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Airbus CEO: "“We’re bleeding cash; may threaten existence of company"

Sun Apr 26, 2020 8:05 pm

Seems the reality is catching up quick with the world's largest producers of airliners:

With airline customers fighting to survive and unable to accept new aircraft, Airbus is juggling its delivery schedules while reassessing its long-term outlook for the aerospace industry, Faury told staff in a letter sent Friday and seen by Bloomberg News. A plan to slash production by one-third announced earlier this month may not reflect the worst-case scenario, he said.

“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,” Faury wrote. “We must now act urgently to reduce our cash-out, restore our financial balance and, ultimately, to regain control of our destiny.”
...
“The aviation industry will emerge into this new world very much weaker and more vulnerable than we went into it,” Faury said.

Ref: https://www.bloomberg.com/news/articles ... are-needed

That's quite a dire image he is projecting!

The part about losing control of our destiny and having to regain it is pretty unnerving to me, and I don't even work in the aviation industry.

Seems no one should have any illusions about "soft landings" of the aviation industry.
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StTim
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:08 pm

There are many industries that will be irrevocably changed by this virus!
 
Jetport
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:32 pm

Airbus may be forced to go back to its original setup as a quasi-governmental consortium to survive. While it was never entirely cut lose from European governments with launch aid continuing for new projects, it has otherwise become an independent multinational company.
 
smartplane
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:34 pm

Can probably count on the fingers of one hand, the number of airlines in the Western World, that haven't created a creditors committee involving their banks, lessors and major creditors, many meeting daily (virtual). Ditto for lessors.

Boeing 787 and all Airbus predicted production forecasts are fantasy unless make work job creation schemes. There are no customers. There is no finance. There are no passengers.

At this stage, only hard and very hard landings, with many casualties. Government support buys time to end 3Q20.
Last edited by smartplane on Sun Apr 26, 2020 8:37 pm, edited 1 time in total.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:39 pm

StTim wrote:
There are many industries that will be irrevocably changed by this virus!

While I think we will see programs already committed to and most of the way to completion continue (A321XLR, 779, MAX RTS) I doubt we'll see anything new started for the next few years.
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AvFanNJ
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:39 pm

I'm really shocked to hear this so soon since I felt Airbus was in a much better position than Boeing due to A. not having a problem child liked the 737 MAX and B. having the new and relatively hot selling A220 which has virtually no competition in its stable.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:41 pm

Airbus, like Boeing and any capital intensive business, has huge fixed costs that can’t be escaped. I think he’s being more open than a lot of builders. US auto industry probably only has until mid Q3 before bankruptcy.
 
StTim
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:42 pm

AvFanNJ wrote:
I'm really shocked to hear this so soon since I felt Airbus was in a much better position than Boeing due to A. not having a problem child liked the 737 MAX and B. having the new and relatively hot selling A220 which has virtually no competition in its stable.


The A220 is not yet at break even so it still costs Airbus to produce.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:52 pm

smartplane wrote:
Can probably count on the fingers of one hand, the number of airlines in the Western World, that haven't created a creditors committee involving their banks, lessors and major creditors, many meeting daily (virtual). Ditto for lessors.

Boeing 787 and all Airbus predicted production forecasts are fantasy unless make work job creation schemes. There are no customers. There is no finance. There are no passengers.

At this stage, only hard and very hard landings, with many casualties. Government support buys time to end 3Q20.

I'm having a hard time picturing why a given airline would want all its different creditors all on one committee, but I don't know how that kind of stuff works in general. Who would chair the committee (CFO?) and what is its goals?

smartplane wrote:
Would our next Churchill please stand tall.

Lord I wish we had one waiting in the wings, but have no evidence of such.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 8:59 pm

GalaxyFlyer wrote:
Airbus, like Boeing and any capital intensive business, has huge fixed costs that can’t be escaped. I think he’s being more open than a lot of builders. US auto industry probably only has until mid Q3 before bankruptcy.

Yep, if Airbus and Boeing are hurting and having daily meetings with creditors, so is Rolls, GE, PW/UTC, etc. PW is somewhat better positioned because it has multi year contracts for F35 engines to keep some cash flowing. Boeing has a lot of defense work too, but also has a lot of debt due to MAX shut down and compensation and all the spending for that, 779, etc. I think if BCA was a stand alone entity, Boeing would consider putting it through CH11 to shed debts.
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klkla
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 9:14 pm

Does Airbus have a Chapter 11 type option?

Worse case scenario I can see Airbus only producing A320 series and A350 series and Boeing only producing 737Max (yes, it will be back) and 787 plus military 737/767.
 
Dmoney
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 9:20 pm

Jaysus lads Airbus will be grand. It's more about setting the stage that it's a fight for survival to allow decisions to be made without consulting with stakeholders who would need to be consulted in other circumstances.

If Airbus need to fire 30% of their staff permanently and close say the Spanish factories that kind of decision is only possible if you present an existential situation which requires otherwise unthinkable moves.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 9:29 pm

I feel that society was ignoring the dangers of this CV until too late, part due to poor information in the beginning. Then we shut down basically everything, possibly overkill in our answer. Travel probably needed to be stopped and full isolation in the hot spots, but in the US entire states have been isolated with hardly a case. Anyway, how we pace the return of our economy is vital to be done right, many industries have already been critically hurt. They are unable to deliver their product because the plant is shut down, but when they do get the product ready the customer cannot pay for it. Each month shut down knocks 8% off revenues, with the original profit margin being around 10%, one month its to break even, two months is a big loss.

Airbus's fixed costs are set for the 900 plane per year production, basically double per frame at 450/yr production. Variable costs aren't linear, it is difficult to lay off with a lot of the expenses just reduced, and suppliers are looking at the same issue. Parts and service revenue is like 1/3 that of production, but it is shut off too.

I saw first hand in Detroit the 1981 crash of the auto industry, my company shrunk to half its size, and half our competitors gone. Thank god I didn't own a house there. Moved to Denver which was booming, by 1985 it cratered and I moved to the Puget Sound.

A lot of aviation was for leisure, that trip to Vegas. For those that can still afford this, would one choose to go on a plane to stay at a hotel so one can be shoulder to shoulder with lots of other partiers. Hotels will lose a fortune as half the rooms are empty, and the other half paid crazy cheap rates. Same with the airlines, struggling with half the revenue per flight.

Heard a ad yesterday, a Chevy dealer is offering 7 year 0% financing, probably still no one in the showroom.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 9:44 pm

Jetport wrote:
Airbus may be forced to go back to its original setup as a quasi-governmental consortium to survive.


As with Boeing, Airbus will receive what direct and indirect support it needs from the government to keep operating. It will be harder for Airbus to unilaterally shed jobs and close locations to cut costs, but on the flip side, the EU governments are more proactive at providing direct support to help keep people employed and sites open even if they are superfluous at the moment which in itself can help Airbus keep those people on staff and those locations open.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 9:48 pm

Where are all the people who said Boeing su*** because it was making general inquiries about a credit back-stop?

Everything connected to passenger aviation - manufacturing, carriers, airports... - is going to be looking for public money.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:12 pm

AvFanNJ wrote:
I'm really shocked to hear this so soon since I felt Airbus was in a much better position than Boeing due to A. not having a problem child liked the 737 MAX and B. having the new and relatively hot selling A220 which has virtually no competition in its stable.


A220: being sold at a loss, especially considering they still need to finish buying Bombardier. The frame is super expensive to produce and its dispatch rate leaves a lot to be desired.
A32X: cash cow but production issues, reduced orders coming.
A330neo: not looking good. Not profitable. Maybe dead.
A350: The 359 is looking good. A35K is not. Both still recouping development costs.
A380: Dead.
Freighter Business: what freighter business?

On the whole, Airbus probably has a harder time reducing operating overhead, labor, etc. due to unions, higher pay and benefits, etc. in the E.U.

So tell me again how/why they're doing so much better than Boeing?

If I were them, I'd use this time to kill the A380, A330, A319/318 completely, focus on sorting A220/A320/A321 production issues and reducing costs, leave the A350 where it is, launch a A350 Freighter, and sieze the NMA market now with a A322 and scaled up PW GTF. An NMA could be the hottest plane on the market after all this, especially if it has type commonality with the A320/A321.
Last edited by GEUltraFan9XGTF on Sun Apr 26, 2020 10:19 pm, edited 1 time in total.
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Vladex
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:16 pm

Can they not shut down production just like they do in the summer holiday? He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis . Otherwise, this crisis is absurdly invented and manufactured if not vastly over hyped so the rebound is inevitable.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:21 pm

Vladex wrote:
Can they not shut down production just like they do in the summer holiday? He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis . Otherwise, this crisis is absurdly invented and manufactured if not vastly over hyped so the rebound is inevitable.


Keep the A380? Are you serious?

This is not a political thread. I guess just about every government in the world is out of its mind.
Last edited by GEUltraFan9XGTF on Sun Apr 26, 2020 10:21 pm, edited 1 time in total.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:21 pm

Vladex wrote:
He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis .

A380 wasn't selling, second hand ones are being scrapped as no one wants them. A330NEO is/was selling reasonably well. Not sure I get your logic.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:23 pm

Stitch wrote:
Jetport wrote:
Airbus may be forced to go back to its original setup as a quasi-governmental consortium to survive.


As with Boeing, Airbus will receive what direct and indirect support it needs from the government to keep operating. It will be harder for Airbus to unilaterally shed jobs and close locations to cut costs, but on the flip side, the EU governments are more proactive at providing direct support to help keep people employed and sites open even if they are superfluous at the moment which in itself can help Airbus keep those people on staff and those locations open.


I hope this means the governments will get a share of future earnings...
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:27 pm

GEUltraFan9XGTF wrote:
Vladex wrote:
Can they not shut down production just like they do in the summer holiday? He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis . Otherwise, this crisis is absurdly invented and manufactured if not vastly over hyped so the rebound is inevitable.


Keep the A380? Are you serious?

This is not a political thread. I guess just about every government in the world is out of its mind.


The age of frequency is over for the next couple of years. Some trunk routes can be running on a once-daily A380.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:31 pm

The problem both Airbus and Boeing are going to face for the next 5 years is the enormous new second hand market that was created overnight because of this virus. Airlines have announced they will be smaller after this crisis, and the percentage by which they expect to shrink increases by the week. If you're an airline a year from now and you want to start adding frames to your fleet again why would you bother paying for new builds when you can buy parked <10 year old models of every aircraft type you can imagine for pennies on the dollar?

They won't be able to compete with a massive 2nd hand market where prices have crashed due to the sheer number of parked airframes. Even the 320/737 lines are at risk because of this. If I'm Airbus and Boeing management I'm looking seriously at ways to accelerate the purchase and scrapping of frames that are going to be retired over the next 6 months.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:35 pm

VS11 wrote:
GEUltraFan9XGTF wrote:
Vladex wrote:
Can they not shut down production just like they do in the summer holiday? He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis . Otherwise, this crisis is absurdly invented and manufactured if not vastly over hyped so the rebound is inevitable.


Keep the A380? Are you serious?

This is not a political thread. I guess just about every government in the world is out of its mind.


The age of frequency is over for the next couple of years. Some trunk routes can be running on a once-daily A380.

you can't be serious! An A380 trunk route? From where to where?? And? who is goin to FLY said Route??
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:36 pm

GEUltraFan9XGTF wrote:
Vladex wrote:
Can they not shut down production just like they do in the summer holiday? He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis . Otherwise, this crisis is absurdly invented and manufactured if not vastly over hyped so the rebound is inevitable.


Keep the A380? Are you serious?

This is not a political thread. I guess just about every government in the world is out of its mind.


A380 was selling very good if I compare to other models in its first 10 years, it was selling excellent compared to the disinfo and FUD that was thrown at it. Anyway, the main 2 reasons for A380 is because of the premium airlines like EK and SQ and because of the future engine developments which can only fit double deck airplanes. For Airbus , they need separation of models and A330/A350 are too close together.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:40 pm

Revelation wrote:
I think if BCA was a stand alone entity, Boeing would consider putting it through CH11 to shed debts.

The problem is that (almost) all companies are in this situation. One company filing Ch. 11 will hurt a few investors but not much more. All companies filing Ch. 11 simultaneously will kill banks and private investors on a level that make the GFC seem tiny. It is in the people's best interest to keep established structures (like airlines, but also most other companies big and small) intact because it is nearly impossible to restart from scratch once they're gone.

For comparison, it took West Germany around 15 years to rebuild her economy post-WW2; and that's with some generous funding from the US. Similarly, the GDP per capita in Russia took more than 10 years to return to their 1991 level (after the collapse of the USSR).
 
VS11
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:42 pm

strfyr51 wrote:
VS11 wrote:
GEUltraFan9XGTF wrote:

Keep the A380? Are you serious?

This is not a political thread. I guess just about every government in the world is out of its mind.


The age of frequency is over for the next couple of years. Some trunk routes can be running on a once-daily A380.

you can't be serious! An A380 trunk route? From where to where?? And? who is goin to FLY said Route??


Yes. NYC-London/Paris/Frankfurt. It is a big airplane that provides more room for social distancing. DL CEO said last week that their strategy is to focus on customers willing to pay premium for quality - meaning airlines minimizing risks for contagion. So yes, bigger planes can definitely play a role. But I am not suggesting that airlines go out and buy A380's.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 10:49 pm

No doubt they are doing it very tough, but the very existence of the company, really? Once the epidemic is over and air travel restarts, the world will once again need aircraft and no-one will be in a better position to pick up that business than Airbus and Boeing. Does anyone seriously imagine them telling customers at some point next year "sorry guys, we won't be making any more A320s, ever, but er... umm... there's the SSJ, or why don't you try COMAC..."
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:09 pm

rigo wrote:
No doubt they are doing it very tough, but the very existence of the company, really? Once the epidemic is over and air travel restarts, the world will once again need aircraft and no-one will be in a better position to pick up that business than Airbus and Boeing. Does anyone seriously imagine them telling customers at some point next year "sorry guys, we won't be making any more A320s, ever, but er... umm... there's the SSJ, or why don't you try COMAC..."


There may be a glut of aircraft available in the market for airlines to pick up for cheap. And this could last years.

Just depends on how things progress...
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:14 pm

Revelation wrote:
smartplane wrote:
Can probably count on the fingers of one hand, the number of airlines in the Western World, that haven't created a creditors committee involving their banks, lessors and major creditors, many meeting daily (virtual). Ditto for lessors.

I'm having a hard time picturing why a given airline would want all its different creditors all on one committee, but I don't know how that kind of stuff works in general. Who would chair the committee (CFO?) and what is its goals?

A creditors committee (different names used), is used to communicate (no surprises), and keep all creditors on the same page.

For example, there can't be many airlines that haven't breached financial covenants by now, with loans technically becoming repayable on demand. Ditto for leases. Breaching an especially onerous financial covenant with bank A, usually triggers a breach of other banks covenants relating defaults with other institutions.

So the purpose of the committee is not to manage the client, as that gets participants into potentially dangerous territory, of behaving like directors or senior management, but to manage what they can manage. So covenants will be reset or suspended, to avoid causing more widespread breaches.

For example, Bank A with USD500m exposure, will undertake to communicate and inform Banks B to F, who all have lower exposures. And so on. Major creditors will do the same for smaller creditors. They won't all be participating in person or via Zoom.

Apart from communication customer to creditors, it's also to ensure communication creditor to creditor. The last thing Bank A wants, is for Bank B with USD10m exposure to take unilateral action. Sometimes you just can't influence smaller participants, who would rather have 20c in the dollar next week, and write of the balance, than possibly 40c in the dollar next year, with a lot of oversight meantime.

Creditors with large exposures, take the opportunity to educate, inform and assess the smaller ones, and in some cases when that fails, increase their own exposure to pay off the mavericks, rarely dollar for dollar. The magnitude of this downturn restricts the ability of major creditors to assist.

Also sub-groups in the committee, verifying data, modelling, and reviewing legal implications for the different interest groups. Usually amazing constructive collaboration and camaraderie occurs, which is why some banks re-construct teams from years or decades earlier, and use profiling to select the right people. Participants want to protect their employers / clients interests AND company continue.

Usually chaired by the CFO, though some companies create a new senior management position for the chairmanship role.

Many countries, under emergency powers, are working on statutory management provisions similar to those in NZ (which are themselves being updated). Not the same as Chapter 11. Some Governments are presumably asked creditors not to act pending revised powers and processes being articulated, while others are hoping they wake up tomorrow and.....................
Last edited by smartplane on Sun Apr 26, 2020 11:29 pm, edited 1 time in total.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:16 pm

Vladex wrote:
A380 was selling very good if I compare to other models in its first 10 years, it was selling excellent compared to the disinfo and FUD that was thrown at it. Anyway, the main 2 reasons for A380 is because of the premium airlines like EK and SQ and because of the future engine developments which can only fit double deck airplanes. For Airbus , they need separation of models and A330/A350 are too close together.

Airbus and its engine partners have made the decision on A380 already, and it's pretty clear it won't be changed given the current situation.

Dmoney wrote:
If Airbus need to fire 30% of their staff permanently and close say the Spanish factories that kind of decision is only possible if you present an existential situation which requires otherwise unthinkable moves.

That's an interesting point. Maybe we shall see Airbus make some moves that it could not make under normal circumstances.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:20 pm

garpd wrote:
Vladex wrote:
He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis .

A380 wasn't selling, second hand ones are being scrapped as no one wants them. A330NEO is/was selling reasonably well. Not sure I get your logic.


A380 was selling to premium airlines. A330 NEO was selling to secondary and lcc airlines and its main was that it was smaller and cheaper which means it has no future especially next to a350.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:21 pm

smartplane wrote:
Revelation wrote:
smartplane wrote:
Can probably count on the fingers of one hand, the number of airlines in the Western World, that haven't created a creditors committee involving their banks, lessors and major creditors, many meeting daily (virtual). Ditto for lessors.

I'm having a hard time picturing why a given airline would want all its different creditors all on one committee, but I don't know how that kind of stuff works in general. Who would chair the committee (CFO?) and what is its goals?

A creditors committee (different names used), are used to communicate (no surprises), and to keep all creditors on the same page.

For example, there can't be any airlines that haven't breached financial covenants by now, with loans becoming repayable on demand. Ditto for leases. Breaching an especially onerous financial covenant with bank A, generally triggers a breach of all others banks covenants relating defaults with other institutions.

So the purpose of the committee is not to manage the client, as that gets participants into potentially dangerous territory, of behaving like directors or senior management, but to manage what they can manage. So covenants will be reset or suspended, to avoid causing more widespread breaches.

For example, Bank A with USD500m exposure, will undertake to communicate and inform Banks B to F, who all have lower exposures. And so on. Major creditors will do the same for smaller creditors. They won't all be participating in person or via Zoom.

Apart from communication customer to creditors, it's also to ensure communication creditor to creditor. The last thing Bank A wants, is for Bank B with USD10m exposure to take unilateral action. Sometimes you just can't influence these smaller participants, who would rather have 20c in the dollar next week, and write of the balance, than possibly 40c in the dollar next year, with a lot of oversight meantime.

Creditors with large exposures, take the opportunity to educate, inform and assess the smaller ones, and in some cases when that fails, increase their own exposure to pay off the mavericks, rarely dollar for dollar. The magnitude of this downturn restricts the ability of major creditors to assist.

Usually chaired by the CFO, though some companies create a new senior management position for the chairmanship role.

Many countries, under emergency powers, are working on statutory management provisions similar to those in NZ (which are themselves being updated). Not the same as Chapter 11. Some Governments are presumably asked creditors not to act pending revised powers and processes being articulated, while others are hoping they wake up tomorrow and.....................

Thanks for the clear explanation. It seems like it's a time where relationships between businesses really matter.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:24 pm

klkla wrote:
Does Airbus have a Chapter 11 type option?

Worse case scenario I can see Airbus only producing A320 series and A350 series and Boeing only producing 737Max (yes, it will be back) and 787 plus military 737/767.


I expect a little bit different "worse case" for Airbus; I see the A220, of the A320 family, the A321 LR and XLR and the A320 Neo...and the A350 on very low product numbers...But also the A330 production line will be in some form safe till around 2024/2025 regarding the A330 MRTT production.
If any plane of an airline is still in the air )so the airline is not completely shut down like AirBaltic), it is the A220. All A220 of Delta, Air Canada and Korean Air are still flying, as one of the two of Air Tanzania and one or two of Egypt Air. The A220 is now the right plane at the right time and it will stay the right plane also in the next years. Jet Blue, Air France, Air Canada and Air Baltic have already announced, they will (starting with year 2021) take the A220 up as scheduled or even earlier than original scheduled and additional numbers (as for Air Baltic). Of course, in this year 2020....to take up any plane....2020 is already a massacre.

A321 LR and XLR as replacement for many routes, former flown by widebodies. I see many swaps back from A321 to the A320 as just a plane in the A321 will not any more been needed on many routes.

Yes, I am on your site with Boeing, also I fear to see a much lower number of produced MAX jets, as many or even most airlines will take the opportunity to cancel all possible orders and the B737 MAX with the prolonged delay of deliveries is and will be a very vulnerable target for cancellations.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:37 pm

Ugh. Shaking my head. People suggesting the A380 is the answer. It was the first plane to be grounded, universally. It's dead people. It was a loss leader and market disaster. It's not coming back. Similarly, the 35K and 77X are headed for a equally gloomy fate. If and when sales of the 77X gather steam, Airbus will announce the A350neo and Boeing will counter with a 787NG. The biggest opportunity through all this is Airbus' to lose. An A322, efficient, versatile, single aisle transcon/tatl/transpac aircraft will sell in droves.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:57 pm

Let's not fool ourselves. While it may have been an internal communication, the intended audience is also the governments where Airbus has significant operations to prepare them for massive job cuts and possibly shutting down factories. Mobile is first in line as it is the easiest plant to have massive job cuts both from social and political perspectives, up to shutting down all assembly save the A220.

Airbus employees and vendors in the UK are next. Compounding the ever-increasing likelihood of a no-deal Brexit to the virus' economic damages, there is no political risk whatsoever in cutting as much from the UK as possible. In a twist of fate, wing manufacturing may be safe for the mid-term, as there is probably zero appetite right now within Airbus for the significant capital expenditure required to relocate the operations elsewhere. The one risk I see is whether the French government wants to be creative and offers Airbus subsidized loans (*) and loan guarantees to cover the cost of moving wing manufacturing to Toulouse in order to keeps jobs while Airbus shuts down A320 and A380 production in France.

(*) if you think any government, especially the French government, is concerned about issuing financial instruments within the rules set by the EU, WTO, Basel Accords, etc. I have an ocean-view villa in the middle of the Sahara desert for sale you may be interested in.

VS11 wrote:
The age of frequency is over for the next couple of years. Some trunk routes can be running on a once-daily A380.

You may be right that the existing A380 fleet may be used to consolidate multiple frequencies into far fewer flights (e.g. two or three BA A380s to JFK), but no one is going to be buying new aircraft for a two or three-year horizon. Two already-owned 777s, or A330s, or 767s is still a far cheaper option than a brand-new A380.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Sun Apr 26, 2020 11:59 pm

StTim wrote:
AvFanNJ wrote:
I'm really shocked to hear this so soon since I felt Airbus was in a much better position than Boeing due to A. not having a problem child liked the 737 MAX and B. having the new and relatively hot selling A220 which has virtually no competition in its stable.

The A220 is not yet at break even so it still costs Airbus to produce.

A220 ramp up is being slowed down so break even will impacted:

A plan to accelerate output toward 10 a month from the current four at the main A220 plant in Mirabel, Quebec, will be postponed until mid-2021, an Airbus spokeswoman said. A goal to build four a month by the middle of the decade in Mobile, Alabama, where a new assembly line has just started, remains unchanged, she said.
...
Airbus had earlier targeted producing 14 A220 aircraft a month at the two sites by the middle of the decade. Now the Toulouse, France-based company is re-considering its previous assumptions, and may revisit the rate in the coming weeks and months, the spokeswoman said.

Ref: https://www.bloomberg.com/news/articles ... -jet-model

I think we will indeed see a revisit in the coming weeks and months. On the good news side, it has customers like DL that are "too big to fail" and AirBaltic which is 80% government owned so also not much concern about it failing. B6 a bit more at risk, Moxy/Breeze must be considered even more at risk.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 12:07 am

Vladex wrote:
garpd wrote:
Vladex wrote:
He needs to keep or restart A380 and cut A330 . These 2 mistakes are there that he can fix in this crisis .

A380 wasn't selling, second hand ones are being scrapped as no one wants them. A330NEO is/was selling reasonably well. Not sure I get your logic.


A380 was selling to premium airlines. A330 NEO was selling to secondary and lcc airlines and its main was that it was smaller and cheaper which means it has no future especially next to a350.

DL is a secondary airline?? You may be right in a year or two!
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 1:05 am

It’s unfortunate that the Airbus military business was doing so poorly and losing money that they were laying people off even before the crisis

https://www.bbc.com/news/business-51560701

With loss making military business and the A220 production line which is also losing money, there is no where for Airbus to offset this downturn.

Their freighter business is virtually nonexistent.

Freight operators and militaries are likely the only customers able to afford deliveries right now.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 1:12 am

AvFanNJ wrote:
I'm really shocked to hear this so soon since I felt Airbus was in a much better position than Boeing due to A. not having a problem child liked the 737 MAX and B. having the new and relatively hot selling A220 which has virtually no competition in its stable.

Ironically, the 737 Max issue has probably forced Boeing to conserve cash much earlier on, and to weed out potential cancellations earlier on, which may help shield some of the impact of this virus.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 1:15 am

Some of us said this in earlier threads..Boeing had already shut down the MAX lines and bled out. Airbus now has to do the same. Incredibly, the benefit to Boeing may turn out to be the year-long period they had the “benefit” of where Airbus will be forced to shut down multiple lines in 4-5 countries with brutal expediency. It’s ugly as sin for both companies.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 1:21 am

Passengers are going to avoid hubs as every connection is a risk. I booked flights for this summer and there are no longer non-stops and I had to justify to my children hubbing.

All the reasons the A380 struggled prior to CV will still exist:
1. Competition reducing the feed, resulting in lower load factor.
2. People will develop a stronger preference for direct flights to minimize personal interactions.
3. Economy of scale will further deteriorate.
4. Large concerts and sporting events will not fill the aircraft.
5. Cruise passengers will take a long time to emerge. In general high density tourism will, temporarily, lose favor.
6. At cheap oil, there is no reason not to fly prior aircraft longer.


GEUltraFan9XGTF wrote:
AvFanNJ wrote:
I'm really shocked to hear this so soon since I felt Airbus was in a much better position than Boeing due to A. not having a problem child liked the 737 MAX and B. having the new and relatively hot selling A220 which has virtually no competition in its stable.


A220: being sold at a loss, especially considering they still need to finish buying Bombardier. The frame is super expensive to produce and its dispatch rate leaves a lot to be desired.
A32X: cash cow but production issues, reduced orders coming.
A330neo: not looking good. Not profitable. Maybe dead.
A350: The 359 is looking good. A35K is not. Both still recouping development costs.
A380: Dead.
Freighter Business: what freighter business?

On the whole, Airbus probably has a harder time reducing operating overhead, labor, etc. due to unions, higher pay and benefits, etc. in the E.U.

So tell me again how/why they're doing so much better than Boeing?

If I were them, I'd use this time to kill the A380, A330, A319/318 completely, focus on sorting A220/A320/A321 production issues and reducing costs, leave the A350 where it is, launch a A350 Freighter, and sieze the NMA market now with a A322 and scaled up PW GTF. An NMA could be the hottest plane on the market after all this, especially if it has type commonality with the A320/A321.

Sadly, both will need to shed 40% to 70% of the workforce. As already noted, existing aircraft will be available in volume to compete with new build.

The NEO was in part driven by Indigo, AirAsia, Easyjet, Delta, American, and others trying to save variable costs in high utilization duty. High utilization is gone for 2+ years. The savings are there, but only a few airlines will be able to take advantage.

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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 1:27 am

One advantage Airbus has is the social net in Europe is more extensive than in the USA, the government social programs pick up more of the slack than in the USA.
Such would make the bail out amount provided to Airbus less.
It will be interesting to see the different approaches which will be taken.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 2:34 am

Stitch wrote:
Jetport wrote:
Airbus may be forced to go back to its original setup as a quasi-governmental consortium to survive.


As with Boeing, Airbus will receive what direct and indirect support it needs from the government to keep operating. It will be harder for Airbus to unilaterally shed jobs and close locations to cut costs, but on the flip side, the EU governments are more proactive at providing direct support to help keep people employed and sites open even if they are superfluous at the moment which in itself can help Airbus keep those people on staff and those locations open.


No doubt, G. Faury is also about to ask for financial assistance as Boeing had done.

Many believed that Boeing would suffer only with the 737MAX but also the possible 777-X cancellations from CX.
I said he would not be the only one to suffer, Airbus is also in the same planet with the COVID19 crisis...
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 2:36 am

lightsaber wrote:
Passengers are going to avoid hubs as every connection is a risk.


Passengers were apt to avoid hubs in general well before this as a point of inconvenience and annoyance. Both Boeing and Airbus had become somewhat keen to that.

As for coronavirus avoidance, getting on a plane with unscreened strangers *period* represents an unacceptable risk. Every connection compounds that risk, true, but the initial risk is so great any compounded risk just becomes academic anyway.

The coronavirus is going to change aviation but I don't think it's going to change the "doom" picture much, just accelerate it and transform it. It's going to change how air travel is approached and it's going to change the short- and mid-term economics but I think the long-term economic picture had been written on the wall, so to speak, for a while. Speaking as an admitted socialist, air travel has a lot of bourgeois "boogeyness" to it - it's something only the upper-middle class can realistically afford on even a semi-regular basis and even then only for economy or a "business" class. Most air travel is perceived as being a business necessity, by middle or upper-echelon-class businessmen, not necessarily done as something for recreation or even as a luxury, and even when not for business it's mostly seen as a luxury by the particularly wealthy, even as a means of a social "flex" (especially bizjets, which for reasons I'll get into were on the ropes to start with and I think coronavirus just rendered them extinct). The vast majority of the voting public in influential Western nations sees aviation period as something outside of their "ownness." This is different in Japan, China and possibly Korea but we'll see how coronavirus changes that attitude. Beyond that, there's also other resource concerns - yes, the totality of aviation only makes up something like 2% of all CO2 emissions but keep in mind nations are being crippled and everyone kept indoors by a pandemic that so far has "only" infected about 2% of the population (Los Angeles County, for example, is a hotspot with 1.6% of the population estimated to be infected). And economic considerations, with the public perceiving airlines as being "bailout vulnerable" institutions.

I don't think air travel is going to be permanently dead but it will be permanently transformed, and shrunk. For starters, the vast majority of business travel - which in turn makes up the vast majority of air travel period - is going to simply evaporate without replenishment. Businesses are always looking to cut costs, especially now, and air travel is going to represent a very huge cost that can be cut immediately. Digital meetings are not the future - they're the present and the paradigm now. There is no incentive to go back and huge disincentives towards doing so. Business travel, both foreign and domestic, is dead.

With that, only leisure travel will be left. There's a legitimate strong possibility that leisure travel will dramatically increase compared to pre-pandemic numbers once the world is confident coronavirus can be definitively controlled and contained, but not enough to make up for the lack of business travel. If the air industry experiences a major paradigm shift favoring leisure travel, it will also transform almost every aspect of the industry. Reduced overall demand combined with an increase in demand for point-to-point domestic travel might make A220-sized aircraft or even Q-400 type aircraft the "new" mainline model and widebodies (on domestic routes) effectively obsolete in new market dynamics. There will also be a greatly reduced emphasis on actual travel speed as directly demanded by the consumer - it is called "Leisure" travel, after all - and with ever increasing emphasis on lower operating costs and better environmental stewardship, we could see average aircraft speeds getting SLOWER - oh yeah and I would probably start selling stock in Aerion right now, the supersonic market is going to be dead on arrival, and this time permanently. There will never be another supersonic passenger-revenue aircraft for the remainder of our lifespans now (especially if it turns out we're in fact witnessing our own extinction right now anyway but I digress in doomsday fashion). In fact the vast majority of air travel may evolve to be oceanic; if most domestic travel ends up being for leisure, it may also take other forms such as cars and later train travel, and if Musk ever makes the Hyperloop a reality, that's absolute game over for the airlines and that's with or without a pandemic.

I guess what I'm trying to say is, if you're considering a career in aviation you might want to evaluate the situation right now. I did, and I'm telling you from a position informed by experience.

Another side effect is that we might see a surge, albeit potentially temporary, for GA, although it will certainly be limited to recreational flying (the act of flying itself is the leisure activity). Anything more complex and expensive than an unpressurized fixed-gear single might slowly die off into extinction.
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 2:50 am

Checklist787 wrote:
No doubt, G. Faury is also about to ask for financial assistance as Boeing had done.
.

Is it confirmed that Boeing has taken government funds, I know they had requested funds for the industry but not for themselves as they did not want any restrictions.
 
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 2:54 am

wingman wrote:
Some of us said this in earlier threads..Boeing had already shut down the MAX lines and bled out. Airbus now has to do the same. Incredibly, the benefit to Boeing may turn out to be the year-long period they had the “benefit” of where Airbus will be forced to shut down multiple lines in 4-5 countries with brutal expediency. It’s ugly as sin for both companies.


I think, Airbus has even a benefit. They do not have only "one line", they have several. They can close or hibernate one or several lines and let the others work at 100%.
I expect, first country, taking up planes again, will be China. The FAL in Tianjing will not be closed,. I also do not expect, that the Mobile FALs for the A320 and A220 will be closed, US Airlines will take up jets earlier again than other countries. The A320 FALs in Toulouse are outdated and shall be exchanged by new FAL in the A380 FAL building. I fear one of them will be closed and never reopened again. A restart will be only in the new build up FAL in the A380 FAL and than it will be also able to produce A321. The old FALs can only build jets in the size of A319 and A320.
Minimum one A320 production line in Hamburg FAL building will be hibernated. The A320 FAL in Hamburg with the production lines has a big benefit, the A321 Neo production lines are in Hamburg.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 2:59 am

T4thH wrote:
wingman wrote:
Some of us said this in earlier threads..Boeing had already shut down the MAX lines and bled out. Airbus now has to do the same. Incredibly, the benefit to Boeing may turn out to be the year-long period they had the “benefit” of where Airbus will be forced to shut down multiple lines in 4-5 countries with brutal expediency. It’s ugly as sin for both companies.


I think, Airbus has even a benefit. They do not have only "one line", they have several. They can close or hibernate one or several lines and let the others work at 100%.
I expect, first country, taking up planes again, will be China. The FAL in Tianjing will not be closed,. I also do not expect, that the Mobile FALs for the A320 and A220 will be closed, US Airlines will take up jets earlier again than other countries. The A320 FALs in Toulouse are outdated and shall be exchanged by new FAL in the A380 FAL building. I fear one of them will be closed and never reopened again. A restart will be only in the new build up FAL in the A380 FAL and than it will be also able to produce A321. The old FALs can only build jets in the size of A319 and A320.
Minimum one A320 production line in Hamburg FAL building will be hibernated. The A320 FAL in Hamburg with the production lines has a big benefit, the A321 Neo production lines are in Hamburg.

What is the point of having multiple lines when nobody or close to nobody is buying or even accepting the planes? Consolidating them may be an option for Airbus, but which one is to close? Most of the Airbus lines are located where they are for political (international) reasons, and closing any one of them will cause some diplomatic headaches. As for Boeing, they do have this little advantage of having almost all of the freighter market that is helping them go along.
 
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Re: Airbus CEO: "“We’re bleeding cash at an unprecedented speed, which may threaten the very existence of our company,”

Mon Apr 27, 2020 3:15 am

Reuters has an update which includes more details of Faury's letter:

To stem the outflow of cash, Airbus this month said it would slash benchmark narrow-body jet production by a third to 40 jets a month. It also issued reduced targets for larger jets implying cuts up to 42% compared with previously published rates.

In other words, in just a couple of weeks we have lost roughly one-third of our business,” Faury wrote in the letter, which was earlier reported by Bloomberg News. “And, frankly, that’s not even the worst-case scenario we could face”.

He said the new production plan would remain in place for as long as it took to make a more thorough assessment of demand, adding this would probably be between two and three months.

Ref: https://www.reuters.com/article/health- ... SL5N2CE0MT

So narrow bodies are cut 33% and wide bodies cut 42% relative to pre-covid targets, and plans are under assessment with an update due in 2-3 months.

atimp wrote:
EU will bail them out.

Yes, they are a center piece of EU industrial policy and "too big to fail" so when push comes to shove they will get government support.

They will have the same issue Boeing is facing: how do you minimize the political strings that will be attached?
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