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Revelation
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Re: The case for more aircraft production cuts/playing chicken

Thu Jul 15, 2021 4:23 pm

jeffrey0032j wrote:
Jetport wrote:
Not sure this is the best thread for this link, and WSJ likely has paywall. Basically says what we know, Airbus is forcing many customers to take planes even if it risks their relationships and the airlines solvency. Sounds like this is coming straight from Faury.

https://www.wsj.com/articles/airbus-boe ... od=itp_wsj

"But in severe downturns airlines and aircraft leasing companies threatened by bankruptcy expect some flexibility. Airbus has shown little."


"Airbus’s rigid approach carries big risks, and some Airbus executives privately worry it threatens long-term relationships with carriers just as demand starts to return."

I had mentioned the issue of goodwill that Boeing provided the airlines vs Airbus had during this crisis earlier in this thread (8 months ago), and a short discussion followed. Seems like industry players are starting to feel the effects.

viewtopic.php?f=3&t=1451221&p=22496169&hilit=jeffrey0032j#p22494663

My view is, Airbus is basically becoming the arrogant Boeing back in early 2000s when Boeing supposedly ignored a few new airlines, some of which have large Airbus fleets now.

It's interesting this comes up now. Early in the pandemic it was clear Airbus was taking a hard line. There was a report that Airbus was filing papers in court in cases where customers were not living up to contractual obligations. Such actions seemed to be tone setters to let the market know they weren't going to be lenient with their customers. The fact they've maintained a relatively high production rate shows the strategy is working from their point of view if not the customer's.

I'm not sure I'd use the word arrogant in this case. It's not like Airbus hasn't suffered during the crisis. They've had meaningful layoffs and production cuts and have had to deal with some "problem" customers, including perhaps a few of their own creation. In particular they seem to be a big creditor in the AAX bankruptcy.
 
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lightsaber
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Re: The case for more aircraft production cuts/playing chicken

Thu Jul 15, 2021 7:27 pm

Revelation wrote:
Early in the pandemic it was clear Airbus was taking a hard line. There was a report that Airbus was filing papers in court in cases where customers were not living up to contractual obligations. Such actions seemed to be tone setters to let the market know they weren't going to be lenient with their customers. The fact they've maintained a relatively high production rate shows the strategy is working from their point of view if not the customer's.

Airbus definitely did well delivering.

However:
https://seekingalpha.com/article/442448 ... transcript

you include the benefit of PSP, it suggests an EBITDA margin of more than 35%. Turning to fleet. During the first quarter, we acquired 3 aircraft at an average all-in price of $16.5 million per tail. These aircraft were paid for with cash; and remain unencumbered, which brings our current unencumbered aircraft count to 29. In the used A320 market, our fleet team is in no short supply of deals coming across their desks at prices that reflect a 30% discount on average to pre-pandemic levels.
These prices, to me, imply a market surplus. When a used aircraft buyer is bragging there is not short supply of deals, it implies the shipments of new aircraft (NEOs) are pushing out the old (CEOs).

22 of Indigo's returned A320s are looking for a good home:
https://www.msn.com/en-in/money/topstor ... NewsSearch

This isn't about one airline or OEM, it is a system that despite discounting cannot clear the pipeline. Too many new aircraft are entering the market in my opinion.

Boeing will ramp production and has the benefit of a more mature freighter conversion market.

The big issue will be widebodies. I think there will be a longer period of time to rebuild travel, in particular in a world more comfortable with remote work.

Lightsaber
 
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flee
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Re: The case for more aircraft production cuts/playing chicken

Fri Jul 16, 2021 2:28 am

I think Airbus decided to play hardball on the A320 orders because the Max was still grounded at that time. The narrow body market was not as soft as the widebody. The pandemic only caused the widebody market to collapse as airlines scramble to reduce capacity. Larger aircraft suffered and aircraft like the A321 series got a lot more popular.
 
jeffrey0032j
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Re: The case for more aircraft production cuts/playing chicken

Fri Jul 16, 2021 2:57 am

flee wrote:
I think Airbus decided to play hardball on the A320 orders because the Max was still grounded at that time. The narrow body market was not as soft as the widebody. The pandemic only caused the widebody market to collapse as airlines scramble to reduce capacity. Larger aircraft suffered and aircraft like the A321 series got a lot more popular.

A lot more popular is a false observation, relatively more popular is more like it. The market is flooded with planes, if there wasn't contractual obligations, airlines wouldn't take those planes during this time. From the short free portion of the article, my thoughts would be that this arrogance will come back to bite Airbus the way it did to Boeing 15-20 years ago.
 
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flee
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Re: The case for more aircraft production cuts/playing chicken

Fri Jul 16, 2021 3:03 am

jeffrey0032j wrote:
From the short free portion of the article, my thoughts would be that this arrogance will come back to bite Airbus the way it did to Boeing 15-20 years ago.

Yes, that would be normal consumer behaviour. However, customers would be more forgiving if you had products and services that they want to buy and there are not that many alternative choices.
 
jeffrey0032j
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Re: The case for more aircraft production cuts/playing chicken

Fri Jul 16, 2021 3:09 am

flee wrote:
jeffrey0032j wrote:
From the short free portion of the article, my thoughts would be that this arrogance will come back to bite Airbus the way it did to Boeing 15-20 years ago.

Yes, that would be normal consumer behaviour. However, customers would be more forgiving if you had products and services that they want to buy and there are not that many alternative choices.

Apparently not the case when Airbus executives themselves are concerned about the potential ramifications of this high level decision. The sales team will have a difficult time as compared to before in the next few years when it comes to negotiations, especially when Boeing is discounting and has been offering relatively flexible arrangements.

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