs are sunk and will never be recovered if you take into account the time value of money. Airbus has stated that they hoped to be revenue positive on production costs next year, but that was predicated on production levels of around 30 aircraft per year. Now that they are starting to look at reduced production levels, it becomes even harder to reach positive cash flow.

As you say, the dev costs are gone and spent and we're talking about cash flow position. It can't really be told whether that point has been reached until accounts are published for the year and studied but 2015 was the position for years for break-even. There have been plenty of improvements in the process recently - witness how quickly EK birds go through the cabin fitting and painting now in Hamburg.

It must be said though that Airbus isn't carrying on building A380s because it's stubborn or embarrassed about backing down If the cost of closing the programme and refunding deposits etc was less than the money they are losing on production then they would do that so even if they're not making a profit they're losing the least money possible on these planes as they go out of the door.
 
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BaconButty
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 4:41 pm

Quoting DTW2HYD (Reply 37):
There is no nationwide 54,000 number. Each station has a weekly seat restriction.

I've read the bilateral (with Dubai) and I'm fully aware of this (though by definition, the sum of all the stations is a national figure, if we're playing silly buggers). I'm not sure what you're trying to say though - did the Indians use soothsayers to predict the seat counts of their 773ER's and cunningly set the station limits to an exact multiple? Is Tim Clark mad to be pressing to use the A380 - and any moment could check the bilateral and cry in anguish "If only I'd listened to a.net!"? The limits to the smaller markets (Kolkata for example) are clearly too low for an A380, but there's enough flexibility in the limits for Delhi and Mumbai.

Anyhow, EK aren't set to be the big winner in the current round of liberalization. It's Etihad, and particularly in relation to their stake in Jet airways. But either way, if you can't see that India (potentially) lifting the bar on VLA's could improve the prospects of said aircraft, I can't help you.
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astuteman
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 5:15 pm

Quoting glbltrvlr (Reply 38):
Airbus has stated that they hoped to be revenue positive on production costs next year, but that was predicated on production levels of around 30 aircraft per year

I don't believe this is strictly accurate. As far as I'm aware Airbus never explicitly linked break-even on production costs to delivering 30 frames.
They said they intended to deliver 30 frames AND expected to reach B/E
That's not quite the same.
However

Quoting glbltrvlr (Reply 38):
Now that they are starting to look at reduced production levels, it becomes even harder to reach positive cash flow.

This is undoubtedly true. It will be harder to reach break even if they deliver 28 instead of 30.
Doesn't mean they won't though

Rgds
 
dtw2hyd
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 5:23 pm

Quoting BaconButty (Reply 40):
did the Indians use soothsayers to predict the seat counts of their 773ER's and cunningly set the station limits to an exact multiple?

It is exactly that. In case of EK, most stations have weekly seat limit set at ~2100.

EY/9W will have access to 23 stations, but EY is restricted to very few and one Daily to major hubs with class F airports. It is near impossible to use A380 even if India lifts equipment restrictions.

Read the fine print.

"Its believed the Indian government is considering the relaxation of bilateral per flight size limitation which would allow A380 model so long as total market seat capacity allowances in bilateral agreements still remained in force."

[Edited 2013-10-24 10:51:37]
 
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BaconButty
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 6:50 pm

Quoting DTW2HYD (Reply 42):
It is exactly that. In case of EK, most stations have weekly seat limit set at ~2100.

Yes but not at the hubs. As I stated but you deliberately ignored. Anyway, you'd better get on to Tim Clark, because the old fool is clearly deluded.
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dtw2hyd
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 6:59 pm

Quoting BaconButty (Reply 43):
Yes but not at the hubs. As I stated but you deliberately ignored. Anyway, you'd better get on to Tim Clark, because the old fool is clearly deluded.

What do you mean not at the hubs, Delhi - 8000 seats/Weekly, Mumbai - 4500 seats/Weekly. It will be 2 daily flights to Delhi and 1 daily flight to Mumbai. Whichever way you slice it, there is no way to flood the market like EK did in South Africa and else where driving out the competition.

EK actually loses 1000 seats/week to Delhi and 1000 seats/week to Mumbai if it just want to use A380.



[Edited 2013-10-24 12:05:18]
 
glbltrvlr
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 7:22 pm

Quoting astuteman (Reply 41):
I don't believe this is strictly accurate. As far as I'm aware Airbus never explicitly linked break-even on production costs to delivering 30 frames. They said they intended to deliver 30 frames AND expected to reach B/E That's not quite the same.

True - agreed.
 
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BaconButty
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 8:31 pm

Quoting DTW2HYD (Reply 44):
What do you mean not at the hubs, Delhi - 8000 seats/Weekly, Mumbai - 4500 seats/Weekly.

I'll try to make this simple:
You said "most stations have weekly seat limit set at ~2100."
I said "Yes but not at the hubs. " And I was right.
It's not exactly the trickiest exercise in english language comprehension.

And FWIW Emirates traffic to Mumbai and Delhi in 2011/12 was 949K and 707K respectively. Or 18+K / week in Mumbai. The load factor is 84% so that implies 21K limit - or rather half that assuming it's one way vs return.
http://content.emirates.com/is/engli...es/Report_Final2_tcm327-970591.pdf - see P20

I've checked the bilateral I have read before and I think it's old - 2007 and it has 29.1K as the total limit whereas the current bilateral was signed in 2008 and has 54.2K as the total limit. The respective limits were similar to yours, 7.3K Mumbai 4.6K Delhi. Given Emirates have four daily frequencies (1 A330, 2 772 and a 77W on the day I looked) to Delhi, they'd blow that limit right out of the water, so they've clearly increased. And I can't find any mention of upper of lower limits on frequencies, save for a statement that "best efforts" will be made to up gauge the Mumbai route, rather than add frequency.
http://dgca.nic.in/bilateral/uae0507.pdf

I imagine this is getting extremely boring for everyone else, and I can't be doing with word games, so I'll leave it there. But if anyone has any detail on the 2013 Abu Dhabi bilateral, or a copy of the updated 2008 Dubai bilateral I'd love to see it.
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dtw2hyd
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 9:22 pm

Quoting BaconButty (Reply 46):
I'll try to make this simple:
You said "most stations have weekly seat limit set at ~2100."
I said "Yes but not at the hubs. " And I was right.
It's not exactly the trickiest exercise in english language comprehension.

Its a math problem. EK doesn't operate all flights all days. AFAIK 29000/week/each way still valid. Let's leave at that.
 
travelhound
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RE: Almost One Year Since Last A380 Order Part 3

Thu Oct 24, 2013 11:27 pm

Quoting scouseflyer (Reply 39):
As you say, the dev costs are gone and spent and we're talking about cash flow position.

There is a little more to this than just profits or cash flows.

If we look at Airbus’s sales and deliveries to date from a pure investment perspective I think it is fair to argue the program hasn't been the best. I think some of the comments recently made by Airbus themselves shows they also acknowledge this.

.... but, if (two if's and one but and anything is possible) in 3 / 5 / 10 year’s time the natural market for the airplane gets to a level where production can be maintained at a cash flow and profitable basis than the value of the program today is not about gross margins and cash flows, but about maintaining the facilities, including the managers, engineering personnel, administrative workers and factory floor staff so that when the shift in market does happen Airbus can take full advantage.

So from this perspective, today the value of the manufacturing facilities and the A380 intellectual property has to be considered just as important as profits and cash flows.

Considering it probably took Airbus ten plus years just to get the first A380 out of the door, I am not sure they would want to do anything that diminishes the value of the A380 assets.
 
Scipio
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RE: Almost One Year Since Last A380 Order Part 3

Mon Oct 28, 2013 10:28 am

The FT is reporting today that Emirates is considering placing orders for A380s and A350s at the upcoming Dubai show. Orders for the Airbus models might be placed alongside an expected record order with Boeing for 100 B777X's. However, Emirates stresses that no agreements have been finalized yet with either manufacturer.

As to the A350, Emirates is reportedly also looking at changing the mix of its current orders, toward more A350-1000's.
 
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scbriml
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RE: Almost One Year Since Last A380 Order Part 3

Mon Oct 28, 2013 10:58 am

Quoting Scipio (Reply 49):
Emirates is considering placing orders for A380s

I've been of the view for some time that EK would order additional A380s this year. Additional A350s would be more of a surprise.

Quoting Scipio (Reply 49):
As to the A350, Emirates is reportedly also looking at changing the mix of its current orders, toward more A350-1000's.

I've always believed that the 787 was too small for EK and that the A350 would be their smallest plane, but I must admit I fully expected it to be the -900. Is it now going to be the -1000?   
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art
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RE: Almost One Year Since Last A380 Order Part 3

Mon Oct 28, 2013 11:11 am

Quoting Scipio (Reply 49):
The FT is reporting today that Emirates is considering placing orders for A380s and A350s at the upcoming Dubai show.

To quote the FT article:

"Mr Clark said Emirates, which has placed orders for 90 A380s so far, has a longstanding interest in buying another 20 superjumbos.

However, he stressed any additional order for the A380 was partly dependent on Emirates having sufficient room for them at its existing base at Dubai International airport or Dubai World Central, the new hub that the emirate is developing."

It sounds to me like (a) a desire to expand the A380 fleet is established (b) actually being able to place an order is subject to having the infrastructure needed for the extra aircraft. Question to me is: when is the required infrastructure due to come on line? If it is scheduled within the next 3-5 years, what stops EK ordering more A380's for delivery 3-5+ years from now?

I won't be too surprised if EK orders more A380's at the show.

Should EK and Doric place firm orders for 30-40 at the show, will current perceptions of the A380 sales program being dead in the water change to it being a program that is steaming ahead nicely?
 
tortugamon
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RE: Almost One Year Since Last A380 Order Part 3

Mon Oct 28, 2013 11:12 am

Emirates has said they don't have a need for anything smaller than 340 seats. A switch to the 1000 is not a surprise.

tortugamon