Weatherwatcher1
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Airbus Financial Discussion 2020

Tue Mar 17, 2020 6:19 pm

Airbus has some significant financial challenges in 2020.

There are layoffs planned in Germany, UK, Spain France and other locations announced in February.

European plane maker Airbus said Wednesday that it plans to cut more than 2,300 jobs at its defense and space division by the end of next year, spreading the cuts across several countries.


https://www.marketwatch.com/story/airbu ... 2020-02-20

Airbus also posted a 2019 loss of 1.4 Billion Euros compared to a 3.1 Billion Euro profit the prior year

The Toulouse-based company had to set aside €3.6bn last month to cover settlements with authorities in the US, France and Britain after admitting it had paid huge bribes on an “endemic” basis to secure contracts in 20 countries. The penalties amount to the largest-ever corporate fine issued for bribery.


https://www.theguardian.com/business/20 ... ss-of-14bn

Production is temporarily being halted due to Coronavirus

On Tuesday, Airbus said it was halting production at French and Spanish plants for four days after French President Emmanuel Macron announced new measures to restrict people’s movements.


https://www.reuters.com/article/us-heal ... SKBN2141SA

There is speculation that Airbus will need government support

Europe’s Airbus (AIR.PA) has signaled that some government support may be needed if the coronavirus crisis lasts for several months, three people familiar with the matter said.


Stock performance is way down
Image

https://leehamnews.com/2020/03/12/boein ... more-32862

Just a month ago Guillaume Faury said the following.


In 2019, we made good progress despite industrial challenges and complex geopolitical environments. In Commercial Aircraft, we delivered a record 863 deliveries, ramping up our production by approximately 8%. Also, we adjusted the deliveries guidance during the year. We demonstrated strong underlying financial performance in 2019, we delivered on EBIT adjusted at 6.9 billion up 19% year-on-year and free cash flow before M&A and customer financing at 3.5 billion up 21% year-on-year.

...

Taking this into account together with good prospects in 2020 we proposed a dividend of EUR 1.8 per share, which is plus 9% versus 2018. In 2019 we had again a strong finish to the year, thanks to a tremendous team effort. But we generally satisfied again with the back-loaded delivery profile.



https://seekingalpha.com/article/432515 ... transcript

While 8% production increases and a back-loaded delivery portfolio allowed an increasing dividend, all that may change. Airbus’ defense business is shrinking at the same time that commercial business is also at risk.
 
Sokes
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 1:10 am

114,4 billion Euro assets are matched by 6 billion Euro equity and 108,4 billion Euro liabilities.
I am o.k. if an ordinary business has only 20% equity. That banks lend money even to businesses which have negative equity is just pathetic. Can there be any surprise if banks with such policies sooner or later have to beg for government help? One wonders what's the task of a regulator?

However aircraft manufacturing is a high risk business. I believe a company in this line of business needs 30% equity. Below that value a company shouldn't be allowed to return money to shareholders or buy back shares.
At least Airbus doesn't have huge deferred production cost.

At the end of financial year 2018 equity was 9,7 billion Euro. Loss in 2019 was 1,3 billion Euro. 2,7 billion Euro went to defined pension plans and 1,4 billion is change of fair value of cash flow hedges. These are an insurance against currency fluctuations.
"The Company uses financial derivatives solely for risk mitigating purposes (“hedging”) and applies hedge accounting for a significant
portion of its hedging portfolio. "
p.58, https://www.airbus.com/investors/financ ... ports.html , click on "financial statements long"
p. 66 of the same report gives an idea of how the company hedges.
More equity would make such financial instruments unnecessary. Business always includes risk, including currency risk. Obviously banks charge for this insurance service.

I don't understand why the money that was lost with hedges is subtracted separately from equity. I would have expected these to be included in profit/ loss.
How governments expect companies to manage pension plans while at the same time change interest rates as they please is beyond me.

Administrative expenses went from 1,6 to 5,2 billion Euro. That includes the fine for paying bribes.

Beside the bribery charge I can't find anything dramatic in the 2019 financial report. Are more fines for bribery expected? Did the share get hammered that much just because of Corona?
Why can't the world be a little bit more autistic?
 
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BN727227Ultra
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 1:34 am

Weatherwatcher1 wrote:
Stock performance is way down
Image


That is interesting and I wasn't expecting it. A's business model isn't a mirror of B's, yet the stock performance is a mirror.
 
moa999
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 1:59 am

Weatherwatcher1 wrote:
Airbus has some significant financial challenges in 2020.

.


Anyone in anything related to aviation and tourism faces challenges in 2020.
 
Sokes
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 2:43 am

I just asked myself:
How comes that after so many years of a seller market the manufacturers of a duopoly are not in a better position?
For Boeing one can say that share buybacks are responsible. But for Airbus?
Why can't the world be a little bit more autistic?
 
Weatherwatcher1
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 2:49 am

Sokes wrote:
I just asked myself:
How comes that after so many years of a seller market the manufacturers of a duopoly are not in a better position?
For Boeing one can say that share buybacks are responsible. But for Airbus?


Going back twenty years, Airbus has been chasing market share. Read this article from 2000

. Airbus Industrie aims to secure as much as 60% of the world's large civil airliner market in the future, and is confident that Boeing's share may drop to 40%.

"We have moved to our goal of 50-55% of the market, and I really think airlines want to see some stabilisation at 50% to 60%," says John Leahy, Airbus' senior vice-president commercial. "Boeing will probably stabilise at around 40%."


https://www.flightglobal.com/airbus-gun ... 56.article

John Leahy led Airbus towards a 60% market share goal for decades. It felt like Airbus would do anything to get that orders to fulfill the market share goal even if it meant bribes or accepting thin margins.

Was Airbus more interested in inflating their order book and winning market share than profit? Are they paying the consequences now because of it?
 
moa999
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 2:52 am

For Airbus - A380.
 
gregpodpl
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 4:23 am

BN727227Ultra wrote:
That is interesting and I wasn't expecting it. A's business model isn't a mirror of B's, yet the stock performance is a mirror.

But that value loss is related to external factors - and whole sector is affected the same way. Also B lost more than A here. In last month B: 338 -> 124, and A: 131 -> 63.
 
mjoelnir
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 9:58 am

Of course a discussion of Airbus finances is needed.

Yes the equity that Airbus has about 6 billion EUR, about 5.2 % of the total liabilities and equity. Low but at least there is something.

Yes Airbus has made a loss, but the gross margin is quite good. The loss is to a big part the result of the huge fines to the tune of 3.6 billion EUR payable to the French, UK and USA authorities.

Cash reserves at the end of the year are 9.3 billion EUR.

In normal years the numbers would not be bad, but with the coming storm it is a question if there are enough reserves.
 
Weatherwatcher1
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 3:37 pm

mjoelnir wrote:
Of course a discussion of Airbus finances is needed.

Yes the equity that Airbus has about 6 billion EUR, about 5.2 % of the total liabilities and equity. Low but at least there is something.

Yes Airbus has made a loss, but the gross margin is quite good. The loss is to a big part the result of the huge fines to the tune of 3.6 billion EUR payable to the French, UK and USA authorities.

Cash reserves at the end of the year are 9.3 billion EUR.

In normal years the numbers would not be bad, but with the coming storm it is a question if there are enough reserves.


Margins on the A320neo are high, but are gross margins quite good across the board? The A321neo delivery delays are projected to last years and the A330neo is looking at cutting production rate.
 
Bricktop
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 3:44 pm

mjoelnir wrote:
In normal years the numbers would not be bad, but with the coming storm it is a question if there are enough reserves.

Airbus will be bailed out, just like Boeing if it comes to it.
 
Sokes
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 5:03 pm

Weatherwatcher1 wrote:
John Leahy led Airbus towards a 60% market share goal for decades. It felt like Airbus would do anything to get that orders to fulfill the market share goal even if it meant bribes or accepting thin margins.

Was Airbus more interested in inflating their order book and winning market share than profit? Are they paying the consequences now because of it?


Interesting. I assumed that
a) pension obligations
b) B787, A380, A400
eat up profits. That apart I assumed that Boeing was selling the B787 too cheap.
But then I never understood what all this take about Leahy was about. So what you say makes sense.
Why can't the world be a little bit more autistic?
 
Weatherwatcher1
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Re: Airbus Financial Discussion 2020

Wed Mar 18, 2020 11:46 pm

Sokes wrote:
Weatherwatcher1 wrote:
John Leahy led Airbus towards a 60% market share goal for decades. It felt like Airbus would do anything to get that orders to fulfill the market share goal even if it meant bribes or accepting thin margins.

Was Airbus more interested in inflating their order book and winning market share than profit? Are they paying the consequences now because of it?


Interesting. I assumed that
a) pension obligations
b) B787, A380, A400
eat up profits. That apart I assumed that Boeing was selling the B787 too cheap.
But then I never understood what all this take about Leahy was about. So what you say makes sense.


Leahy was a salesman who apparently sold at any cost. The A380 and A400 eat up the profit from the A321neo
 
Sokes
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 4:01 am

Weatherwatcher1 wrote:
Leahy was a salesman who apparently sold at any cost. The A380 and A400 eat up the profit from the A321neo


What you say now doesn't make sense.
Beside the inability in Airbus reports to see which plane has which cost and which profit, it also doesn't fit considering time.
Why can't the world be a little bit more autistic?
 
marcelh
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 6:48 am

Bricktop wrote:
mjoelnir wrote:
In normal years the numbers would not be bad, but with the coming storm it is a question if there are enough reserves.

Airbus will be bailed out, just like Boeing if it comes to it.


Just as any industry of importance.
 
mjoelnir
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 1:12 pm

Weatherwatcher1 wrote:
mjoelnir wrote:
Of course a discussion of Airbus finances is needed.

Yes the equity that Airbus has about 6 billion EUR, about 5.2 % of the total liabilities and equity. Low but at least there is something.

Yes Airbus has made a loss, but the gross margin is quite good. The loss is to a big part the result of the huge fines to the tune of 3.6 billion EUR payable to the French, UK and USA authorities.

Cash reserves at the end of the year are 9.3 billion EUR.

In normal years the numbers would not be bad, but with the coming storm it is a question if there are enough reserves.


Margins on the A320neo are high, but are gross margins quite good across the board? The A321neo delivery delays are projected to last years and the A330neo is looking at cutting production rate.


Yes the underlying operational data is quite good at Airbus. The current CEO is cleaning house. Even the 3.6 billion EUR fines could have been booked as they were payed instead of all of it hitting 2019.
Revenue 2019 was 70.5 billion EUR and gross margin 10.5. That are 14,9 %, quite decent. The big sum cutting the profits down are 5.2 billion administrative expenses and that sum includes the 3.6 billion fines.

Airbus SE – IFRS Consolidated Income Statement
for the years ended 31 December 2019 and 2018
(In € million) 2019 2018
Revenue 70,478 63,707
Cost of sales (59,973) (54,920)
Gross margin 10,505 8,787 [2019 14.9 % and 2018 13.8 %]
Selling expenses (908) (861)
Administrative expenses (5,217) (1,574)
Research and development expenses (3,358) (3,217)
Other income 370 1,656
Other expenses (356) (182)
Share of profit from investments accounted for under the equity method 299 330
Other income from investments 4 109
Profit before financial result and income taxes 1,339 5,048
Interest income 228 208
Interest expense (339) (440)
Other financial result (164) (531)
Total financial result 16 (275) (763)
Income taxes (2,389) (1,274)
(Loss) Profit for the period (1,325) 3,011

You also have to think about, that the fines Airbus pays is done after tax. So Airbus pays income tax even though they show a loss, because the fines are payed from the taxed income.
 
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InsideMan
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 1:37 pm

the job cuts in D&S were planned before Corona
Cash will be an issue short term and how much of the order book will be lost.
However it will free capacity for potential 737 customers to switch so outlook should be better than for Boeing....
 
Bordeauxline
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 6:55 pm

At such a time, do you think the backlog Airbus currently have is hiding the fact that it could be hit very hard by delayed purchase of A320, with so many airliners having cash problems (as well as states) ? Airbus situation seems quite dire, even if Boeing is in bad shape too, I see the production rate too high for the coming future after coronavirus event. Has Airbus enough cash to keep the production rate at this level for some time ?
 
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 7:27 pm

Bordeauxline wrote:
Has Airbus enough cash to keep the production rate at this level for some time ?

Probably not, but production probably won't stay at this level for some time, in fact it is currently paused.

It doesn't really matter, Airbus fits the description of "too big to fail" perfectly.

DE and FR still control large portions of the outstanding shares, they will be intimately involved in preserving its future.
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TaromA380
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Re: Airbus Financial Discussion 2020

Thu Mar 19, 2020 8:00 pm

Airbus ended (by chance) the A380 just before the crisis and any shrinking A32X orders will open slots for Max switchers. Taking a Max order is not anymore a matter of patience but of economic disadvantage, because of its mandatory training, not to mention the hard to assess impact of public fear for some time after RTS and who knows what other problems should arise.

With its mature, proven and diversified offer, I don't see something structurally worrying for Airbus. When all this will come to end, we should see that Airbus was the winner of the crisis.
 
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 3:12 am

In other words, Airbus could also likely to delay deliveries as much aircraft that was due to delivered to most airlines now.
If it's not Boeing, I'm not going!
 
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zkojq
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 3:52 am

This is actually a good opportunity for Airbus. They should be able to weather this storm without government assistance whilst their friends in Seattle will need a bailout or line of credit of some kind. Airbus can take this straight to the WTO! Our friends in Seattle keep chirping on repeatedly about how terrible it is for aircraft manufacturers to get low interest government loans. :lol:
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Bricktop
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 5:36 pm

marcelh wrote:
Bricktop wrote:
mjoelnir wrote:
In normal years the numbers would not be bad, but with the coming storm it is a question if there are enough reserves.

Airbus will be bailed out, just like Boeing if it comes to it.


Just as any industry of importance.

Indeed. Boeing is the US's largest exporter, and I would guess Airbus has a similar position in the EU. Their supply chains are vast, employing many people other than direct employees. The devil is in the details though, because I know that many from the President of the United States on down (to say nothing of a large contingent here including moi) have been critical of Boeing for stock buybacks instead of investing in their people and new airplane designs.
 
Bricktop
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 5:38 pm

zkojq wrote:
This is actually a good opportunity for Airbus. They should be able to weather this storm without government assistance whilst their friends in Chicago will need a bailout or line of credit of some kind. Airbus can take this straight to the WTO! Our friends in Chicago keep chirping on repeatedly about how terrible it is for aircraft manufacturers to get low interest government loans. :lol:

A subtle but important FYP.
 
morrisond
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 5:45 pm

You are dreaming if you think Airbus won't need a bailout like Boeing. It will take some time before Airlines need new capacity and there will be 100's/1,000's of newish NB's and WB's for sale at cents on the dollar from Bankrupt airlines if they need more capacity than before.

With Oil where it is the economic incentive to fly newer more efficient frames has been removed as well.

https://www.reuters.com/article/us-heal ... SKBN2141SA
 
Vladex
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 6:13 pm

Weatherwatcher1 wrote:
Sokes wrote:
I just asked myself:
How comes that after so many years of a seller market the manufacturers of a duopoly are not in a better position?
For Boeing one can say that share buybacks are responsible. But for Airbus?


Going back twenty years, Airbus has been chasing market share. Read this article from 2000

. Airbus Industrie aims to secure as much as 60% of the world's large civil airliner market in the future, and is confident that Boeing's share may drop to 40%.

"We have moved to our goal of 50-55% of the market, and I really think airlines want to see some stabilisation at 50% to 60%," says John Leahy, Airbus' senior vice-president commercial. "Boeing will probably stabilise at around 40%."


https://www.flightglobal.com/airbus-gun ... 56.article

John Leahy led Airbus towards a 60% market share goal for decades. It felt like Airbus would do anything to get that orders to fulfill the market share goal even if it meant bribes or accepting thin margins.

Was Airbus more interested in inflating their order book and winning market share than profit? Are they paying the consequences now because of it?


What market share? They allowed Hawaiian , American and United to cancel A350 to go for more 787?
+
 
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zkojq
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 8:01 pm

Bricktop wrote:
zkojq wrote:
This is actually a good opportunity for Airbus. They should be able to weather this storm without government assistance whilst their friends in Chicago will need a bailout or line of credit of some kind. Airbus can take this straight to the WTO! Our friends in Chicago keep chirping on repeatedly about how terrible it is for aircraft manufacturers to get low interest government loans. :lol:

A subtle but important FYP.


Duly noted!

morrisond wrote:
You are dreaming if you think Airbus won't need a bailout like Boeing. It will take some time before Airlines need new capacity and there will be 100's/1,000's of newish NB's and WB's for sale at cents on the dollar from Bankrupt airlines if they need more capacity than before.


Do you ever comment in a way that isn't arguing the angle that Boeing's PR department wants argued? :roll:

Unlike our friends in Chicago, Airbus has an airworthy narrow body offering which produces ~50 high margin deliveries each month and are consequently in a much better financial position to whether the coming storm.

I look forwards to you telling us all how Airbus' delivery delays are somehow comparable to the MAX situation and how narrow body deliveries are somehow irrelevant to cashflow. :wave:
First to fly the 787-9
 
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Polot
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 8:09 pm

zkojq wrote:
Bricktop wrote:
zkojq wrote:
This is actually a good opportunity for Airbus. They should be able to weather this storm without government assistance whilst their friends in Chicago will need a bailout or line of credit of some kind. Airbus can take this straight to the WTO! Our friends in Chicago keep chirping on repeatedly about how terrible it is for aircraft manufacturers to get low interest government loans. :lol:

A subtle but important FYP.


Duly noted!

morrisond wrote:
You are dreaming if you think Airbus won't need a bailout like Boeing. It will take some time before Airlines need new capacity and there will be 100's/1,000's of newish NB's and WB's for sale at cents on the dollar from Bankrupt airlines if they need more capacity than before.


Do you ever comment in a way that isn't arguing the angle that Boeing's PR department wants argued? :roll:

Unlike our friends in Chicago, Airbus has an airworthy narrow body offering which produces ~50 high margin deliveries each month and are consequently in a much better financial position to whether the coming storm.

I look forwards to you telling us all how Airbus' delivery delays are somehow comparable to the MAX situation and how narrow body deliveries are somehow irrelevant to cashflow. :wave:

That narrow body cash flow is only coming in as long as airlines are accepting deliveries. I also doubt most of the current A320neo deliveries are high margin, especially when the delays are taken into account. It is future A321neo orders/deliveries that are high margin, not current.

That is why Airbus has signaled that if this last for several months they will likely require assistance.
 
astuteman
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Re: Airbus Financial Discussion 2020

Fri Mar 20, 2020 8:28 pm

Polot wrote:
zkojq wrote:
Bricktop wrote:
A subtle but important FYP.


Duly noted!

morrisond wrote:
You are dreaming if you think Airbus won't need a bailout like Boeing. It will take some time before Airlines need new capacity and there will be 100's/1,000's of newish NB's and WB's for sale at cents on the dollar from Bankrupt airlines if they need more capacity than before.


Do you ever comment in a way that isn't arguing the angle that Boeing's PR department wants argued? :roll:

Unlike our friends in Chicago, Airbus has an airworthy narrow body offering which produces ~50 high margin deliveries each month and are consequently in a much better financial position to whether the coming storm.

I look forwards to you telling us all how Airbus' delivery delays are somehow comparable to the MAX situation and how narrow body deliveries are somehow irrelevant to cashflow. :wave:

That narrow body cash flow is only coming in as long as airlines are accepting deliveries. I also doubt most of the current A320neo deliveries are high margin, especially when the delays are taken into account. It is future A321neo orders/deliveries that are high margin, not current.

That is why Airbus has signaled that if this last for several months they will likely require assistance.


Analysis of last years figures suggests that, after the contingency for bribery penalties is stripped out, margin on A320NEO's in 2019 was somewhere in the region of 15%-17%, and that is AFTER the 7% or 8% being spent on R+D is accounted for.
A320NEO's have almost certainly been the highest margin deliveries being made out there up to Coronavirus ground zero.
Your point about future deliveries is pretty well made though. That margin is only going to go up in the longer term...

Rgds
 
Sokes
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Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 4:06 am

If there had to be no politics I would say it's a good time to buy Airbus shares. But then it's possible that Boeing gets more generous help than Airbus.
I hate how all companies come begging without even considering to issue new shares. It looks like aviation is the only industry that got hit by corona. The governments should just tell them to f.... New shares would be issued very fast.
But then: privatize profits, socialize losses!
Why can't the world be a little bit more autistic?
 
morrisond
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Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 1:08 pm

Sokes wrote:
If there had to be no politics I would say it's a good time to buy Airbus shares. But then it's possible that Boeing gets more generous help than Airbus.
I hate how all companies come begging without even considering to issue new shares. It looks like aviation is the only industry that got hit by corona. The governments should just tell them to f.... New shares would be issued very fast.
But then: privatize profits, socialize losses!


Agreed they should both be issuing shares to get though this crisis.
 
morrisond
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Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 1:20 pm

zkojq wrote:
Bricktop wrote:
zkojq wrote:
This is actually a good opportunity for Airbus. They should be able to weather this storm without government assistance whilst their friends in Chicago will need a bailout or line of credit of some kind. Airbus can take this straight to the WTO! Our friends in Chicago keep chirping on repeatedly about how terrible it is for aircraft manufacturers to get low interest government loans. :lol:

A subtle but important FYP.


Duly noted!

morrisond wrote:
You are dreaming if you think Airbus won't need a bailout like Boeing. It will take some time before Airlines need new capacity and there will be 100's/1,000's of newish NB's and WB's for sale at cents on the dollar from Bankrupt airlines if they need more capacity than before.


Do you ever comment in a way that isn't arguing the angle that Boeing's PR department wants argued? :roll:

Unlike our friends in Chicago, Airbus has an airworthy narrow body offering which produces ~50 high margin deliveries each month and are consequently in a much better financial position to whether the coming storm.

I look forwards to you telling us all how Airbus' delivery delays are somehow comparable to the MAX situation and how narrow body deliveries are somehow irrelevant to cashflow. :wave:


I have said many nice things about Airbus. It's a great company - but there balance sheet isn't radically different from Boeings and they will face the same issues. Their customers are going broke.

You are dreaming if you think Airlines won't use this as opportunity to adjust order books and renegotiate prices.

With oil prices where they are it wrecks the calculus on how much more a NEO is worth vs buying a used CEO from a defunct airline.

I'll be stunned if production isn't severely curtailed on all Airliner production lines worldwide. Just look at what happened after 9/11.

Worldwide demand for travel will be sometime before it comes back to pre Corvid levels - the Elderly won't want to travel for sometime and businesses will figure out they can save tons of cash by picking up the phone or doing video conference just like they are mastering right now.

On the other hand Business People who are used to being away a lot may want to get away from their families when this is over - so there might be an initial spike in bookings.
 
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scbriml
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Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 1:26 pm

Polot wrote:
That narrow body cash flow is only coming in as long as airlines are accepting deliveries. I also doubt most of the current A320neo deliveries are high margin, especially when the delays are taken into account. It is future A321neo orders/deliveries that are high margin, not current.


Analysis of 2019's numbers behind the headline loss doesn't support that view. :shakehead:
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zkojq
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Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 2:00 pm

morrisond wrote:
You are dreaming if you think Airlines won't use this as opportunity to adjust order books and renegotiate prices.

With oil prices where they are it wrecks the calculus on how much more a NEO is worth vs buying a used CEO from a defunct airline.


I'm sure that some delivery schedules will be arranged but OEMs have price inflators in their contracts for good reason. Oil will go up again as fast as it went down - Saudi Arabia can't even come close to balancing their budget at current price levels.

astuteman wrote:
Analysis of last years figures suggests that, after the contingency for bribery penalties is stripped out, margin on A320NEO's in 2019 was somewhere in the region of 15%-17%, and that is AFTER the 7% or 8% being spent on R+D is accounted for. A320NEO's have almost certainly been the highest margin deliveries being made out there up to Coronavirus ground zero.


:checkmark: I find it laughable that people would suggest that A320neos are somehow a low margin product. Just because the A321neo (especially LR and XLR) is higher margin doesn't detract from the good money that Airbus is making on their primary narrowbody product.

If you want a low margin narrowbody product, I'd suggest you take a look at the handful of A320ceos which Airbus is still delivering.

Polot wrote:
That is why Airbus has signaled that if this last for several months they will likely require assistance.


When did Airbus suggest several months ago that they may need assistance?
First to fly the 787-9
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 2:08 pm

morrisond wrote:
zkojq wrote:
Bricktop wrote:
A subtle but important FYP.


Duly noted!

morrisond wrote:
You are dreaming if you think Airbus won't need a bailout like Boeing. It will take some time before Airlines need new capacity and there will be 100's/1,000's of newish NB's and WB's for sale at cents on the dollar from Bankrupt airlines if they need more capacity than before.


Do you ever comment in a way that isn't arguing the angle that Boeing's PR department wants argued? :roll:

Unlike our friends in Chicago, Airbus has an airworthy narrow body offering which produces ~50 high margin deliveries each month and are consequently in a much better financial position to whether the coming storm.

I look forwards to you telling us all how Airbus' delivery delays are somehow comparable to the MAX situation and how narrow body deliveries are somehow irrelevant to cashflow. :wave:


I have said many nice things about Airbus. It's a great company - but there balance sheet isn't radically different from Boeings and they will face the same issues. Their customers are going broke.

You are dreaming if you think Airlines won't use this as opportunity to adjust order books and renegotiate prices.

With oil prices where they are it wrecks the calculus on how much more a NEO is worth vs buying a used CEO from a defunct airline.

I'll be stunned if production isn't severely curtailed on all Airliner production lines worldwide. Just look at what happened after 9/11.

Worldwide demand for travel will be sometime before it comes back to pre Corvid levels - the Elderly won't want to travel for sometime and businesses will figure out they can save tons of cash by picking up the phone or doing video conference just like they are mastering right now.

On the other hand Business People who are used to being away a lot may want to get away from their families when this is over - so there might be an initial spike in bookings.


I do not know if Airbus will need government help later this year, as I can not predict the course of the coronavirus crisis.

But the balance sheets of Airbus are radically different from Boeing.

Equity:
Boeing does show a negative equity of 8,3 billion USD, but to compare that to the IFRS accounting of Airbus you have to detract 25.5 billion of deferred cost, booked in inventories. (Added up deferred production and tooling cost for 737, 777 and, 787 see Note 7 – Inventories in the 2019 Boeing Annual Report.)
So real equity at Boeing is 33.8 billion USD negative compared to IFRS accounting. With simple words Boeing owes 33.8 billion more than they own.

Airbus has an equity of nearly 6 Billion EUR. Airbus owns 6 billion EUR more that they owe.

I would call that a significant difference regarding the balance sheet.

Deliveries:

Airbus is actively delivering A320 family frames and A350 frames other commercial aircraft deliveries are minor. The military deliveries are down.

Boeing is actively delivering 787, other commercial aircraft deliveries are down. Military deliveries are down, but significant.

Airbus has currently a positive cash flow and Boeing a negative.

PS. the balance sheet in old style simple bookkeeping was only what is today called Statement of financial positions. In my eyes still the most important information in the annual reports.
 
Bricktop
Posts: 1409
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Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 2:25 pm

mjoelnir wrote:
But the balance sheets of Airbus are radically different from Boeing.

Equity:
Boeing does show a negative equity of 8,3 billion USD, but to compare that to the IFRS accounting of Airbus you have to detract 25.5 billion of deferred cost, booked in inventories. (Added up deferred production and tooling cost for 737, 777 and, 787 see Note 7 – Inventories in the 2019 Boeing Annual Report.)
So real equity at Boeing is 33.8 billion USD negative compared to IFRS accounting. With simple words Boeing owes 33.8 billion more than they own.

Airbus has an equity of nearly 6 Billion EUR. Airbus owns 6 billion EUR more that they owe.

I would call that a significant difference regarding the balance sheet.

Deliveries:

Airbus is actively delivering A320 family frames and A350 frames other commercial aircraft deliveries are minor. The military deliveries are down.

Boeing is actively delivering 787, other commercial aircraft deliveries are down. Military deliveries are down, but significant.

Airbus has currently a positive cash flow and Boeing a negative.

PS. the balance sheet in old style simple bookkeeping was only what is today called Statement of financial positions. In my eyes still the most important information in the annual reports.

I hope you followed your own advice and shorted Boeing, and you are posting from a beach somewhere they have tall cold drinks with little umbrellas in them. ;)
 
mjoelnir
Posts: 9388
Joined: Sun Feb 03, 2013 11:06 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 2:51 pm

Bricktop wrote:
mjoelnir wrote:
But the balance sheets of Airbus are radically different from Boeing.

Equity:
Boeing does show a negative equity of 8,3 billion USD, but to compare that to the IFRS accounting of Airbus you have to detract 25.5 billion of deferred cost, booked in inventories. (Added up deferred production and tooling cost for 737, 777 and, 787 see Note 7 – Inventories in the 2019 Boeing Annual Report.)
So real equity at Boeing is 33.8 billion USD negative compared to IFRS accounting. With simple words Boeing owes 33.8 billion more than they own.

Airbus has an equity of nearly 6 Billion EUR. Airbus owns 6 billion EUR more that they owe.

I would call that a significant difference regarding the balance sheet.

Deliveries:

Airbus is actively delivering A320 family frames and A350 frames other commercial aircraft deliveries are minor. The military deliveries are down.

Boeing is actively delivering 787, other commercial aircraft deliveries are down. Military deliveries are down, but significant.

Airbus has currently a positive cash flow and Boeing a negative.

PS. the balance sheet in old style simple bookkeeping was only what is today called Statement of financial positions. In my eyes still the most important information in the annual reports.

I hope you followed your own advice and shorted Boeing, and you are posting from a beach somewhere they have tall cold drinks with little umbrellas in them. ;)


I divested nearly all my stocks when the coronavirus started in China. I run and partly own a company and I am harvesting any bit of cash I can lay my hands on, including opening credit lines before I need them. I still run profitable, but I fear a credit crunch hitting me and my customers later this year.
 
majano
Posts: 245
Joined: Sun Oct 14, 2018 10:45 am

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 3:01 pm

mjoelnir wrote:
Bricktop wrote:
mjoelnir wrote:
But the balance sheets of Airbus are radically different from Boeing.

Equity:
Boeing does show a negative equity of 8,3 billion USD, but to compare that to the IFRS accounting of Airbus you have to detract 25.5 billion of deferred cost, booked in inventories. (Added up deferred production and tooling cost for 737, 777 and, 787 see Note 7 – Inventories in the 2019 Boeing Annual Report.)
So real equity at Boeing is 33.8 billion USD negative compared to IFRS accounting. With simple words Boeing owes 33.8 billion more than they own.

Airbus has an equity of nearly 6 Billion EUR. Airbus owns 6 billion EUR more that they owe.

I would call that a significant difference regarding the balance sheet.

Deliveries:

Airbus is actively delivering A320 family frames and A350 frames other commercial aircraft deliveries are minor. The military deliveries are down.

Boeing is actively delivering 787, other commercial aircraft deliveries are down. Military deliveries are down, but significant.

Airbus has currently a positive cash flow and Boeing a negative.

PS. the balance sheet in old style simple bookkeeping was only what is today called Statement of financial positions. In my eyes still the most important information in the annual reports.

I hope you followed your own advice and shorted Boeing, and you are posting from a beach somewhere they have tall cold drinks with little umbrellas in them. ;)


I divested nearly all my stocks when the coronavirus started in China. I run and partly own a company and I am harvesting any bit of cash I can lay my hands on, including opening credit lines before I need them. I still run profitable, but I fear a credit crunch hitting me and my customers later this year.

This is an interesting line of thought. My understanding is that governments are likely to pressure banks into lenient behaviour, certainly in these initial stages of the crisis. Once an economic crash is averted, do you think banks will become more hawkish? Or do you fear that banks will themselves start facing liquidity issues of their own?
 
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Revelation
Posts: 23017
Joined: Wed Feb 09, 2005 9:37 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 3:27 pm

mjoelnir wrote:
I divested nearly all my stocks when the coronavirus started in China. I run and partly own a company and I am harvesting any bit of cash I can lay my hands on, including opening credit lines before I need them. I still run profitable, but I fear a credit crunch hitting me and my customers later this year.

Yeah but if you followed your own advice and took your cash from divesting all your stocks and used it to short Boeing, you wouldn't have to be worrying about any silly credit crunch. It's a shame to see you not benefit from all the wisdom you share so repetitively. I don't know why you didn't take this great opportunity to demonstrate to everyone the courage of your conviction.
Wake up to find out that you are the eyes of the world
The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
The heart has its seasons, its evenings and songs of its own
 
Dmoney
Posts: 8
Joined: Tue Mar 17, 2020 9:53 am

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 3:38 pm

Mjoelnir who do you think they "owe" deferred production costs too? You've absolutely no idea how to read a balance sheet.
 
User avatar
Polot
Posts: 10181
Joined: Thu Jul 28, 2011 3:01 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 4:02 pm

zkojq wrote:
When did Airbus suggest several months ago that they may need assistance?

I didn’t say that Airbus said several months ago that they may need assistance. I said Airbus has signaled that if current situation lasts for several more months they may need assistance.

See https://www.reuters.com/article/us-heal ... SKBN2141SA
 
morrisond
Posts: 2499
Joined: Thu Jan 07, 2010 12:22 am

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 4:13 pm

zkojq wrote:
morrisond wrote:
You are dreaming if you think Airlines won't use this as opportunity to adjust order books and renegotiate prices.

With oil prices where they are it wrecks the calculus on how much more a NEO is worth vs buying a used CEO from a defunct airline.


I'm sure that some delivery schedules will be arranged but OEMs have price inflators in their contracts for good reason. Oil will go up again as fast as it went down - Saudi Arabia can't even come close to balancing their budget at current price levels.




However in an Oil price war there will be a lot of supply destruction - it most likely won't return to the same levels - couple that with the coming electrification of Auto's and you have long term demand disruption as well.

I expect Canada to shutter a lot of the Oil Sands - which will really hurt Alberta - but then at least we will be under our Carbon targets.

What are price inflators good for? It will be a simple discussion from the Airlines to Boeing and Airbus "You know those 100 frames we have on order over the next 5 years - we can now only take 10 to replace retiring aircraft."
 
Aither
Posts: 1238
Joined: Mon Oct 25, 2004 3:43 am

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 4:17 pm

If hundreds of A320 neo slots are made available many will switch from 737 to Airbus. That will help Airbus to absorb the shock. Also the smaller A220 could be preferred by some airlines. Boeing does not have the equivalent.
The big issue is for the widebody market. Clearly there will be over capacity for quite some time.
All in all we could see Airbus having like 70%+ of aircraft deliveries for the next few years.
The big question is the market size. But if the virus continues to spread like today, we won't care anymore about stock prices.
Never trust the obvious
 
User avatar
Polot
Posts: 10181
Joined: Thu Jul 28, 2011 3:01 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 4:38 pm

Aither wrote:
If hundreds of A320 neo slots are made available many will switch from 737 to Airbus. That will help Airbus to absorb the shock. Also the smaller A220 could be preferred by some airlines. Boeing does not have the equivalent.
The big issue is for the widebody market. Clearly there will be over capacity for quite some time.
All in all we could see Airbus having like 70%+ of aircraft deliveries for the next few years.
The big question is the market size. But if the virus continues to spread like today, we won't care anymore about stock prices.

If hundreds of neo slots are suddenly available that means either a) nobody wants planes right now or b) carriers are collapsing meaning tons of cheap used planes. Conversely if everyone is switching to Neos that gives airlines an opportunity to quickly build a cheap max fleet. As far as I’m aware 737 RTS efforts are still on going and not suspended.

I think people are overestimating the impact this will have on Max vs Neo dynamic. This is essentially just a giant pause button.
 
oldJoe
Posts: 69
Joined: Fri Jan 10, 2020 11:04 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 9:00 pm

Polot wrote:
Aither wrote:
If hundreds of A320 neo slots are made available many will switch from 737 to Airbus. That will help Airbus to absorb the shock. Also the smaller A220 could be preferred by some airlines. Boeing does not have the equivalent.
The big issue is for the widebody market. Clearly there will be over capacity for quite some time.
All in all we could see Airbus having like 70%+ of aircraft deliveries for the next few years.
The big question is the market size. But if the virus continues to spread like today, we won't care anymore about stock prices.

If hundreds of neo slots are suddenly available that means either a) nobody wants planes right now or b) carriers are collapsing meaning tons of cheap used planes. Conversely if everyone is switching to Neos that gives airlines an opportunity to quickly build a cheap max fleet. As far as I’m aware 737 RTS efforts are still on going and not suspended.

I think people are overestimating the impact this will have on Max vs Neo dynamic. This is essentially just a giant pause button.


The question is, which airline CEO will build up a cheap MAX-fleet when no pax want to fly on it ?
 
michael478
Posts: 7
Joined: Sat Mar 21, 2020 6:17 pm

Re: Airbus Financial Discussion 2020

Sat Mar 21, 2020 10:51 pm

Polot wrote:
Aither wrote:
If hundreds of A320 neo slots are made available many will switch from 737 to Airbus. That will help Airbus to absorb the shock. Also the smaller A220 could be preferred by some airlines. Boeing does not have the equivalent.
The big issue is for the widebody market. Clearly there will be over capacity for quite some time.
All in all we could see Airbus having like 70%+ of aircraft deliveries for the next few years.
The big question is the market size. But if the virus continues to spread like today, we won't care anymore about stock prices.

If hundreds of neo slots are suddenly available that means either a) nobody wants planes right now or b) carriers are collapsing meaning tons of cheap used planes. Conversely if everyone is switching to Neos that gives airlines an opportunity to quickly build a cheap max fleet. As far as I’m aware 737 RTS efforts are still on going and not suspended.

I think people are overestimating the impact this will have on Max vs Neo dynamic. This is essentially just a giant pause button.


exactly, its a giant pause button, I am not sure why you think that favours boeing
up to now many were thinking the max backlog is safe because airlines need planes, they need them now, and they cant get neos soon enough

but now with this situation, airlines dont need planes right away, so they have the luxury of waiting for neos
 
JayinKitsap
Posts: 1878
Joined: Sat Nov 26, 2005 9:55 am

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 3:59 am

It will take a year or more to get the currently parked planes back in service. It was several years after 9.11 before traffic returned to the prior levels. Balance sheets will be weak, so very little new orders. Lots of metal avail from airlines that didn't make it. Oil prices low for a year plus, ceo's will do fine. Airbus will be back to 600/year production, that will be better than Boeing.
 
astuteman
Posts: 7093
Joined: Mon Jan 24, 2005 7:50 pm

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 7:10 am

morrisond wrote:
You are dreaming if you think Airlines won't use this as opportunity to adjust order books and renegotiate prices.

With oil prices where they are it wrecks the calculus on how much more a NEO is worth vs buying a used CEO from a defunct airline.

I'll be stunned if production isn't severely curtailed on all Airliner production lines worldwide. Just look at what happened after 9/11.

Worldwide demand for travel will be sometime before it comes back to pre Corvid levels .


I have had a look at the production numbers post 9/11
They make interesting reading.

Rgds
 
User avatar
Polot
Posts: 10181
Joined: Thu Jul 28, 2011 3:01 pm

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 11:17 am

michael478 wrote:
Polot wrote:
Aither wrote:
If hundreds of A320 neo slots are made available many will switch from 737 to Airbus. That will help Airbus to absorb the shock. Also the smaller A220 could be preferred by some airlines. Boeing does not have the equivalent.
The big issue is for the widebody market. Clearly there will be over capacity for quite some time.
All in all we could see Airbus having like 70%+ of aircraft deliveries for the next few years.
The big question is the market size. But if the virus continues to spread like today, we won't care anymore about stock prices.

If hundreds of neo slots are suddenly available that means either a) nobody wants planes right now or b) carriers are collapsing meaning tons of cheap used planes. Conversely if everyone is switching to Neos that gives airlines an opportunity to quickly build a cheap max fleet. As far as I’m aware 737 RTS efforts are still on going and not suspended.

I think people are overestimating the impact this will have on Max vs Neo dynamic. This is essentially just a giant pause button.


exactly, its a giant pause button, I am not sure why you think that favours boeing
up to now many were thinking the max backlog is safe because airlines need planes, they need them now, and they cant get neos soon enough

but now with this situation, airlines dont need planes right away, so they have the luxury of waiting for neos

Except many won’t be able to get neos later when they want them, because current Neo slot holders also won’t want their planes now and will also defer their orders to the same time when current Max order holders will want new planes again too. It would be the exact same scenario as today (well, pre-COVID). The A320 production not being enough to fulfill worldwide demand is a long term issue, not a short term issue that the coronavirus fixes.

And no where did I say this favors Boeing- I said people are overestimating the impact this will have on the Max v Neo dynamic, which currently favors the Neo.
 
oslmgm
Posts: 224
Joined: Wed Dec 03, 2014 6:29 pm

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 12:45 pm

Polot wrote:
michael478 wrote:
Polot wrote:
If hundreds of neo slots are suddenly available that means either a) nobody wants planes right now or b) carriers are collapsing meaning tons of cheap used planes. Conversely if everyone is switching to Neos that gives airlines an opportunity to quickly build a cheap max fleet. As far as I’m aware 737 RTS efforts are still on going and not suspended.

I think people are overestimating the impact this will have on Max vs Neo dynamic. This is essentially just a giant pause button.


exactly, its a giant pause button, I am not sure why you think that favours boeing
up to now many were thinking the max backlog is safe because airlines need planes, they need them now, and they cant get neos soon enough

but now with this situation, airlines dont need planes right away, so they have the luxury of waiting for neos

Except many won’t be able to get neos later when they want them, because current Neo slot holders also won’t want their planes now and will also defer their orders to the same time when current Max order holders will want new planes again too. It would be the exact same scenario as today (well, pre-COVID). The A320 production not being enough to fulfill worldwide demand is a long term issue, not a short term issue that the coronavirus fixes.

And no where did I say this favors Boeing- I said people are overestimating the impact this will have on the Max v Neo dynamic, which currently favors the Neo.

So maybe Airbus should produce white tail NEOs if they get many cancellations/deferrals the coming year?

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