brindabella
Posts: 587
Joined: Fri Apr 30, 2010 10:38 am

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 12:49 pm

Dmoney wrote:
Mjoelnir who do you think they "owe" deferred production costs too? You've absolutely no idea how to read a balance sheet.


Mjoelnir who do you think they "owe" deferred production costs to?

He never listens and never answers this.

Many great posts but sheesh ... :banghead:

cheers
Billy
 
brindabella
Posts: 587
Joined: Fri Apr 30, 2010 10:38 am

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 1:25 pm

astuteman 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'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


Och weel --- I had played with the idea of mentioning same.

IIRC, last time around BA were outraged that AB never reduced production despite a severe market downturn.
BA had done exactly that.
To their detriment, as the downturn didn't last long.

BA were left high-and-dry, with AB gaining market share.

My 2cents:

A) they will both get bailouts, as deliveries will crash. Current delivery projections are toilet-paper grade only.
B) AB will continue with extremely high production-rates; not anywhere close to deliveries - just like last time.
C) so this time, despite BA having, deservedly become highly-radioactive politically in the States, Trump will find it difficult not to finance BA to similarly produce madly through this recession.

cheers

PS:
Ironically, BA may get a fillip in that 737 production is stopped.
AB is pumping-out 3(?) NB per day.

Who do they think will be taking them?
Do AB not know that their customers are heading over the hill in a cloud of dust?

OF COURSE THEY DO!

The losses will accelerate at an amazing rate.

Faster than the AB boosters like ZK... can understand.
Bottom line?
The markets as above have it right.

BA is (desevedly) in deep doo-doo.

But AB is too,

And the longer AB clings to the scenario of (only) 1 Month ago, then the deeper will be the hole that AB digs for itself.




cheers
Billy
 
User avatar
Polot
Posts: 10150
Joined: Thu Jul 28, 2011 3:01 pm

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 1:32 pm

oslmgm wrote:
Polot wrote:
michael478 wrote:

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?

Depends on how long things last. Airbus is coming into the crisis in a better position that Boeing, but that doesn’t mean they can bury their heads in the sand and pretend all is normal. Airbus wants to exit the crisis in a position of strength, the worse case scenario would be Airbus financially pressured while facing a new resurgent Boeing (helped by government aid or whatever). If Airbus is facing significant cancellations and deferrals at some point they will throttle back production to protect their, and their supplier’s (many of whom are already weakened due to Max grounding), financial position. White tails cost money and a lot of them will weaken future margins.
 
morrisond
Posts: 2469
Joined: Thu Jan 07, 2010 12:22 am

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 2:53 pm

brindabella wrote:
astuteman 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'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


Och weel --- I had played with the idea of mentioning same.

IIRC, last time around BA were outraged that AB never reduced production despite a severe market downturn.
BA had done exactly that.
To their detriment, as the downturn didn't last long.

BA were left high-and-dry, with AB gaining market share.

My 2cents:

A) they will both get bailouts, as deliveries will crash. Current delivery projections are toilet-paper grade only.
B) AB will continue with extremely high production-rates; not anywhere close to deliveries - just like last time.
C) so this time, despite BA having, deservedly become highly-radioactive politically in the States, Trump will find it difficult not to finance BA to similarly produce madly through this recession.

cheers

PS:
Ironically, BA may get a fillip in that 737 production is stopped.
AB is pumping-out 3(?) NB per day.

Who do they think will be taking them?
Do AB not know that their customers are heading over the hill in a cloud of dust?

OF COURSE THEY DO!

The losses will accelerate at an amazing rate.

Faster than the AB boosters like ZK... can understand.
Bottom line?
The markets as above have it right.

BA is (desevedly) in deep doo-doo.

But AB is too,

And the longer AB clings to the scenario of (only) 1 Month ago, then the deeper will be the hole that AB digs for itself.




cheers


Interesting I tried to find that information but I couldn't - I suspect that AB didn't reduce production that much due to Employment Rules that made it too expensive to lay-off workers and 9/11 was more of a US thing that affected the US more than anyone else - they were not ordering that many Airbus frames at that time. The bags of money Airbus was handing out at the time probably helped the Airline exec's find the funds to take delivery.

This being a Global issue will most likely affect Airbus more this time.

They can continue to produce at there existing rates when the lines return but I would be stunned if they don't have 200-300 undelivered frames sitting on the ground within 12 months if they do. Can they afford to do that without help?

On the positive side A321XLR should do well as it can replace a lot of widebody routes - but then again the calculus comes into play - with fuel this cheap - just keep your existing WB's and fly them 30-50% full until demand returns - instead of shelling out $60-80 million for a new frame.

If MAX RTS - I can see line rates being only 10-20 per month for the next few years as the will most likely have to find new Customers for a lot of the Whitetails - and this may prompt the MAX replacement sooner rather than later. 787 may go down to 4-5 and the 777X a few per month at best.

For Airbus 23-35 A320/321 Series per month for the next few years seems reasonable, and 330 a few per month if not shut down and A350 the same 4-5 per month as 787.
 
michael478
Posts: 5
Joined: Sat Mar 21, 2020 6:17 pm

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 5:27 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.

Yes there will be companies that will not be able to take planes right away and will defer for both boeing and airbus. But there will be airlines that will want those newly available early airbus slots because their finances might survive this crisis. Some of those might be max customers which now have the option to defect. An option they did not have before

Its all hypothetical anyway. We are all just guessing. Time will tell if this crisis leads to a change in market share for a and b
 
Sokes
Posts: 786
Joined: Sat Mar 09, 2019 4:48 pm

Re: Airbus Financial Discussion 2020

Sun Mar 22, 2020 8:00 pm

Aren't there a lot of old narrow-bodies that need replacing?
I would be more concerned about wide-body orders, both for Airbus and Boeing.

If some countries try to get Corona under control by making people sit at home for two weeks and other countries try to infect the whole population with a flat curve, how is the world economy ever to recover? Which Chinese businessman will be willing to meet a business partner in Europe, just to be isolated for two weeks when he returns home?
If the West doesn't bury it's liberal values for two weeks the world economy is screwed.
On the other side four weeks of zero economy with full economy afterwards should be a trivial event for aircraft manufacturers. Airlines will increase rates for some time to make up for losses, afterwards business as usual.
Why can't the world be a little bit more autistic?
 
Weatherwatcher1
Topic Author
Posts: 416
Joined: Sun Mar 03, 2019 5:14 pm

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 1:50 am

Looks like production will resume at a reduced rate. That will have a financial outcome. Combined with airlines having financing difficulties as well as not being able to take deliveries, how much financial impact can we expect?

PARIS - Airbus confirmed on Sunday it would resume only partial aircraft production when its French and Spanish factories reopen on Monday after a four-day shutdown to tackle health concerns over the coronavirus.

Some French labor unions said on Saturday it had been decided that production would resume at a slower than normal rate.

In a statement late on Sunday, the European planemaker said its production and assembly work would "partially resume" in France and Spain on Monday, following health and safety checks.


https://news.abs-cbn.com/business/03/23 ... ction-rate
 
astuteman
Posts: 7086
Joined: Mon Jan 24, 2005 7:50 pm

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 5:42 am

morrisond wrote:
brindabella wrote:
astuteman wrote:

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

Rgds


Och weel --- I had played with the idea of mentioning same.

IIRC, last time around BA were outraged that AB never reduced production despite a severe market downturn.
BA had done exactly that.
To their detriment, as the downturn didn't last long.

BA were left high-and-dry, with AB gaining market share.

My 2cents:

A) they will both get bailouts, as deliveries will crash. Current delivery projections are toilet-paper grade only.
B) AB will continue with extremely high production-rates; not anywhere close to deliveries - just like last time.
C) so this time, despite BA having, deservedly become highly-radioactive politically in the States, Trump will find it difficult not to finance BA to similarly produce madly through this recession.

cheers

PS:
Ironically, BA may get a fillip in that 737 production is stopped.
AB is pumping-out 3(?) NB per day.

Who do they think will be taking them?
Do AB not know that their customers are heading over the hill in a cloud of dust?

OF COURSE THEY DO!

The losses will accelerate at an amazing rate.

Faster than the AB boosters like ZK... can understand.
Bottom line?
The markets as above have it right.

BA is (desevedly) in deep doo-doo.

But AB is too,

And the longer AB clings to the scenario of (only) 1 Month ago, then the deeper will be the hole that AB digs for itself.




cheers


Interesting I tried to find that information but I couldn't - I suspect that AB didn't reduce production that much due to Employment Rules that made it too expensive to lay-off workers and 9/11 was more of a US thing that affected the US more than anyone else - they were not ordering that many Airbus frames at that time. The bags of money Airbus was handing out at the time probably helped the Airline exec's find the funds to take delivery.

This being a Global issue will most likely affect Airbus more this time.

They can continue to produce at there existing rates when the lines return but I would be stunned if they don't have 200-300 undelivered frames sitting on the ground within 12 months if they do. Can they afford to do that without help?

On the positive side A321XLR should do well as it can replace a lot of widebody routes - but then again the calculus comes into play - with fuel this cheap - just keep your existing WB's and fly them 30-50% full until demand returns - instead of shelling out $60-80 million for a new frame.

If MAX RTS - I can see line rates being only 10-20 per month for the next few years as the will most likely have to find new Customers for a lot of the Whitetails - and this may prompt the MAX replacement sooner rather than later. 787 may go down to 4-5 and the 777X a few per month at best.

For Airbus 23-35 A320/321 Series per month for the next few years seems reasonable, and 330 a few per month if not shut down and A350 the same 4-5 per month as 787.


I don't think Airbus's social obligations were anything to do with the production rates.
I think 9/11 was very much a "US" thing, and at the time Boeing were very heavily exposed in the USA - much more than Airbus were.
They had also just accelerated output significantly - particularly of the 737NG.
I think there were other complications, like the demise of the 757, and passenger 767, and the 747-400 wind-down, leading up to the 748

This is how delivery figures went, from 2000, to 2005..

737 - 282, 299, 223, 173, 202, 212
757 - 45, 45, 29, 14, 11, 2

747 - 25, 31, 27, 19, 15, 13
767 - 44, 40, 35, 24, 9, 10
777 - 55, 61, 47, 39, 36, 40

A320 - 241, 257, 236, 233, 233, 289

A330 - 43, 35, 42, 31, 47, 56
A340 - 19, 22, 16, 33, 28, 24

It was in this period that Airbus took a dominant position in narrowbodys.

As you say, the COVID 19 crisis is much more international, and is going to affect everyone.
It is quite hard to predict what will happen as I suspect there will be a lot more worldwide government intervention.

I think narrowbody output will be more resilient, and recover quicker than widebody output (which for me had already gone over the top in terms of output, with both Airbus and Boeing announcing rate cuts.
How the huge narrowbody backlogs translate into output over the next 5 years is much harder to fathom IMO.
I don't think 2020 will look good at all. 2021 might not be great.
I think they will recover strongly from 2022

Rgds
 
JayinKitsap
Posts: 1862
Joined: Sat Nov 26, 2005 9:55 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 11:14 am

Airbus will shrink, just as Boeing Commercial will. With a system flush like what just occurred (basically all passenger planes between countries and a lot within countries) it cannot be predicted with any kind of accuracy. Will Airbus have 400 or 4,000 cancellations? What will be the growth in aircraft within China? Is the WB markets saturated? very few new orders over the next 5 years?

Lots and lots of questions. I am sure both Airbus and Boeing are working scenarios rapidly to avoid bankruptcy for themselves and their best customers. A very interesting but painful time to be an aviation fan.
 
Flying-Tiger
Posts: 4005
Joined: Mon Aug 23, 1999 5:35 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 11:18 am

The aircraft manufacturer has taken measures to boost liquidity to €30 billion ($32 billion), excluding non-pooled cash, and is not asking European governments for help.


The company now has access to a new €15 billion credit facility that increases available liquidity from the €25 billion as of the end of 2019 by almost another €5 billion, in spite of the €3.6 billion compliance penalty payment to authorities, €500 million for the acquisition of Bombardier’s share in the Airbus Canada partnership and the funding of operations in what is normally already a low-delivery part of the year.


https://aviationweek.com/aerospace/airbus-secures-large-loan-deals-multiple-deferral-requests

That should certainly help for some time to weather the storm and prepare and pay for the drastic cuts coming all along.
Flown: A319/320/321,A332/3,A343/346, A380,AT4,AT7,B732/3/4/5/7/8/9,B742/4,B762/763,B772/77W,CR2/7/9/K,ER3/4,E70/75/90/95, F50/70/100,M11,L15,SF3,S20, AR8/1, 142/143,...
 
TaromA380
Posts: 342
Joined: Sun Sep 11, 2005 12:35 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 11:33 am

Airbus cancels planned dividends over coronavirus
https://www.dw.com/en/airbus-cancels-15 ... a-52884866
European aviation giant Airbus on Monday said it was canceling a planned dividend payment and revoking its 2020 earnings forecast in the face of the global economic uncertainty created by the coronavirus pandemic.

"We have withdrawn our 2020 guidance due to the volatility of the situation," Airbus chief executive Guillaume Faury said in a statement.
 
Aither
Posts: 1230
Joined: Mon Oct 25, 2004 3:43 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 12:10 pm

The biggest risk is self fulfilling prophecies.
If all companies like Airbus & Boeing just stop manufacturing, that's for sure, will kill the airlines - for many years. And that's what precisely governments are trying to avoid. Even going as far as paying salaries to people who are not working these days.

It's great to anticipate worst cases scenarios but if you don't prepare for best cases scenarios as well ( because money is there and people after life threatening crisis want to travel to do things they always postponed) - then for sure your company will be left behind.
Never trust the obvious
 
morrisond
Posts: 2469
Joined: Thu Jan 07, 2010 12:22 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 12:35 pm

Good moves by Airbus - shoring up available credit - but as they are partially owned by the French and German Governments I'm sure the banks have no worries about getting paid back.

It does sound like Production will be cut and given the massive increase in potential borrowing they will try and keep there workforce intact.

https://www.bloomberg.com/news/articles ... n-pandemic
 
Aither
Posts: 1230
Joined: Mon Oct 25, 2004 3:43 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 12:45 pm

Scotron12 wrote:

Some think that magically zillions will be flying again in 12 months. Fat chance!

To get back, just to pre Wuhan levels will take quite a while.


Not magically.
There is so much at stake and it's everybody's interest to get things back. We will see a huge rebound because of the current budget policies are all aiming for that. It's more a when than a if.

There will be a first wave of travelers who need to fly to meet their families etc.
Then if things go well for this first wave tourists will be back attracted by incredible cheap holiday packages.
Business traffic will be back as well as one of the outcome will be a review and reshape of the world logistics.

Obviously it all depends on how the virus will continue to spread. But if you don't believe in this scenario, don't waste your time on A.net and enjoy time with your relatives.
Never trust the obvious
 
pune
Posts: 315
Joined: Tue Feb 12, 2019 9:18 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 1:01 pm

Aither wrote:
Scotron12 wrote:

Some think that magically zillions will be flying again in 12 months. Fat chance!

To get back, just to pre Wuhan levels will take quite a while.


Not magically.
There is so much at stake and it's everybody's interest to get things back. We will see a huge rebound because of the current budget policies are all aiming for that. It's more a when than a if.

There will be a first wave of travelers who need to fly to meet their families etc.
Then if things go well for this first wave tourists will be back attracted by incredible cheap holiday packages.
Business traffic will be back as well as one of the outcome will be a review and reshape of the world logistics.

Obviously it all depends on how the virus will continue to spread. But if you don't believe in this scenario, don't waste your time on A.net and enjoy time with your relatives.


I second this. After covid it is possible that more people will do the thing they had always wanted and posphoned, travel. It really would depend on a combination of things, visa, cheap rates, what guest countries offer travelers, things like that.
 
Scotron12
Posts: 406
Joined: Fri Mar 01, 2019 2:13 pm

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 1:18 pm

I don't disagree that travel won't rebound, just the timescale. Just to reach pre Wuhan levels will take a lot longer than 12 months....hell...because of this crisis an estimated 56M Chinese alone are not flying!
 
morrisond
Posts: 2469
Joined: Thu Jan 07, 2010 12:22 am

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 2:23 pm

Aither wrote:
Scotron12 wrote:

Some think that magically zillions will be flying again in 12 months. Fat chance!

To get back, just to pre Wuhan levels will take quite a while.


Not magically.
There is so much at stake and it's everybody's interest to get things back. We will see a huge rebound because of the current budget policies are all aiming for that. It's more a when than a if.

There will be a first wave of travelers who need to fly to meet their families etc.
Then if things go well for this first wave tourists will be back attracted by incredible cheap holiday packages.
Business traffic will be back as well as one of the outcome will be a review and reshape of the world logistics.

Obviously it all depends on how the virus will continue to spread. But if you don't believe in this scenario, don't waste your time on A.net and enjoy time with your relatives.


You are quite right - air travel will rebound but will Airlines need new metal? I would guess we are back to pre-covid levels in about 3 years time - however that means frames are needed for replacement only and not growth for some time and a lot of that will be deferred as Airlines just won't have the cash as they will not have the same profits they enjoyed pre-crisis or will be able to buy a lot of cheap barely used frames from defunct carriers.
 
Weatherwatcher1
Topic Author
Posts: 416
Joined: Sun Mar 03, 2019 5:14 pm

Re: Airbus Financial Discussion 2020

Mon Mar 23, 2020 2:53 pm

It’s all a dynamic situation. Airlines can’t take delivery of airplanes. Production rates are going down. The backlog for narrowbodies is big, but not as strong for widebodies. I think the production planning people at Airbus are going to have the whole delivery stream change this year. How many airplanes actually get delivered this year is a big mystery at this point.
 
gregpodpl
Posts: 74
Joined: Fri Jan 04, 2013 3:49 am

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 4:28 am

Interesting quote from Financial Times:
"Thanks to the acquisition of a small German lender in 2014 that has since become Airbus bank, the group also has access to central bank facilities to ensure liquidity."

Curious how it works exactly.

source: https://www.ft.com/content/35da9db0-6d1 ... 503995cd6f (paywall)
 
FluidFlow
Posts: 558
Joined: Wed Apr 10, 2019 6:39 am

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 7:22 am

gregpodpl wrote:
Interesting quote from Financial Times:
"Thanks to the acquisition of a small German lender in 2014 that has since become Airbus bank, the group also has access to central bank facilities to ensure liquidity."

Curious how it works exactly.

source: https://www.ft.com/content/35da9db0-6d1 ... 503995cd6f (paywall)


Without being able to read the FT article:

As far as I know, central banks lend money to banks, which then lend it to companies. This also dictates the interest. Even when the central bank has 0.0-0.25% rates, lending from the bank has a higher interest that actually reflects the risk for the bank to lend.

Now for airbus it seems that due to having access directly to central bank facilities, they can borrow at the low central bank rate "directly". There are rules for banks tho, so I would say there are high hurdles for the "airbus bank" to lend to airbus as even the airbus bank has to comply with Basel III for example.
 
gregpodpl
Posts: 74
Joined: Fri Jan 04, 2013 3:49 am

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 8:21 am

FluidFlow wrote:
As far as I know, central banks lend money to banks, which then lend it to companies. This also dictates the interest. Even when the central bank has 0.0-0.25% rates, lending from the bank has a higher interest that actually reflects the risk for the bank to lend.
Now for airbus it seems that due to having access directly to central bank facilities, they can borrow at the low central bank rate "directly". There are rules for banks tho, so I would say there are high hurdles for the "airbus bank" to lend to airbus as even the airbus bank has to comply with Basel III for example.

There is not much more in the article - that was the only line on that subject.
I'm just thinking if there are any benefits for Airbus here other than:
- bank can take some more risk giving loans to Airbus - inside the regulations
- loans may be cheaper cheaper - or even if Airbus (plane division) has to pay market commission - profit on the bank side stays "in the family"

And on the downside:
- if bank is in trouble - they may have to spend money providing additional capital for it
 
User avatar
keesje
Posts: 13670
Joined: Thu Apr 12, 2001 2:08 am

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 3:13 pm

"Never mistake motion for action." Ernest Hemingway
 
JonesNL
Posts: 134
Joined: Tue Aug 06, 2019 2:40 pm

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 3:37 pm

gregpodpl wrote:
FluidFlow wrote:
As far as I know, central banks lend money to banks, which then lend it to companies. This also dictates the interest. Even when the central bank has 0.0-0.25% rates, lending from the bank has a higher interest that actually reflects the risk for the bank to lend.
Now for airbus it seems that due to having access directly to central bank facilities, they can borrow at the low central bank rate "directly". There are rules for banks tho, so I would say there are high hurdles for the "airbus bank" to lend to airbus as even the airbus bank has to comply with Basel III for example.

There is not much more in the article - that was the only line on that subject.
I'm just thinking if there are any benefits for Airbus here other than:
- bank can take some more risk giving loans to Airbus - inside the regulations
- loans may be cheaper cheaper - or even if Airbus (plane division) has to pay market commission - profit on the bank side stays "in the family"

And on the downside:
- if bank is in trouble - they may have to spend money providing additional capital for it


One important note; banks are heavily leveraged (around 10 to 1), even under Basel III. The easiest way to gain access to big capital sums is for Airbus to increase equity by 1 bil. and the bank can borrow and lend 9bil to one of its customers. The interest rate should at least reflect the risk, but that doesn't matter as Airbus will pocket the higher interest rates itself. Cheapest form of lending that is possible, during the last crisis some companies with banking license in the Netherlands did that as well.
 
LJ
Posts: 5057
Joined: Wed Nov 17, 1999 8:28 pm

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 3:40 pm

Aither wrote:
Not magically.
There is so much at stake and it's everybody's interest to get things back. We will see a huge rebound because of the current budget policies are all aiming for that. It's more a when than a if.

There will be a first wave of travelers who need to fly to meet their families etc.
Then if things go well for this first wave tourists will be back attracted by incredible cheap holiday packages.
Business traffic will be back as well as one of the outcome will be a review and reshape of the world logistics.


I think you'll be highly disappointed. This crisis is not just a health crisis, it will turn into a recession. Travel is not the number one priority if you have bills to pay. Or do you really think that most people will not have negative income effects? If so, I wonder on what you base this assumption. Moreover, those cheap holiday packages are a recipe for disaster and will only make the life of the travel companies and airlines worse (if they they don't go bankrupt). Don't think that any bail out will come for free, they've to be repaid (including interest). Finally, travel is also not the most important thiing on the minds of many governments. It's ensuring that the vital parts of the economy aren't getting hit too much. This means that they will select what they will support.

Finally, the most important problem for both Boeing and Airbus will be that the airlines either have no cash or are full of liabilities. Those who haven't ordered yet (for example AF/KL) must cannot order as intrest and principal repayments will eat out of their cash flow for some time. Those who have ordered must try to finance their order based on their new credit rating....that won't be cheap. If you count on governments, you're probably going to be disappointed as well. This crisis eats a lot out of any government budget.
 
LJ
Posts: 5057
Joined: Wed Nov 17, 1999 8:28 pm

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 3:46 pm

FluidFlow wrote:
Without being able to read the FT article:

As far as I know, central banks lend money to banks, which then lend it to companies. This also dictates the interest. Even when the central bank has 0.0-0.25% rates, lending from the bank has a higher interest that actually reflects the risk for the bank to lend.

Now for airbus it seems that due to having access directly to central bank facilities, they can borrow at the low central bank rate "directly". There are rules for banks tho, so I would say there are high hurdles for the "airbus bank" to lend to airbus as even the airbus bank has to comply with Basel III for example.


Any loan from a central bank needs to be collateralised by assets and those include eligible monetary assets only. Despite the relaxation of the eligibility rules, I doubt any loan to EADS and/or Airbus will considered eligible for the ECB. Thus in order to use any facility from a central bank it will have to have other monetary assets which are eligible (cerain types of debt securities, eligible credit claims). Moreover, you can only use central bank faciities to lend to another party. However, the central bank has clearly defined programs under which you can lend money. Given the size of Airbus, the most interesting program (TLTRO) is not available for loans to Airbus.
 
trex8
Posts: 5434
Joined: Sat Nov 02, 2002 9:04 am

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 3:50 pm

Is Airbus still paying royalties to eg UK government for the A320 program etc like they were a decade ago? They could put that on hold. IIRC UK treasury had received almost half billion $ when we last discussed this over a decade ago. Even some tens of millions a year will help now.
 
Aither
Posts: 1230
Joined: Mon Oct 25, 2004 3:43 am

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 4:33 pm

LJ wrote:
Aither wrote:
Not magically.
There is so much at stake and it's everybody's interest to get things back. We will see a huge rebound because of the current budget policies are all aiming for that. It's more a when than a if.

There will be a first wave of travelers who need to fly to meet their families etc.
Then if things go well for this first wave tourists will be back attracted by incredible cheap holiday packages.
Business traffic will be back as well as one of the outcome will be a review and reshape of the world logistics.


I think you'll be highly disappointed. This crisis is not just a health crisis, it will turn into a recession. Travel is not the number one priority if you have bills to pay. Or do you really think that most people will not have negative income effects? If so, I wonder on what you base this assumption. Moreover, those cheap holiday packages are a recipe for disaster and will only make the life of the travel companies and airlines worse (if they they don't go bankrupt). Don't think that any bail out will come for free, they've to be repaid (including interest). Finally, travel is also not the most important thiing on the minds of many governments. It's ensuring that the vital parts of the economy aren't getting hit too much. This means that they will select what they will support.

Finally, the most important problem for both Boeing and Airbus will be that the airlines either have no cash or are full of liabilities. Those who haven't ordered yet (for example AF/KL) must cannot order as intrest and principal repayments will eat out of their cash flow for some time. Those who have ordered must try to finance their order based on their new credit rating....that won't be cheap. If you count on governments, you're probably going to be disappointed as well. This crisis eats a lot out of any government budget.


Your point is valid if you are reasoning under the standard economic/ financial / budget rules. The problem, is that all these rules and economic laws have just blown up. And actually it started some time ago with the negative interests rate, no inflation despite massive quantitative easing etc. (...).
Now we are in a mode of "whatever it takes". And this will be coordinated worldwide. And there is no reason to think that a doomsday scenario is more likely than some happy changes.

In Europe people continue to get paid, even the ones without activity. Companies are getting unlimited liquidity. This allows the economy to be in a pause mode, not a stop mode. Consumption is largely postponed, not cancelled. The lack of confidence could push people to make savings instead of consuming but :

- When you survive death you think twice before postponing the top things you want to do in your life (there are interesting literature on the topic).
- All the budget rules are dead. Freaking amount of liquidity is coming. This will lead to inflation. So for the money at the bank it's spend it or lose it.
- A lot of air traffic is constraint (workers, immigrants, VFR) and cheap. Very often cheaper than taking your own car. It's not a luxury thing anymore. Also governments are asking to review the "world logistics". This will stimulate business traffic as there is a clear demand for more diversified supplied chains across regions of the world.
- Governments will help aviation because there are millions of direct and indirect jobs at stake.
- Air traffic consolidation and rationalization will finally happen and that's great for the industry and the bottom line of the airlines.

So yes we can have a doomsday scenario. But if I to take a bet, it's going to be a doomsday only for the people who are anticipating the worse.
Never trust the obvious
 
LJ
Posts: 5057
Joined: Wed Nov 17, 1999 8:28 pm

Re: Airbus Financial Discussion 2020

Tue Mar 24, 2020 6:18 pm

Aither wrote:
In Europe people continue to get paid, even the ones without activity. Companies are getting unlimited liquidity. This allows the economy to be in a pause mode, not a stop mode. Consumption is largely postponed, not cancelled. The lack of confidence could push people to make savings instead of consuming but :


This is incorrect. First, people are not getting full wages (at least not where I love). Second, the bill has to be paid by someone and no government is going to pay it all. Third, companies will go bust. Finally, something like "unlimited liquidity" doesn't exist.

Aither wrote:
- When you survive death you think twice before postponing the top things you want to do in your life (there are interesting literature on the topic).


And you really think that people think they've survived death?

Aither wrote:
- All the budget rules are dead. Freaking amount of liquidity is coming. This will lead to inflation. So for the money at the bank it's spend it or lose it.


If rates increase -> higher intrest on mortgages -> less lending -> less economic activity. Moreover, when rates increase in Europe (which would be the only positive outcome of this crisis) you'll see more people saving as saving actually will make sense.

Aither wrote:
- A lot of air traffic is constraint (workers, immigrants, VFR) and cheap. Very often cheaper than taking your own car. It's not a luxury thing anymore. Also governments are asking to review the "world logistics". This will stimulate business traffic as there is a clear demand for more diversified supplied chains across regions of the world.


And you really think that customers will want to pay for it? Governments have also otehr thinkgs to worry about, the most important thing will be reducing debt.

Aither wrote:
- Governments will help aviation because there are millions of direct and indirect jobs at stake.


The will not get money so that they can order shiny new Airbusses. Moreover, the "help" is a loan, which needs to be paid back. How dio you think airlines will do that? By ordering new aircraft? Moreover, a LCC which kills someones national carrier will hardly been seen as important. Moreover, the number of employees in retail is much larger and will be seen as more important than those working in aviation.

Aither wrote:
- Air traffic consolidation and rationalization will finally happen and that's great for the industry and the bottom line of the airlines.


If it happens (which is still a big IF in Europe), it doesn't help Airbus much. Or do you think that the more money the airlines have the more they buy?

Aither wrote:
So yes we can have a doomsday scenario. But if I to take a bet, it's going to be a doomsday only for the people who are anticipating the worse.


There is a difference between doomsday scenario and realism. Have you read the thread about Delta? https://www.airliners.net/forum/viewtopic.php?f=3&t=1443189 . It will not only be Delta who will reduce flights and staff. Moreover, what you'll see is that some countries want to abondon the "Green deal". However, this would be a negative for Airbus as the green deal would force airlines to invest in less poluting aircraft. Or in other words, replace your narrowbody with NEO or MAX and buy 787/A350 for your long haul.
 
brindabella
Posts: 587
Joined: Fri Apr 30, 2010 10:38 am

Re: Airbus Financial Discussion 2020

Thu Mar 26, 2020 12:06 pm

Aither wrote:
LJ wrote:
Aither wrote:
Not magically.
There is so much at stake and it's everybody's interest to get things back. We will see a huge rebound because of the current budget policies are all aiming for that. It's more a when than a if.

There will be a first wave of travelers who need to fly to meet their families etc.
Then if things go well for this first wave tourists will be back attracted by incredible cheap holiday packages.
Business traffic will be back as well as one of the outcome will be a review and reshape of the world logistics.


I think you'll be highly disappointed. This crisis is not just a health crisis, it will turn into a recession. Travel is not the number one priority if you have bills to pay. Or do you really think that most people will not have negative income effects? If so, I wonder on what you base this assumption. Moreover, those cheap holiday packages are a recipe for disaster and will only make the life of the travel companies and airlines worse (if they they don't go bankrupt). Don't think that any bail out will come for free, they've to be repaid (including interest). Finally, travel is also not the most important thiing on the minds of many governments. It's ensuring that the vital parts of the economy aren't getting hit too much. This means that they will select what they will support.

Finally, the most important problem for both Boeing and Airbus will be that the airlines either have no cash or are full of liabilities. Those who haven't ordered yet (for example AF/KL) must cannot order as intrest and principal repayments will eat out of their cash flow for some time. Those who have ordered must try to finance their order based on their new credit rating....that won't be cheap. If you count on governments, you're probably going to be disappointed as well. This crisis eats a lot out of any government budget.


Your point is valid if you are reasoning under the standard economic/ financial / budget rules. The problem, is that all these rules and economic laws have just blown up. And actually it started some time ago with the negative interests rate, no inflation despite massive quantitative easing etc. (...).
Now we are in a mode of "whatever it takes". And this will be coordinated worldwide. And there is no reason to think that a doomsday scenario is more likely than some happy changes.

In Europe people continue to get paid, even the ones without activity. Companies are getting unlimited liquidity. This allows the economy to be in a pause mode, not a stop mode. Consumption is largely postponed, not cancelled. The lack of confidence could push people to make savings instead of consuming but :

- When you survive death you think twice before postponing the top things you want to do in your life (there are interesting literature on the topic).
- All the budget rules are dead. Freaking amount of liquidity is coming. This will lead to inflation. So for the money at the bank it's spend it or lose it.
- A lot of air traffic is constraint (workers, immigrants, VFR) and cheap. Very often cheaper than taking your own car. It's not a luxury thing anymore. Also governments are asking to review the "world logistics". This will stimulate business traffic as there is a clear demand for more diversified supplied chains across regions of the world.
- Governments will help aviation because there are millions of direct and indirect jobs at stake.
- Air traffic consolidation and rationalization will finally happen and that's great for the industry and the bottom line of the airlines.

So yes we can have a doomsday scenario. But if I to take a bet, it's going to be a doomsday only for the people who are anticipating the worse.


Congrats on a great post!

Just check-out the responses!

(bugger-all to do with Airliners, but who's counting? :D )
Billy
 
brindabella
Posts: 587
Joined: Fri Apr 30, 2010 10:38 am

Re: Airbus Financial Discussion 2020

Thu Mar 26, 2020 12:44 pm

brindabella wrote:
Aither wrote:
LJ wrote:

I think you'll be highly disappointed. This crisis is not just a health crisis, it will turn into a recession. Travel is not the number one priority if you have bills to pay. Or do you really think that most people will not have negative income effects? If so, I wonder on what you base this assumption. Moreover, those cheap holiday packages are a recipe for disaster and will only make the life of the travel companies and airlines worse (if they they don't go bankrupt). Don't think that any bail out will come for free, they've to be repaid (including interest). Finally, travel is also not the most important thiing on the minds of many governments. It's ensuring that the vital parts of the economy aren't getting hit too much. This means that they will select what they will support.

Finally, the most important problem for both Boeing and Airbus will be that the airlines either have no cash or are full of liabilities. Those who haven't ordered yet (for example AF/KL) must cannot order as intrest and principal repayments will eat out of their cash flow for some time. Those who have ordered must try to finance their order based on their new credit rating....that won't be cheap. If you count on governments, you're probably going to be disappointed as well. This crisis eats a lot out of any government budget.


Your point is valid if you are reasoning under the standard economic/ financial / budget rules. The problem, is that all these rules and economic laws have just blown up. And actually it started some time ago with the negative interests rate, no inflation despite massive quantitative easing etc. (...).
Now we are in a mode of "whatever it takes". And this will be coordinated worldwide. And there is no reason to think that a doomsday scenario is more likely than some happy changes.

In Europe people continue to get paid, even the ones without activity. Companies are getting unlimited liquidity. This allows the economy to be in a pause mode, not a stop mode. Consumption is largely postponed, not cancelled. The lack of confidence could push people to make savings instead of consuming but :

- When you survive death you think twice before postponing the top things you want to do in your life (there are interesting literature on the topic).
- All the budget rules are dead. Freaking amount of liquidity is coming. This will lead to inflation. So for the money at the bank it's spend it or lose it.
- A lot of air traffic is constraint (workers, immigrants, VFR) and cheap. Very often cheaper than taking your own car. It's not a luxury thing anymore. Also governments are asking to review the "world logistics". This will stimulate business traffic as there is a clear demand for more diversified supplied chains across regions of the world.
- Governments will help aviation because there are millions of direct and indirect jobs at stake.
- Air traffic consolidation and rationalization will finally happen and that's great for the industry and the bottom line of the airlines.

So yes we can have a doomsday scenario. But if I to take a bet, it's going to be a doomsday only for the people who are anticipating the worse.


Congrats on a great post!

Just check-out the responses!

(bugger-all to do with Airliners, but who's counting? :D )


Found your quote!

Your point is valid if you are reasoning under the standard economic/ financial / budget rules. The problem, is that all these rules and economic laws have just blown up. And actually it started some time ago with the negative interests rate, no inflation despite massive quantitative easing etc. (...).
Now we are in a mode of "whatever it takes". And this will be coordinated worldwide. And there is no reason to think that a doomsday scenario is more likely than some happy changes.
h

Great stuff but I diverge on the last sentence.
From here, the downside looks a whole heap stronger than the upside.
(I am not "Hanrahan" (Australian reference- a doomsayer).)

Many cogent observers over many years have identified that it is IMPOSSIBLE for interest-rates/inflation to rise.

Why so?
Because a huge majority of countries/economies are critically indebted, and CANNOT allow interest-rates to rise.

Or basically the world goes bust.

Consider that ...

cheers
BTW I lived through an Australia that had 17% Mortgage rates and 21% overdraft rates, due to unbelievable Government mismanagement.
But basically I don't know which is worse . :boxedin: ..
Billy
 
morrisond
Posts: 2469
Joined: Thu Jan 07, 2010 12:22 am

Re: Airbus Financial Discussion 2020

Thu Mar 26, 2020 1:09 pm

brindabella wrote:
brindabella wrote:
Aither wrote:

Your point is valid if you are reasoning under the standard economic/ financial / budget rules. The problem, is that all these rules and economic laws have just blown up. And actually it started some time ago with the negative interests rate, no inflation despite massive quantitative easing etc. (...).
Now we are in a mode of "whatever it takes". And this will be coordinated worldwide. And there is no reason to think that a doomsday scenario is more likely than some happy changes.

In Europe people continue to get paid, even the ones without activity. Companies are getting unlimited liquidity. This allows the economy to be in a pause mode, not a stop mode. Consumption is largely postponed, not cancelled. The lack of confidence could push people to make savings instead of consuming but :

- When you survive death you think twice before postponing the top things you want to do in your life (there are interesting literature on the topic).
- All the budget rules are dead. Freaking amount of liquidity is coming. This will lead to inflation. So for the money at the bank it's spend it or lose it.
- A lot of air traffic is constraint (workers, immigrants, VFR) and cheap. Very often cheaper than taking your own car. It's not a luxury thing anymore. Also governments are asking to review the "world logistics". This will stimulate business traffic as there is a clear demand for more diversified supplied chains across regions of the world.
- Governments will help aviation because there are millions of direct and indirect jobs at stake.
- Air traffic consolidation and rationalization will finally happen and that's great for the industry and the bottom line of the airlines.

So yes we can have a doomsday scenario. But if I to take a bet, it's going to be a doomsday only for the people who are anticipating the worse.


Congrats on a great post!

Just check-out the responses!

(bugger-all to do with Airliners, but who's counting? :D )


Found your quote!

Your point is valid if you are reasoning under the standard economic/ financial / budget rules. The problem, is that all these rules and economic laws have just blown up. And actually it started some time ago with the negative interests rate, no inflation despite massive quantitative easing etc. (...).
Now we are in a mode of "whatever it takes". And this will be coordinated worldwide. And there is no reason to think that a doomsday scenario is more likely than some happy changes.
h

Great stuff but I diverge on the last sentence.
From here, the downside looks a whole heap stronger than the upside.
(I am not "Hanrahan" (Australian reference- a doomsayer).)

Many cogent observers over many years have identified that it is IMPOSSIBLE for interest-rates/inflation to rise.

Why so?
Because a huge majority of countries/economies are critically indebted, and CANNOT allow interest-rates to rise.

Or basically the world goes bust.

Consider that ...

cheers
BTW I lived through an Australia that had 17% Mortgage rates and 21% overdraft rates, due to unbelievable Government mismanagement.
But basically I don't know which is worse . :boxedin: ..


5% Mortgage Rates would do most Mortgages in right now.
 
LJ
Posts: 5057
Joined: Wed Nov 17, 1999 8:28 pm

Re: Airbus Financial Discussion 2020

Thu Mar 26, 2020 6:24 pm

brindabella wrote:
Many cogent observers over many years have identified that it is IMPOSSIBLE for interest-rates/inflation to rise.


You clearly don't live in Europe (or better in an Euro area country). The whole goal of the ECB is to increase intrest rates, it's a necessity for Europe. It looks fine for Airbus such low intrest rates, but any excess cash cost them 50bps to put it on deposit (though on their USD account they would have received interest until recently). Living in a low interest country has its advantages if you've to loan money (I pay just 1.84% on a 10-year fixed mortgage, but we've already flexible rates around 1.0%), but is killing for companies with excess cash (though ths crisis helps that going away) and those who have pensions (thus not good for the Airbus employees). Airbus is probably lucky that we have too much money in the market which at banks would cost them 50bps to deposit (thus better underwrite a credit facility of EUR 15bn)
 
Vladex
Posts: 423
Joined: Sat Oct 26, 2013 2:44 pm

Re: Airbus Financial Discussion 2020

Thu Mar 26, 2020 11:20 pm

I'll ask again, If production and deliveries go way down even of A320 NEO and A350 as they definitively will this year and a few years after, why not bring back A380 and at least have EK have more of it for a few years? I realize that the production now is winding down but everything else is and will.
 
moa999
Posts: 803
Joined: Tue Mar 13, 2018 6:37 am

Re: Airbus Financial Discussion 2020

Fri Mar 27, 2020 12:10 am

Much of the pre-production line is now shut so almost impossible to restart.

And I can't imagine EK wants any more (at least at a price where Airbus makes money). Travel demand is going to be subdued for a while.
 
Vladex
Posts: 423
Joined: Sat Oct 26, 2013 2:44 pm

Re: Airbus Financial Discussion 2020

Fri Mar 27, 2020 1:09 am

The whole point of cancelling A380 was to increase production of A350 and A320 which is not happening now and for the foreseeable future. EK is weathering crisis well and they cut all flights today clean unlike CX which lost 250 million last month and I don't see CX taking delivery of A350's this year or other Chinese, American and Euro airlines doing the same when they come back.

EK ordered 38 A380 so they made deposits which they were forced to convert to A350 by Airbus itself, even then to take them from 2022. It seems to me like EK will survive and competitors will be decimated and they will gladly take A380's especially when the oil is so cheap now. The only question is with Airbus current management, the changes and the potential for failures will be big but so is staying the current course. I realize that the pre production is halted by now but it could be started with some time and they just shipped those last parts last month not last year.
 
LJ
Posts: 5057
Joined: Wed Nov 17, 1999 8:28 pm

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 8:20 am

Vladex wrote:
I'll ask again, If production and deliveries go way down even of A320 NEO and A350 as they definitively will this year and a few years after, why not bring back A380 and at least have EK have more of it for a few years? I realize that the production now is winding down but everything else is and will.


Airlines are grounding their A380 fleet, and you're wondering why they won't restart production of the A380? Nobody needs an A380 for the foreseeable future, and it's uncertain how long it will take before some airlines will start flying it again. Moreover, you see that prior to the COVID-19 crisis the A380 was too big for many airlines. Emirates is stuck with their A380s, thus they'll have no option. Therefore, why built aircraft nobody wants to have?
 
Scotron12
Posts: 406
Joined: Fri Mar 01, 2019 2:13 pm

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 8:48 am

Also there will be no business as usual from day 1 once Wuhan virus restrictions are lifted. It will take at least a year if not more for travel to rebound to pre-Wuhan levels nevermind increase.

We most likely will see EK leave a big amount of their A380s parked. It's doubtful it will fly again for AF.
 
brindabella
Posts: 587
Joined: Fri Apr 30, 2010 10:38 am

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 10:26 am

LJ wrote:
brindabella wrote:
Many cogent observers over many years have identified that it is IMPOSSIBLE for interest-rates/inflation to rise.


You clearly don't live in Europe (or better in an Euro area country). The whole goal of the ECB is to increase intrest rates, it's a necessity for Europe. It looks fine for Airbus such low intrest rates, but any excess cash cost them 50bps to put it on deposit (though on their USD account they would have received interest until recently). Living in a low interest country has its advantages if you've to loan money (I pay just 1.84% on a 10-year fixed mortgage, but we've already flexible rates around 1.0%), but is killing for companies with excess cash (though ths crisis helps that going away) and those who have pensions (thus not good for the Airbus employees). Airbus is probably lucky that we have too much money in the market which at banks would cost them 50bps to deposit (thus better underwrite a credit facility of EUR 15bn)


Interesting points but my underlying observation is not addressed, IMO.

You give me the news that ECB is working on raising inflation by pushing interest-rates up.
When? Where? How?

I would point out to you that many, many Central Banks worldwide have in fact been trying to achieve that very thing- with results that can only be classified as "dismal failures" for one and all.

If you care to look at the sorry "dot-plot" strategy as enacted by the US' Federal Reserve, then you will see that over several years the Fed actually did consistently and publicly push interest-rates up, in the hope of getting inflation going again - before the public humiliation of having to cut the rates to ribbons again and go back into massive "QE".

The ECB has had the "QE" - but has never been able to recover enough to start actually raising interest-rates again, unlike the Fed, which actually gave it a try - before an ignominious retreat.

While I concur with your summary regarding the toxic effects of negative interest-rate regimes as practiced by the ECB, nevertheless I can only repeat that many knowledgeable observers have been forecasting for years that interest-rates just cannot rise significantly else numerous large global economies will immediately go bust.

Many countries in the ECB and elsewhere have either large public debts (Government debt) or large business debts (Private Corporations) or large household debts (the rest of us).
And indeed some countries have them all.

For the ECB/EU I cannot see rising interest-rates and inflation for many years to come.

To the contrary, I suspect the negative interest-rates already plaguing these countries will prove very very difficult to escape.

:crying:

Perhaps you know more.

cheers
Billy
 
LJ
Posts: 5057
Joined: Wed Nov 17, 1999 8:28 pm

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 11:04 am

brindabella wrote:
You give me the news that ECB is working on raising inflation by pushing interest-rates up.
When? Where? How?


First, the ECB wants to increase rates, but cannot do it at the moment (if you've read my reply I mentioned that it works to increasing rates and inflation, not that it uses high rates to increase inflation). Why does it wants to increase rates? Long term negative interest rate are killing for the financial firms in the EUR area, especially as the large supply of excess money increased competition on the areas where they used to make money (hence why you see such a low mortgage rates in EUR areas and why Airbus gets a EUR 15bn credit line without any problem). The ECB wants a stable financial community, and this won't happen with interest rates as we currently have. However, their policies don't work as people don't react to negative interest rates as one would expect. In theory negative interest rates would reduce the money supply as people stop saving and start investing and consuming. This is unfotuneatly not what's happening. Which makes the only silver lining in this crisis the fact that increase spending by governments may increase interest rates and excess supply of cash is actually going to be invested in the real world (and not end up piled up at the ECB).

As for inflation. The ECB aims at an inflation rate of around 2%. It was looking good at the end of 2019, but inflation dropped yet again in the final months of 2019 (bad news).

https://www.ecb.europa.eu/mopo/html/index.en.html

BTW with "investing" I mean investing in the real world, not on the stock exchange as the latter does nothing to increase inflation.
 
Vladex
Posts: 423
Joined: Sat Oct 26, 2013 2:44 pm

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 4:12 pm

LJ wrote:
Vladex wrote:
I'll ask again, If production and deliveries go way down even of A320 NEO and A350 as they definitively will this year and a few years after, why not bring back A380 and at least have EK have more of it for a few years? I realize that the production now is winding down but everything else is and will.


Airlines are grounding their A380 fleet, and you're wondering why they won't restart production of the A380? Nobody needs an A380 for the foreseeable future, and it's uncertain how long it will take before some airlines will start flying it again. Moreover, you see that prior to the COVID-19 crisis the A380 was too big for many airlines. Emirates is stuck with their A380s, thus they'll have no option. Therefore, why built aircraft nobody wants to have?

Emirates is the 1. airline in the world and Singapore is the second one and they are guaranteed to prevail over this hysteria and groundings. All these other airlines that you talk about will be decimated and EK and SQ will pick up their traffic so they will need A380's if anything. Furthermore , I just don't see Airbus delivering 100 of A350's and 700 of A320's this year and next year, Tough talk is only impressive to weaklings.
 
User avatar
Phosphorus
Posts: 819
Joined: Tue May 16, 2017 11:38 am

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 4:45 pm

Vladex wrote:
LJ wrote:
Vladex wrote:
I'll ask again, If production and deliveries go way down even of A320 NEO and A350 as they definitively will this year and a few years after, why not bring back A380 and at least have EK have more of it for a few years? I realize that the production now is winding down but everything else is and will.


Airlines are grounding their A380 fleet, and you're wondering why they won't restart production of the A380? Nobody needs an A380 for the foreseeable future, and it's uncertain how long it will take before some airlines will start flying it again. Moreover, you see that prior to the COVID-19 crisis the A380 was too big for many airlines. Emirates is stuck with their A380s, thus they'll have no option. Therefore, why built aircraft nobody wants to have?

Emirates is the 1. airline in the world and Singapore is the second one and they are guaranteed to prevail over this hysteria and groundings. All these other airlines that you talk about will be decimated and EK and SQ will pick up their traffic so they will need A380's if anything. Furthermore , I just don't see Airbus delivering 100 of A350's and 700 of A320's this year and next year, Tough talk is only impressive to weaklings.


Suppose if you are right, and it's that bad, that airlines worldwide drop like flies, while mighty EK and SQ soldier on.
What happens after travel starts to reopen? Do you really expect the world economy to rebound so fast, that the world runs out of available airframes quickly, higher-capacity airframes will be so sought after, that A380 is becoming a hot commodity and sells like hotcakes, with EK leading the charge?
If that is the case, owners of other A380 will be climbing over each other, trying to sell or lease their frames to EK at very attractive rates. All the Malaysian and Thai and Asiana's and probably even ANA's, Air France's and Etihad's would be available...
AN4 A40 L4T TU3 TU5 IL6 ILW I93 F50 F70 100 146 ARJ AT7 DH4 L10 CRJ ERJ E90 E95 DC-9 MD-8X YK4 YK2 SF3 S20 319 320 321 332 333 343 346 722 732 733 734 735 73G 738 739 744 74M 757 767 777
Ceterum autem censeo, Moscovia esse delendam
 
Aither
Posts: 1230
Joined: Mon Oct 25, 2004 3:43 am

Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 5:01 pm

In a more airline consolidated world yes we could see more demand for the A380, even if the traffic does not fully recover. But I hardly see how this can reach a point where Airbus could think to restart the production. First it would cost them and their suppliers a lot and they are badly hit by the crisis. Second, they will never do this for only one carrier. It's just too risky.

However because of this prospect of consolidation even if my A380s are grounded right now I will keep them. It's a huge cash machine on the big premium routes. These are the routes that will be the first to recover in particular because a lot of abandoned routes will generate more transit traffic on these hub routes.
Never trust the obvious
 
Scotron12
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Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 5:53 pm

Aither wrote:
In a more airline consolidated world yes we could see more demand for the A380, even if the traffic does not fully recover. But I hardly see how this can reach a point where Airbus could think to restart the production. First it would cost them and their suppliers a lot and they are badly hit by the crisis. Second, they will never do this for only one carrier. It's just too risky.

However because of this prospect of consolidation even if my A380s are grounded right now I will keep them. It's a huge cash machine on the big premium routes. These are the routes that will be the first to recover in particular because a lot of abandoned routes will generate more transit traffic on these hub routes.


Reports earlier were that EK were looking to delay/defer delivery of their last 8 A380s. Could be a good reason to cancel them and pick.up the A339s again?
 
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Polot
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Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 6:42 pm

Scotron12 wrote:
Aither wrote:
In a more airline consolidated world yes we could see more demand for the A380, even if the traffic does not fully recover. But I hardly see how this can reach a point where Airbus could think to restart the production. First it would cost them and their suppliers a lot and they are badly hit by the crisis. Second, they will never do this for only one carrier. It's just too risky.

However because of this prospect of consolidation even if my A380s are grounded right now I will keep them. It's a huge cash machine on the big premium routes. These are the routes that will be the first to recover in particular because a lot of abandoned routes will generate more transit traffic on these hub routes.


Reports earlier were that EK were looking to delay/defer delivery of their last 8 A380s. Could be a good reason to cancel them and pick.up the A339s again?

There is no financial incentive for Airbus to allow easy switch to A339. Parts for the last 8 A380 have already been built (or the airframe already completed, not sure where A380 production is currently at). If EK cancels then Airbus is stuck with white tails and/or useless large parts for unpopular soon out of production frames. It would be better to just allow EK to defer than cancel, and no guarantee that EK will want A339s any earlier.
 
Sokes
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Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 7:03 pm

Vladex wrote:
Tough talk is only impressive to weaklings.


Do you know the movie "Harley Davidson and the Marlboro man"?
https://www.youtube.com/watch?v=g8K34N604Iw&t=28s
Why can't the world be a little bit more autistic?
 
T4thH
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Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 8:40 pm

Polot wrote:
Scotron12 wrote:
Aither wrote:
In a more airline consolidated world yes we could see more demand for the A380, even if the traffic does not fully recover. But I hardly see how this can reach a point where Airbus could think to restart the production. First it would cost them and their suppliers a lot and they are badly hit by the crisis. Second, they will never do this for only one carrier. It's just too risky.

However because of this prospect of consolidation even if my A380s are grounded right now I will keep them. It's a huge cash machine on the big premium routes. These are the routes that will be the first to recover in particular because a lot of abandoned routes will generate more transit traffic on these hub routes.


Reports earlier were that EK were looking to delay/defer delivery of their last 8 A380s. Could be a good reason to cancel them and pick.up the A339s again?

There is no financial incentive for Airbus to allow easy switch to A339. Parts for the last 8 A380 have already been built (or the airframe already completed, not sure where A380 production is currently at). If EK cancels then Airbus is stuck with white tails and/or useless large parts for unpopular soon out of production frames. It would be better to just allow EK to defer than cancel, and no guarantee that EK will want A339s any earlier.

The last A380; last big parts of the last A380 have been already produced and shipped to Toulouse. So the last 8 are all long time in production or even already in assembling. The answer is no, these 8 can neither be deferred or cancelled. They can perhaps defer the take up by EK few month, Airbus has to close the A380 production and assembly lines as fast as possible, so the assembly of these last 8 has to be completed and end of the A380 story.
 
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Polot
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Re: Airbus Financial Discussion 2020

Sun Mar 29, 2020 8:52 pm

T4thH wrote:
Polot wrote:
Scotron12 wrote:

Reports earlier were that EK were looking to delay/defer delivery of their last 8 A380s. Could be a good reason to cancel them and pick.up the A339s again?

There is no financial incentive for Airbus to allow easy switch to A339. Parts for the last 8 A380 have already been built (or the airframe already completed, not sure where A380 production is currently at). If EK cancels then Airbus is stuck with white tails and/or useless large parts for unpopular soon out of production frames. It would be better to just allow EK to defer than cancel, and no guarantee that EK will want A339s any earlier.

The last A380; last big parts of the last A380 have been already produced and shipped to Toulouse. So the last 8 are all long time in production or even already in assembling. The answer is no, these 8 can neither be deferred or cancelled. They can perhaps defer the take up by EK few month, Airbus has to close the A380 production and assembly lines as fast as possible, so the assembly of these last 8 has to be completed and end of the A380 story.

They can always be deferred. Nothing stops Airbus from fully completing the aircraft, interior and all, and storing them until EK’s new delivery dates. Not ideal of course, but at least Airbus will still have a home for them in a contract that I’m sure would have steep cancelation penalties (although I’m sure the negotiated contract when it was decided to end production also has heavy cancelation penalties). At this point as you say it is impossible to cancel production of the aircraft, meaning if EK cancels Airbus suddenly has 8 new white tail A380s they need to find a home for. That would be worse case scenario for Airbus and why I suspect they would not making switching to A339 easy.
 
brindabella
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Re: Airbus Financial Discussion 2020

Mon Mar 30, 2020 12:43 pm

Polot wrote:
T4thH wrote:
Polot wrote:
There is no financial incentive for Airbus to allow easy switch to A339. Parts for the last 8 A380 have already been built (or the airframe already completed, not sure where A380 production is currently at). If EK cancels then Airbus is stuck with white tails and/or useless large parts for unpopular soon out of production frames. It would be better to just allow EK to defer than cancel, and no guarantee that EK will want A339s any earlier.

The last A380; last big parts of the last A380 have been already produced and shipped to Toulouse. So the last 8 are all long time in production or even already in assembling. The answer is no, these 8 can neither be deferred or cancelled. They can perhaps defer the take up by EK few month, Airbus has to close the A380 production and assembly lines as fast as possible, so the assembly of these last 8 has to be completed and end of the A380 story.

They can always be deferred. Nothing stops Airbus from fully completing the aircraft, interior and all, and storing them until EK’s new delivery dates. Not ideal of course, but at least Airbus will still have a home for them in a contract that I’m sure would have steep cancelation penalties (although I’m sure the negotiated contract when it was decided to end production also has heavy cancelation penalties). At this point as you say it is impossible to cancel production of the aircraft, meaning if EK cancels Airbus suddenly has 8 new white tail A380s they need to find a home for. That would be worse case scenario for Airbus and why I suspect they would not making switching to A339 easy.


Very difficult for both parties IMO:

AB has a Contract and has performed to that.
Shortly all the frames will be ready & AB desperately wants them delivered & gone.
As indeed, AB is entitled to expect under that Contract.
:D

Of course it is possible that a scenario like that sketched by Vladex above may transpire.
But there is also the reverse case.
And if the sudden huge market bounce predicted by Vladex does not in fact appear then it is hard to see these 8 brand-new frames ever making money for EK.

Quite the reverse, in fact.
:ouch:

And I would be very sure that AB doesn't like the probable outcome one little bit - they have to muscle their best-ever customer to take frames that they really don't want to take.
This means AB must force EK to lay-out precious Capital for frames that may well lose money every time they take-off.
If they ever do, realistically.
:tombstone:


So this is the denoument of Sir Tim's strategems to force RR & AB to produce the upgraded,re-engined A380.

Götterdämmerung, really. (**)

Very sad and a sorry ending for an historically-significant frame & much-beloved heavy lifter (at least where the passengers were concerned, anyway).
:sorry:

cheers

PS (**) - which appears to have finalised with EK having a fleet of 115+ mega-lifters with no customers and (almost certainly) no resale market.
Will be many Business School studies written about this IMO.
The Capital loss beggars contemplation.
:weeping:
Billy
 
frmrCapCadet
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Re: Airbus Financial Discussion 2020

Mon Mar 30, 2020 3:27 pm

Res the price of gas: this was also mostly posted in a non-aviation forum. The author of Tipping Point is predicting that when EVs hit 5% of the market the steep S curve of sales will begin. There is preliminary evidence supporting this. Add to this the Russian and Saudi oil wars. The price of oil may never recover. By the time current demand would return EVs will begin destroying that demand by a couple billion barrels a day, and accelerating. Older planes fuel consumption may not be a factor in retiring them.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
Vladex
Posts: 423
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Re: Airbus Financial Discussion 2020

Tue Mar 31, 2020 5:46 am

Phosphorus wrote:
Vladex wrote:
LJ wrote:

Airlines are grounding their A380 fleet, and you're wondering why they won't restart production of the A380? Nobody needs an A380 for the foreseeable future, and it's uncertain how long it will take before some airlines will start flying it again. Moreover, you see that prior to the COVID-19 crisis the A380 was too big for many airlines. Emirates is stuck with their A380s, thus they'll have no option. Therefore, why built aircraft nobody wants to have?

Emirates is the 1. airline in the world and Singapore is the second one and they are guaranteed to prevail over this hysteria and groundings. All these other airlines that you talk about will be decimated and EK and SQ will pick up their traffic so they will need A380's if anything. Furthermore , I just don't see Airbus delivering 100 of A350's and 700 of A320's this year and next year, Tough talk is only impressive to weaklings.


Suppose if you are right, and it's that bad, that airlines worldwide drop like flies, while mighty EK and SQ soldier on.
What happens after travel starts to reopen? Do you really expect the world economy to rebound so fast, that the world runs out of available airframes quickly, higher-capacity airframes will be so sought after, that A380 is becoming a hot commodity and sells like hotcakes, with EK leading the charge?
If that is the case, owners of other A380 will be climbing over each other, trying to sell or lease their frames to EK at very attractive rates. All the Malaysian and Thai and Asiana's and probably even ANA's, Air France's and Etihad's would be available...


I don't know what you just wrote as it doesn't make sense now . EK and SQ are totally different not just in terms of brand and quality but in the ways to rebound from this than Norwegian, Air France or even Cathay. Dubai and Singapore are relatively less affected by this grounding then others as they are far away from Europe , China and USA .They won't be taking in A380's from others as it doesn't fit their fleet. There will be a lot of deferrals and cancellations this year for other planes (A320, A350). All these other airlines will be very slow to get up to speed however EK and SQ will be very quick as they didn't suffer much, they are city states so they have less politics to deal with and they are totally supported by their owners while passengers will be looking for reliability.

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