eugdog
Posts: 426
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:16 am

I believe the A380 will break even and make small profit for Airbus as they have sold 160 and only need 250 to break even. But is still a terrible mistake for Airbus to develop the A380 for the following reason

1) They conceded the far more lucrative mid market to Boeing and the 787. By devoting all their capital and talent to the A380 they are unable to launch an adequate rival to the B787. What ever Airbus do they will be 4-6 years late in competing in the mid size market which is clearly much bigger then the jumb market
2) it has greatly weakened the case for subsidy. The A380 is such a high profile aircraft in which the politicians such as Blair and Chirac have openly associated themselves with. This has awakened the debate over subsidies for Airbus. This is an issue Airbus must keep quiet about. But the boasting by Blair and Chirac about this grand project for thier own political ends has put the issue of subsidies back in the spotlight. Consequently the Americans have withdrawn from the agreement to allow subsidies for Airbus. As result it is highly unlikely that Airbus will get a full one-third subsidy for the A350/370. Had Airbus developed a less politically spectacular plane which Blair and Chirac had little interest in associating themselves with then it is likely that subsidies would not be put back in the spot light.


( I do not wish to get into an arguement about Boeing subisidies - the fact remains that Airbus is OPENLY subsidised whilst Boeing is covertly subsidised. This makes it easier for US politicians to take aim at Airbus but harder for European politicians to attack Boeing)
 
ikramerica
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:23 am

Starting this thread - A Terribe Mistake?  Wink
Of all the things to worry about... the Wookie has no pants.
 
GoBlue
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:26 am

We should all prepare for another A Vs. B war here
 
EMBQA
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:26 am

Quoting Eugdog (Thread starter):
I believe the A380 will break even and make small profit for Airbus as they have sold 160 and only need 250 to break even

They have only sold 159... a number that remains all but unchanged since it's first flight well over 1 year ago. They also need closer to 300 to break even according to the National Geographic Special a few weeks back. That number goes up each time they have more costly delays... the third major delay of the program occured just last week. Airbus will need to land around 40 or more orders just this year to make the program viable. If they don't get them, you can bet questions will start to be asked........and if cancelations start..look out.
"It's not the size of the dog in the fight, but the size of the fight in the dog"
 
StarAC17
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:28 am

Quoting Ikramerica (Reply 1):
Starting this thread - A Terribe Mistake?

 checkmark . If I was a mod the next starter anti A380 thread should get 3 days off. I'm really tired of reading all this nonsense which is purely opinion about the A380. This week there has been one thread a day and its annoying.
Engineers Rule The World!!!!!
 
zvezda
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:30 am

Quoting Eugdog (Thread starter):
only need 250 to break even.

If Airbus had sold 250 at list price by 2004 then yes, but that didn't happen. Prior to the latest (3rd) delay, Airbus needed to sell 350-400 according to independent estimates. Now that number will be substantially greater. It's still hypothetically possible that the WhaleJet could recoup its development costs, but it is far from certain. The farther in the future sales come, the more will be needed.
 
RichardPrice
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:40 am

Quoting EMBQA (Reply 3):
They have only sold 159... a number that remains all but unchanged since it's first flight well over 1 year ago.

During which time 1 passenger 747 have been sold, its not exactly a booming market at the moment but Boeing certainly think its going to change and you can bet your bottom dollar that the A380 is going to be considered in practically any situation the 747-8 would be. Its not guaranteed that Airbus will reach 250 airframes, but to make 159 airframes at a time when Boeings largest offering is only making freighter sales is to be frank, astonishing.

EDIT: Spelling.

[Edited 2006-06-17 23:48:29]
 
BoomBoom
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:44 am

Quoting StarAC17 (Reply 4):
This week there has been one thread a day and its annoying.

There's been one bombshell a day.

Airbus A380 Faces Operating Limits
New A380 Delay Announced
Eads Stock Plunges On A380 News!
Eads Shareholders Plan Lawsuit Against Managers
Eads To Forgeard : Shut Up....
Airbus, Parent Blame Each Other Over A380 Delays

These are all real news stories, not the product of someone's fertile imagination. It's certainly fair to discuss them.
Our eyes are open, our eyes are open--wide, wide, wide...
 
11Bravo
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:56 am

Quoting RichardPrice (Reply 6):
but to make 159 airframes at a time when Boeings largest offering is only making freighter sales is to be frank, astonishing.

If you're going to preclude the the Boeing freighter sales from your comparison, you should do the same for the WhaleJet.

Airbus has sold 134 pax models of the A380.

I agree with part of your statement though. The VLA pax component is almost completely absent from the market in the last two years.
WhaleJets Rule!
 
legoguy
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 6:58 am

Quoting BoomBoom (Reply 7):

Welcome back boomboom

As to whether A380 was a mistake. ONly time will tell. We can only speculate at this stage
Can you say 'Beer Can' without sounding like a Jamaican saying 'Bacon'?
 
dutchjet
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 7:18 am

Airbus has had its problems lately, and last week was a horrible one for Airbus - thus, threads like this are fair game and are to be expected. The simple answer is that its too soon to tell if the A380 program will be a success in the longrun....there are lots of problems now, and sales have only been mediocre to date, but the A380 is a long term project. In about five to seven years time, someone will be able to answer the original question of whether the A380 was a mistake or not.

And, to the Airbus cheerleaders who are now offended by the posts concerning the difficult situation at Airbus, remember, it was just a few short years ago that you were happily kicking Boeing when it was having its troubles. There is an old expression - be nice to others on your way up, because you will see all of them again on your way down. It is time for Airbus to get its act together.
 
LY777
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 7:20 am

For me, the A380 could become the 2nd Concorde
Flown:717,727,732,734,735,738,73W,742/744/748,752,762/2ER/763/3ER,772/77E/773/77W, 788, D8,D10,L1011, A3B2,A320,A321,A332,A343,A388
 
chiad
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 7:23 am

I think the problems at Airbus come from a combination of loss of focus and not knowing one's limitation.
The A380 did have, and still has, a huge potential to become a very good product for both Airbus and its customers.
Some at A-net has suggested that Airbus should keep the current A350 specification and let go of the new A370 ... at least for now. Keep the focus on the A380 and go for 1/3 of the B787/A350 marked. I agree on this.
When the A380 finally has proven itself it might be time for the extremely important NG A320/B737 products to be developed.

I think if the A380 gets all Airbus' focus now until securely in airline service, it will be a good and successful business case.
If they split attention now to a new A370, and soon the A320NG, the disaster can be the result.
 
redflyer
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 7:24 am

Quoting Eugdog (Thread starter):
But the boasting by Blair and Chirac

Actually, it was Chirac and former German PM Gerhard Schroeder that did most of the boasting. In fact, it was Schroeder who said at the unveiling in January, 2005, "this plane shows that 'old Europe' still works", or something to that affect.

Quoting StarAC17 (Reply 4):
If I was a mod the next starter anti A380 thread should get 3 days off.

Good thing you're not. I don't think we need any more censorship on this board.
My other home is in the sky inside my Piper Cherokee 180.
 
CptGermany
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 7:32 am

Quoting Ikramerica (Reply 1):
Starting this thread - A Terribe Mistake?

Good one!!

Quoting Legoguy (Reply 9):
As to whether A380 was a mistake. ONly time will tell. We can only speculate at this stage

 checkmark 
 
cairo
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 7:42 am

I have no real opinion as to whether the A380 will be a long term success or not.

I've always felt that the case for the A380 right NOW was weak, although this could change in years to come.

1. No US passenger carrier wants it - that is eliminating 30-40% of the new aircraft market right there.

2. The main buyers of this aircraft are doing so in large part because of slot restrictions at LHR - take away this problem and overcrowding at maybe 2 other airports and the customer base for the A380 would rather add frequency instead of add a bigger airplane.

3. BOTH Boeing's AND Airbus's own market outlooks predict the overwhelming growth in new aircraft orders will come in mid-sized narrowbody planes - so why gamble so much on the A380?

Anyway, the A380 market could still develop strongly, although I think it is a bit premature right now.

Cairo
 
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mariner
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:05 am

With all the glee from the bashers over the last few days, one thing has been lost:

It is a superb machine.

mariner
aeternum nauta
 
Ruscoe
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:05 am

As originally envisaged the 380 would have been an extraordinary aircraft.

In 1994 when Airbus unvieled their twin deck concept for the A3XX, (3 years after their Vision for the Future Concept), the craft was described as having a MTOW of 471T, a number they reiterated again the next year at the Paris Airshow. It was to seat 570 people in 3 classes and have 15% better seat costs than the 747. (This assuming Boeing did nothing with the 747 or develop another competitior).

I guess you can see the problem! It has grown to 560T for essentially the same mission. This is 90T over the original concept.

This is one of the fundamental reasons the 380 is open to competition from aircraft in a completely different class (eg 787) and from upgraded 747, and despite tweaking around the edges is a flawed concept which should never have proceeded. (And there were plenty of people who could see this from an early stage.

Ruscoe
 
Ken777
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:08 am

Hindsight is always 20-20.

As for the plane itself, I don't see it as an instant success, but I believe that the people actually working on the plane will provide continual improvements and it will end up a solid product that does turn a profit. These days we are looking too much at "what is it doing TODAY" and not considering it's 20-40 year life. I'm sure there would have been some interesting threads if this site was available to us when the original 747 was suffering through its birth pains.

I'm in the camp that believes that Airbus must continue to allocate resources to the 380 program, even at the expense of the timing of some other programs. EIS isn't going to be the end of the 380 development and giving it a high priority will ensure it becomes the plane it should be.

Personally I wish them all the best as I would love to fly the 380 some day.
 
mainMAN
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:09 am

Quoting Cairo (Reply 15):
The main buyers of this aircraft are doing so in large part because of slot restrictions at LHR - take away this problem and overcrowding at maybe 2 other airports and the customer base for the A380 would rather add frequency instead of add a bigger airplane.

Well said. The 777 and 340 families would seem to have the rest of the world well-catered for, and the 787 will fill in the gaps.

The A380 is all about kudos and the limited number of routes it will fly may well be negated by competing 787 services between smaller cities. Just my opinion....not necessarily true because nobody yet knows.
 
warreng24
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:14 am

When you speak of a subsidy for Boeing... what exactly do you speak of?

Many many many defense contracts are given to various divisions of Boeing and EADS.

If you look at Airbus itself (the commercial aircraft division) you see DIRECT many direct subsidies. It's practially:

European Governments: "Hello Mr. Airbus. Please build this plane. Here is a loan to go do it."

If you look at Boeing's commercial aircraft division, do you see DIRECT subsidies as indicated above... no. But, you don't see indirect subsidies either. Commerical aircraft operates as a seperate business unit from the rest of the company.

Ok, I agree in the case of the KC-767 you have something along the lines of a indirect subsidy:

Boeing Integrated Defense Systems (IDS) gets a contract to supply XX KC-767's to the USAF. Then, Boeing IDS awards the build contact for the airframes to Boeing Commercial Aircraft.

Yes, I agree that could be seen as a subsidy. It might actually be a subsidy. But, when was the last time the Boeing Commerical Aircraft was involved in such a huge subsidy?

1) Air Force 1 (1980's)
2) KC-135 (1950's)
3) KC-10 (1980's... was technically a different company at the time)
4) KC-767 (still up in the air, no pun intended)

I agree that the above could be seen as pork barrel spending. However, in the case of AF1. What would you think of the CEO of BMW driving around in a Mercedes?

Personally, I think the KC-767 is a potentially indirect subsidy. Boeing had a rough set of years pre-787 launch. US congress probably wanted to give a hand... and asked the Pentagon to look into KC-767's. Those KC-10's will last forever (good ol' Douglas), and the re-engining program on the KC-135's have brought new life to the aircrafts.

But the bottom line is that whenever Airbus feels the need to launch a new aircraft, governments feel the need to provide a loan. I don't think Airbus really needs the loans, but the terms are possibly too good for the accountants at Airbus to pass up.

[Edited 2006-06-18 01:15:39]

[Edited 2006-06-18 01:17:33]
 
Dougloid
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:15 am

Quoting EMBQA (Reply 3):
They have only sold 159... a number that remains all but unchanged since it's first flight well over 1 year ago. They also need closer to 300 to break even according to the National Geographic Special a few weeks back. That number goes up each time they have more costly delays... the third major delay of the program occured just last week. Airbus will need to land around 40 or more orders just this year to make the program viable. If they don't get them, you can bet questions will start to be asked........and if cancelations start..look out.

When I worked for Douglas they invested about 6.5 billion USD on the MD11 and they figured that they'd have to sell 450 aircraft to start returning serious money to the stockholders. I think it was a reasonable estimate. Airbus is known to be on the hook for 12 billion USD or more for the A380 depending on who you ask. If they sold 300 of the A380 for cash on the barrelhead that would have to return 40 million per hull USD just to pay the development money let alone any carrying costs, time value of money, discounts, etc etc.

I think it unlikely that they can turn the A380 into a cash cow on 250 hulls, or even break even.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
dl757md
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:28 am

Quoting Cairo (Reply 15):
2. The main buyers of this aircraft are doing so in large part because of slot restrictions at LHR - take away this problem and overcrowding at maybe 2 other airports and the customer base for the A380 would rather add frequency instead of add a bigger airplane.

It's doubtful that we'll ever be able to "take away this problem". Rather it is a problem that will likely become more widespread as air travel increases, creating more justification for the A380.

DL757Md
757 Most beautiful airliner in the sky!
 
RichardPrice
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:34 am

Quoting Warreng24 (Reply 20):
If you look at Boeing's commercial aircraft division, do you see DIRECT subsidies as indicated above... no.

I hate doing subsidy discussions, but sometimes falacies have to be blown open.

State of Kansas - $200million in Bond Investment for 787 nose production paid back over 20 years at an interest rate of 5%, paid back by withholding taxes on employees.

State of Oklahoma - offered $350million in subsidies for 787 production work, including an interest free bond of $250million and a $100million research investment funded by a 4/10th of a penny increase on taxes across the board for 13 years.

Italy - $590million interest free investment for 787 production work.

Direct subsidies (if its OK to call the loans Airbus gets 'subsidies' then these fit the same standards).

The subsidy discussion is one that will never be resolved here on a.net, there are too many people with their own views and opinions that will never change so lets not do that shall we.
 
EMBQA
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:36 am

Quoting RichardPrice (Reply 6):
During which time 1 passenger 747 have been sold, its not exactly a booming market at the moment

Are you serious...??? Airbus and Boeing had their best year last year in a LONG TIME. The key.... medium range jets...!! That is where the market place is. The airlines are already happy with the long range offerings from Boeing and Airbus...
"It's not the size of the dog in the fight, but the size of the fight in the dog"
 
RichardPrice
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:53 am

Quoting EMBQA (Reply 24):
Are you serious...??? Airbus and Boeing had their best year last year in a LONG TIME. The key.... medium range jets...!! That is where the market place is. The airlines are already happy with the long range offerings from Boeing and Airbus...

Yet at a time when Boeings flagship product is flagging for passenger sales, the A380 has run away with over 130 passenger airframe orders - it definately seems to lay to rest the 'there is no VLA market' myth thats prevelent on here, and maybe even puts a shot across the bow of the 'the 747-8 will destroy the A380s market' myth at the same time.

9 months since launch and the latest 747 incarnation has achieved 1 passenger airframe sale. If Airbus launched a product that did that well, that product would be slated on here but surprisingly that isnt happening.

[Edited 2006-06-18 01:54:17]
 
spartanmjf
Posts: 459
Joined: Fri Nov 11, 2005 11:31 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 8:59 am

Quoting RichardPrice (Reply 25):
Yet at a time when Boeings flagship product is flagging for passenger sales, the A380 has run away with over 130 passenger airframe orders - it definately seems to lay to rest the 'there is no VLA market' myth thats prevelent on here, and maybe even puts a shot across the bow of the 'the 747-8 will destroy the A380s market' myth at the same time.

The Boeing 787 Dreamliner has sold remarkably well over the past twelve months, far outstripping the orders for the A350, and the A380 is stuck where it is.

No one has claimed that the 748 is going to be a market buster, but it is a project that in and of itself is not distracting the focus of BCA to the detriment of other programs.
"Nuts to the man in 21D!"
 
Lumberton
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:00 am

Quoting RichardPrice (Reply 25):
Yet at a time when Boeings flagship product is flagging for passenger sales, the A380 has run away with over 130 passenger airframe orders - it definately seems to lay to rest the 'there is no VLA market' myth thats prevelent on here, and maybe even puts a shot across the bow of the 'the 747-8 will destroy the A380s market' myth at the same time.

Perhaps there will be some 748I sales announced at Farnborough? One never knows....
"When all is said and done, more will be said than done".
 
NIKV69
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:01 am

Quoting Mariner (Reply 16):
It is a superb machine.

This has yet to be seen. I feel Airbus is going to take a loss on this one. They haven't even gotten this thing even close to commercial service and I feel it will cost more to operate than airbus says once it does enter service.
Hey that guy with the private jet can bail us out! Why? HE CAN AFFORD IT!
 
cairo
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:08 am

Quoting Dl757md (Reply 22):
It's doubtful that we'll ever be able to "take away this problem". Rather it is a problem that will likely become more widespread as air travel increases, creating more justification for the A380.

If you are an accurate predictor, great, invest and get rich.

As I say, I really don't claim to know what will happen, but the situation in London certainly IS resolvable - it is mainly a matter of how the UK deals with its 5+ London area airports. Also, London, like Tokyo and the 1 or 2 other hubs currently argued in favor of the A380 are much like JFK was 30 years ago = the overwhelmingly dominate international gateway for their countries.

JFK international traffic has been stagnate for 30 years as transatlantic traffic spread to other US cities - regional airports in the UK could grow, other London airports could grow, non-Tokyo Japanese airports could grow, etc... if in fact the rest of the world follows the US model of airline development, the case for the A380 is weaker.

Anyway my point is that nothing is certain and I don't even believe those who claim to have 'likely' outcomes ready for the future to accept.

Cairo
 
User avatar
mariner
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:09 am

Quoting NIKV69 (Reply 28):
This has yet to be seen. I feel Airbus is going to take a loss on this one.

Oh, I'm sorry. I thought this was a forum for aviation enthusiasts.

I didn't realize one had to have a Harvard MBA to post here.

mariner
aeternum nauta
 
flyabunch
Posts: 444
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:10 am

Talking about subsidies and trying to figure out who gets more is impossible. It is a little like trying to figure out a politician who tells you that if he is elected he will cut your taxes...yeah, right...if you believe that, I have a bridge to sell you.

All major companies in the world look for and get subsidies from various governments to encourage them to employ people in their jurisdictions. It is the way that the world works. At least the EU subsidies to Airbus appear to be slightly more transparent.

Remember the early discussions between the state of Washington and Boeing about whether or not they were going to keep the 787 assembly in Everett. There was no real reason for Boeing to consider any other location. There is a nice big factory, trained workforce, access to ports, etc. But, if other states wanted to get them to move by throwing money in their face, they would be crazy not to consider.

Airbus and Boeing will both continue to do business this way. They will both also continue to cry about their competitors getting more. That is what keeps them both more honest about it than they would be otherwise.

Mike
 
787engineer
Posts: 545
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:33 am

A mistake? No way! Think of all the fun we had "bashing" the WhaleJet. J/K  Wink

Quoting RichardPrice (Reply 25):
Yet at a time when Boeings flagship product is flagging for passenger sales, the A380 has run away with over 130 passenger airframe orders - it definately seems to lay to rest the 'there is no VLA market' myth thats prevelent on here, and maybe even puts a shot across the bow of the 'the 747-8 will destroy the A380s market' myth at the same time.

9 months since launch and the latest 747 incarnation has achieved 1 passenger airframe sale. If Airbus launched a product that did that well, that product would be slated on here but surprisingly that isnt happening.

To be fair in the six years since 2000 in which the A380 has gained about 130 passenger orders, the 747 has gotten 29 orders. Also in that time about 100 747 freighters were sold compared to roughly 30 for the A380. I really would hesitate to say the A380 had "run away" with 130 passenger orders. Would you say the 747 has "run away" with over 100 freighter orders since 2000? I thought Airbus expected 200 before EIS. I don't think the VLA market is quite as large as Airbus initially predicted, and the numbers for both airplanes are hardly anything to brag about.

I think most A.net members will agree that there is a VLA market, but it isn't quite as big as Airbus predicted (and probably larger than Boeing predicted). It's funny how it's mostly the Airbus cheerleaders that bring up extreme cases like: "Everyone on here says there's no VLA market", "Everyone on A.net says Airbus is going to die", or my favorite  Smile "Why does everyone think the 787 is perfect in every way" LOL

Back on topic: I think it's far too early to say the a380 as a whole was a mistake. But at this point in time with the facts we have now, IMO, it's safe to say that Airbus probably could have had a better ROI at this point if they went after a different market segment.
 
Parabolica
Posts: 74
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:40 am

Good Evening

I think any intelligent person can see that the A380 will turn a profit and make itself useful eventually, but the topis of these threads (and I wholly refute the notion that the number of threads is out of proportion considering that this is the biggest aviation news of the year) is whether or not the A380 was the best choice.

Many have clearly stated that the circumstances and spec of the craft have changed, even if the mission has not, all of which have contributed to some natural disapointment and pessemism. I myself have even said as much, going so far as to link this particular aerospace disaster with Concorde, another highly sensitive subject that engenders powerful feelings on both sides of the Atlantic (and English Channel). Ultimately, the A380 will not kill Airbus not EADS, nor will it crush Boeing as others had predicted a year or more ago. It will fly under many colours and probably break even.

However, could Airbus have spent their money and resources more wisely? I certainly think so. I really think the business case for the 380 was too coloured from the start by politics and chauvenism, a bid by a up and coming European industry to leapfrog the old master and show off with a true flagship model after decades of smart, if slightly prudent designs that made Airbus the success it is. They screwed the pooch on this one, by letting ego and supra-nationalism get the best of them, as the management fiasco of the past week has shown.

If the marketing people and "big" men don't get their act together (because the engineers are outstanding as the products clearly indicate) then we may see the 380 become another white elephant, a great machine that missed the mark due to poor leadership and lack of vision, like Concorde, the DC10, Lockheed L-1649 Starliner.

P-
oh please let there never be cell phones in airliners...
 
greaser
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A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:55 am

Quoting Parabolica (Reply 33):
However, could Airbus have spent their money and resources more wisely? I certainly think so. I really think the business case for the 380 was too coloured from the start by politics and chauvenism, a bid by a up and coming European industry to leapfrog the old master and show off with a true flagship model after decades of smart, if slightly prudent designs that made Airbus the success it is. They screwed the pooch on this one, by letting ego and supra-nationalism get the best of them, as the management fiasco of the past week has shown.

That's what it seems now. Way back when i'm sure most of us knew a 747 quasi replacement was coming. Certainly airbus wouldn't go into a bold new foray without doing its research, but it looks like it's 1200+ figure won't pan out. Of course europeanism (if there's such a word) played a big part in the launched of the 380. The big 4 leaders showed that when they christened the first one. Everyone knew that it won't sell like the 320 or 737 does for sure, but nobody expect this week to happen! It's simply not going to see the kind of market they were hoping for. Just be glad that Boeing did not go for BWB, if not we'd have 2 damaged companies now.
Now you're really flying
 
jeffrito
Posts: 125
Joined: Mon May 28, 2001 3:17 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 9:55 am

Quoting Mariner (Reply 30):
Oh, I'm sorry. I thought this was a forum for aviation enthusiasts.

I didn't realize one had to have a Harvard MBA to post here.

Indeed, I really hate all these people who worry about whether or not these machines can make any money for their owners! After all, revenue generation has nothing to do with the specification, design or purchase of these noble craft! 'Tis merely a one-finger salute to gravity, and we enthusiasts salute the purity of the gesture!
 
redflyer
Posts: 3882
Joined: Thu Feb 24, 2005 3:30 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:03 am

Quoting Mariner (Reply 16):
It is a superb machine.

Most prototypes usually are.

Quoting Cairo (Reply 15):
I've always felt that the case for the A380 right NOW was weak, although this could change in years to come.

If the business case for the A380 right now is weak, then Airbus should have never embarked on the project to begin with. If Airbus was totally dependent on market forces (meaning if it didn't have access to easy government capital) then it would not have built the A380 for another ten years, at a minimum.

So let's say that the A380's business case makes it viable in 2015. That is 15 years after launch -- 15 years of technology advances. When its business case eventually does arrive, it will effectively be obsolete.

No one has ever said there's no need for a VLA. The issue has always been that the market just doesn't exist currently to justify a $15 billion investment. Let's revisit the issue in 2015.

Quoting RichardPrice (Reply 23):
State of Kansas - $200million in Bond Investment for 787 nose production paid back over 20 years at an interest rate of 5%, paid back by withholding taxes on employees.

State of Oklahoma - offered $350million in subsidies for 787 production work, including an interest free bond of $250million and a $100million research investment funded by a 4/10th of a penny increase on taxes across the board for 13 years.

Italy - $590million interest free investment for 787 production work.

Direct subsidies (if its OK to call the loans Airbus gets 'subsidies' then these fit the same standards).

What all the Airbus boosters fail to remember is that these puported Boeing "subsidies" are available to both players.

For the sake of argument, let's say that "Boeing's subsidies" are equal to Airbus' subsidy equity -- in other words they're the same dollar for dollar. Airbus could just as easily have applied for -- and received -- the same benefits from the state of Kansas, the state of Oklahoma, and even the state of Washington. And, in fact, Airbus has received the same consideration by the state of Alabama for its proposed KC-30.

Do you think Boeing would have received ANY consideration had it applied for a "subsidy" if it had approached the government sponsors of Airbus?

In the final analysis, Airbus has access to a unique and easy form of capital that no one else has access to.

Quoting Lumberton (Reply 27):
Perhaps there will be some 748I sales announced at Farnborough? One never knows....

I doubt it. But it doesn't matter. Boeing's $4 billion investment in the 748 will be recouped on freighter sales alone.

Quoting Cairo (Reply 29):
it is mainly a matter of how the UK deals with its 5+ London area airports.

Again, we're back to the issue of whether or not it was worth a $15 billion investment just to cater to a few markets. If the UK is that slot restricted, a few A380s alone are not going to resolve the issue. The UK's limitations will play out in many different forms in the free market. If the country becomes saturated then flying mega-sized aircraft alone will only be a stop-gap measure, not a panacea.

[Edited 2006-06-18 03:06:36]
My other home is in the sky inside my Piper Cherokee 180.
 
atmx2000
Posts: 4301
Joined: Wed Oct 13, 2004 4:24 pm

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:14 am

http://news.independent.co.uk/business/news/article1090101.ece

EADS counts potential €8.1bn cost of beleaguered Airbus

This includes the BAE's price €5.8bn, €350m in fines and €2bn in already announced losses.

I have a new suggestion. EADS should give BAE a larger chunk of Airbus ownership in exchange for not leaving.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
commavia
Posts: 10106
Joined: Mon Apr 25, 2005 2:30 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:26 am

I think the Wall Street Journal (Europe) said it better than I ever could in their recent editorial entitled, "Icarus Inc." of 16-18 June 2006:

"Airbus is fast becoming the current airborne testament to the hubris of state-led industrial policy in Europe ..."

"(i)t is instructive to note that Boeing itself was, only a few years ago, in a similar pickle ... but Boeing got through the painful restructuring ... and made hard decisions (like refusing to fight Airbus for the A380 market) knowing that money was finite ..."

"[Boeing's] updated product line is led by the 'Dreamliner' ... suddenly, Boeing is poised to dominate its market for years to come ... in its present guise Airbus, or EADS, looks ill-disposed to take this road ..."

"State treasuries have been eager to build toys that boost national egos, to the tune of $15B in taxpayer handouts over the past three decades ... (f)inancial realism was never a big part of the equation at Airbus ... politicans expect the company to shun Anglo-Saxon-style restructuring ..."

"Tellingly, Airbus's fall from grace is portrayed as a blow to European pride rather than to the company's shareholders and millions of air travelers, who will suffer directly ... (t)his is the real trans-Atlantic gap ... Americans tend to judge corporations on the bottom line, not the national flag ... companies ... get plenty of encouragment from politicians ... who think business is their business ..."

"Cut free from subsidies and politics, Airbus would be free to behave like a normal company ... (i)t is not that today"
 
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mariner
Posts: 18415
Joined: Fri Nov 23, 2001 7:29 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:31 am

Quoting RedFlyer (Reply 36):
Most prototypes usually are.

Prototype? I thought they were into production. Foolish me.

mariner
aeternum nauta
 
9V-SPJ
Posts: 668
Joined: Thu Dec 21, 2000 1:51 pm

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:32 am

I think that is hard to say if the A380 was a mistake or not. I remember that a few years back, there was a debate as to whether airlines wanted to concentrate on the hub and spoke concept or the direct city pairs concept. Airbus must have thought in the early nineties that since there air traffic was growing at an immense pace and that there was interest from airlines, that why not build something bigger than the B744.
Boeing on the other hand, started 787 development in the early 2000s. This was after the asian economic crisis and the beginning of the downturn of the commericial aviation industry when saving costs became a major factor.
Airbus was probably too far along to cancel the A380 development and there was still a bit of a niche in the market for large capacity aircraft.
With most airlines outfitting the A380 with 450-500 seats, Boeing saw that if airlines don't want to put more that 500 seats, why not combat the A380 with the B747-8?
The fact that Boeing are building the B747-8 shows that there is a demand for aircraft slightly larger than the B744, but not a very large one.

Airbus was not wrong in designing the A380, it just so happened that it is entering service in an undesirable environment.

9V-SPJ
 
tbnist03
Posts: 101
Joined: Wed Apr 05, 2006 2:23 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:33 am

Quoting BoomBoom (Reply 7):
These are all real news stories, not the product of someone's fertile imagination. It's certainly fair to discuss them.

I agree. Why not give all things aviation a chance to be discussed. I don't really get around to checking all news sources, since I know I can just come here to get an idea of what's going on in aviation.


 Smile
-Mike
 
ebbuk
Posts: 844
Joined: Thu May 11, 2006 6:47 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 10:50 am

Quoting 787engineer (Reply 32):

Back on topic: I think it's far too early to say the a380 as a whole was a mistake. But at this point in time with the facts we have now, IMO, it's safe to say that Airbus probably could have had a better ROI at this point if they went after a different market segment.

you are right. Airbus should have forseen in 1994 that the direction to go in was composite fuselage and that bleedless technology would come on stream in 10 years. A380 was never going to get off the ground

Oh and oil prices would be a lot higher in 12 years time. Boeing knew this why didn't A? That's why as an organisation, if they can't see into the future like boeing can, then they are finished, A380 et al

Doomed! doomed! I tell you
 
gregtx
Posts: 210
Joined: Sat Apr 22, 2006 8:36 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:03 am

Quoting Eugdog (Thread starter):
I believe the A380 will break even and make small profit for Airbus as they have sold 160 and only need 250 to break even

Clearly impossible...then and now. Likely this will need to be revised upward to 500 airframes ---or in that ballpark.

Boeing had to revise breakeven estimates for all series of aircraft except the 75,76, and 77 series by more than 40% once all prototype, preproduction, and post production issues were known.....it's not uncommon. The biggest hickup came in the mid 90's when production was ramping up and quality was a huge issue. The next gen 737 line went from from 550 breakeven point (all variants) to just over 1000. Source is Avitas...but you can search AWST for the articles.

Airbus will need to do the same.

MacDac never broke even on a single variants---or family....even though over 1000 MD-8X's were sold.

A very sporty game, indeed.
 
ltbewr
Posts: 12501
Joined: Thu Jan 29, 2004 1:24 pm

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:05 am

One cannot perdict the future with certainty except that generally believed that there will be growth in long-distance travel demand to/from points with limited airports and slots (LHR, LAX, NRT) thus making a 'Whale Jet' like the A-380 a necessity. In that sense, it isn't a mistake. However, Airbus has problems with other models (the A-340, A-350/370 series as noted in other posts) that along with the recent added problems of the A-380 are very challanging to Airbus indeed. It is possible that the break even for the A-380 may exceed the number sold in the next 10 years.
 
SergioAEE
Posts: 30
Joined: Sun Jun 18, 2006 10:39 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:08 am

Hello to all,

Isnt it possible that some airlines will benefit more from the A380 than others? I dont think its such a black or white subject. Failure or success. Maybe this aircraft can be used efficiently and economically with few airline models only.

SergioAEE
 
BoomBoom
Posts: 2459
Joined: Fri Nov 04, 2005 2:26 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:10 am

Quoting RichardPrice (Reply 23):
State of Kansas - $200million in Bond Investment

State of Oklahoma - offered $350million in subsidies for 787 production work...

It's akin to local subsidies designed to protect jobs - such as the $800 million subsidy the city of Hamburg provided an Airbus production facility.

This is in addition to the "launch aid".

[Edited 2006-06-18 04:11:42]
Our eyes are open, our eyes are open--wide, wide, wide...
 
BoomBoom
Posts: 2459
Joined: Fri Nov 04, 2005 2:26 am

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:28 am

Quoting Commavia (Reply 38):
i)WSJ: It is instructive to note that Boeing itself was, only a few years ago, in a similar pickle ...

PICKEL? The Wall Street Journal has been reading Halibut's a.net posts!

Quoting Mariner (Reply 39):
Prototype? I thought they were into production. Foolish me.

Production's been delayed? Haven't you heard?

[Edited 2006-06-18 04:34:09]
Our eyes are open, our eyes are open--wide, wide, wide...
 
atmx2000
Posts: 4301
Joined: Wed Oct 13, 2004 4:24 pm

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:45 am

Quoting SergioAEE (Reply 45):
Isnt it possible that some airlines will benefit more from the A380 than others? I dont think its such a black or white subject. Failure or success. Maybe this aircraft can be used efficiently and economically with few airline models only.

Sure, it is probably a mixed blessing in disguise for European airlines who won't see a certain Middle Eastern airline inundate their base airports with A380s.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
ptcflyer
Posts: 95
Joined: Fri Apr 13, 2001 12:03 pm

A380 - A Terrible Mistake?

Sun Jun 18, 2006 11:55 am

Two business concepts make the A380 a dubious investment:

Risk and Opportunity Costs!

Risk to Airbus in terms of launching, engineering, marketing, such a complex, large aircraft.

Risk to Airlines to operate. Many global markets have seasonal spikes in traffic. In the summer season, Europe to US turns has positive yields and demand. In winter, it is just the opposite. An airline has to fly the plane unecononomically for 1/2 the year and hope to make it up the other half.
With two mid-sized aircraft, an airline can increase or decrease frequency by season and redeploy lift to other markets. The inability to fragment the A-380 greatly limits the routes in which it can be deployed. The infrastructure investments / support limits the routes in which it can be deployed. With bird flu, geopolitical risks... airlines may find themselves in situations where the A380 can not be flown economically. Its huge capital cost will make such disruptions particularly painful. Inflexibilty to airlines = risk!


Risk of competitive action. When Airbus conceived the A-380 with its per-seat mile cost advantage, did it anticipate the 787 innovation? If airlines can achieve a similar per seat mile cost with a smaller aircraft.... the decrease in risk with the smaller aircraft will make the smaller aircraft the overwelming favorite. This analysis limits the A-380 market even smaller: slot constratined airports.

Now with the threat of requirements for increasing separation between A-380 and other aircraft means that the competitive advantage for slot-controlled airports may be diminished.

Did Airbus take into consideration that Boeing could modify the 747 without a huge investment that could achieve incremental operation savings? An opportunity for Boeing to steal a certain percentage of the large aircraft market?

Risk in the order book: With 1/3 of the A380 order book tied to one airline... and nearly half tied to one (politically instable geographic market)...... Risk Risk Risk.

On the opportunity cost side... What else could Airbus have done with the $12 billion investment in A-380. Could it have nailed the mid-market away from Boeing? Could it be well on the way to a new single-aisle innovative airplane beyond the A320? Should it have invested in a strategy that drives lower per seat costs without introducing such huge risks for the airlines?

And insightful analysis shows that it really isn't necessarily the opportunity cost of capital, but rather the opportunity cost of its engineering resources.

I believe that the ego of launching the largest commercial aircraft may have inspried many to overlook the risk and true opportunity costs of the project. Will Airbus come out of the A380 with excellent financial results? Assessing the risk vs. rewards... I would not bet on it.

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