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Curmudgeon
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Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 8:29 pm

Jets are for kids
 
RichardPrice
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 8:40 pm

No, they posted a 195m Euro loss.

Quote:

EADS reported a net loss of 195m euros ($250m; £131m) during the third quarter, against net income of 279m euros in the same period last year.

The A380 charges were 1Bill Euros.

http://news.bbc.co.uk/1/hi/business/6127492.stm
 
OU812
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 8:49 pm

The timing of this salient news couldn't have been worse . EADS is in dire need of money to go forth with 1 and possibly 2 new a/c types , the A350 & A320 successor .


http://www.bloomberg.com/apps/news?p...100&sid=ag48mIHp2jk0&refer=germany

EADS Posts Unexpected Loss After Airbus Jet Delays (Update5)

By Andrea Rothman and Susanna Ray

Nov. 8 (Bloomberg) -- European Aeronautic, Defence & Space Co., the parent of Airbus SAS, posted its first quarterly loss in three years because of delays on the A380 superjumbo jet that prompted FedEx Corp. to cancel an order.

The third-quarter net loss was 195 million euros ($249 million) compared with net income of 279 million euros a year earlier, EADS said today in a statement. The Paris- and Munich- based company was expected to report profit of 142 million euros, according to the median estimate of seven analysts surveyed by Bloomberg News.
 
Curmudgeon
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 8:55 pm

Quoting RichardPrice (Reply 1):
No, they posted a 195m Euro loss.

Quite right, I fixed my post. Thanks for the correction, the error was all mine, and not made maliciously.
Jets are for kids
 
slz396
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 8:55 pm

Indeed RichardPrice, EADS has booked the entire annual charge for the A380 delay this quarter, so logically it influences the Q3 result negatively through these non-recurring charges, in a was similar to Boeing's Q2 results when they had to book huge penalty payments for failing to deliver on some military projects....

Annual results however still show a big profit and an increase in revenue is expected for the entire year, so although certainly disappointing, it was expected and not really dramatic when placed in the right financial context... but then sensation doesn't like context I suppose.
 
RichardPrice
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 9:02 pm

Quoting Curmudgeon (Reply 3):
Quite right, I fixed my post. Thanks for the correction, the error was all mine, and not made maliciously.

Never attribute to malice that which can be easily attributed to honest error  Smile
 
Curmudgeon
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 9:03 pm

Quoting Slz396 (Reply 4):
but then sensation doesn't like context I suppose.

No, I don't suppose that it does. How's this for sensation: The second article quotes the CFO as saying that all the freighter orders are now "in the cancellation zone". Would you care to put that into context for us?
Jets are for kids
 
NAV20
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 9:45 pm

Quoting Slz396 (Reply 4):
Annual results however still show a big profit and an increase in revenue is expected for the entire year, so although certainly disappointing, it was expected and not really dramatic when placed in the right financial context... but then sensation doesn't like context I suppose.

Speaking of 'context,' Slz396, surely the third-quarter figures are 'history' in cash flow terms? Since that time (in October) EADS has had to pay out $US4.3B. in cash to BAE for the purchase of their stake. How will EADS show that on the profit-and-loss?

Personally I was utterly astonished to see this in the EADS announcement:-

"As already announced, EADS will not issue an updated 2006 outlook until further notice."

That's cloud-cuckoo-land to me. Nearly halfway through November and a supposedly 'major' company can't (or doesn't dare to) estimate the end-of-year out-turn with only seven weeks of the financial year to go?

http://www.eads.com/web/lang/en/1024...F00000040950509/5/20/41497205.html

Forget Dun and Bradstreet, that's more like Gilbert and Sullivan..........  Smile
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slz396
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 10:00 pm

Quoting NAV20 (Reply 7):
Speaking of 'context,' Slz396, surely the third-quarter figures are 'history' in cash flow terms? Since that time (in October) EADS has had to pay out $US4.3B. in cash to BAE for the purchase of their stake. How will EADS show that on the profit-and-loss?

First of all, you need a new battery in your pocket calculator, since €2,75BN does NOT amount to $4,3BN.

Secondly, your question in itself is really astonishing as you seem to be able to quote verbally from an EADS press release which contains the answer to it. Being a bit dyslectic when reading numbers, aren't you?
 
NAV20
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 10:19 pm

Quoting Slz396 (Reply 8):
€2,75BN does NOT amount to $4,3BN.

The cash sum quoted doesn't take account of pension fund liabilities for which EADS will henceforward assume responsibility, Slz396. But even using your 'cash only' figure, it still seems likely to push EADS into a substantial loss for Year 2006 as a whole? So why don't they say so?

Quoting Slz396 (Reply 8):
your question in itself is really astonishing as you seem to be able to quote verbally from an EADS press release

Is there any other way to quote except 'verbally'? Unless you're suggesting that we start communicating in sign language?

Quoting Slz396 (Reply 4):
Annual results however still show a big profit and an increase in revenue is expected for the entire year

That's the bit of your earlier post that surprised me. What published information are you basing that on (bearing in mind that EADS itself has declined to provide any guidance?).

And would you please put a figure on what sort of 'big profit' you personally are forecasting? In dollars OR Euros?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
OU812
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 10:26 pm

With all due respect !
Some Airbus fans are being a tad bit myopic . Though I am not stating that Airbus is in a perquisite state . The A380 delays are far more deleterious than many acknowledge . If I am not mistaken , the A380 will be a salient drag on their profits until 2010---ish !

---[edit typo]---

[Edited 2006-11-08 14:31:37]
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 10:35 pm

EADS and (especially) Airbus' "fundamentals" still look quite good, at least for the near term, if for no other reason then their $200 billion USD backlog. Yes, Airbus is not adding to it as aggressively as they have in the past, but they are. And yes, some A388 and A388F orders might be cancelled, but the impact should not be critical.

There may be some additional "one time" charges related to the A380 program as they correct it, especially if the A388F program is postponed, but the biggest hit on EADS/Airbus' financials going forward will be the lower then expected revenues until the A388 returns to normal serial production rates.

Quoting NAV20 (Reply 9):
That's the bit of your earlier post that surprised me (Slz396). What published information are you basing that on (bearing in mind that EADS itself has declined to provide any guidance)?

The article quotes EADS re-affirming that they'd still clear over €37 billion in revenues, so I would compare that number to 2005's to see how they're expecting to do, in comparison.

[Edited 2006-11-08 14:44:06]
 
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deltadawg
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 10:42 pm

A bit of a side note but is there any information as to the charges against the A400 program along with the A330 tanker program?

The A400 program is small potatoes compared to the 380 but it sure has been dragging along for quite some time.

As far as the 330 Tanker program, I know they have gotten some orders from the likes of Australia and such but obviously the crown for this program is the USDOD. I still feel it is unlikely they will get this business yet they keep sinking money into it. Is the program profitable yet, anyone?
GO Dawgs, Sic' em, woof woof woof
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Wed Nov 08, 2006 10:46 pm

Quoting DeltaDAWG (Reply 12):
As far as the 330 Tanker program, I know they have gotten some orders from the likes of Australia and such but obviously the crown for this program is the USDOD. I still feel it is unlikely they will get this business yet they keep sinking money into it. Is the program profitable yet, anyone?

Even if they do not win the USAF order, there are plenty of other potential buyers for such a plane. Also, if the USAF does place a super-order for the KC-767, that could prevent Boeing from supplying other countries depending on the production rate the USAF needs. And if the USAF chooses the KC-777, Boeing might very well kill the KC-767 program which would leave the rest of the market to the A330T.

So it strikes me as prudent for EADS to continue to invest in the program.
 
mush
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 12:34 am

Quoting NAV20 (Reply 9):
The cash sum quoted doesn't take account of pension fund liabilities for which EADS will henceforward assume responsibility, Slz396. But even using your 'cash only' figure, it still seems likely to push EADS into a substantial loss for Year 2006 as a whole? So why don't they say so?

I wouldn't read it as a loss, it is a reduction in cash-flow, but now the full value of Airbus SAS can be counted on the balance sheet of EADS and will probably work out to being a gain for them in the long term. All this purchase did was move some dollars from the cash or cash equivalents column to the properties column.

Quoting Stitch (Reply 13):
Even if they do not win the USAF order, there are plenty of other potential buyers for such a plane. Also, if the USAF does place a super-order for the KC-767, that could prevent Boeing from supplying other countries depending on the production rate the USAF needs. And if the USAF chooses the KC-777, Boeing might very well kill the KC-767 program which would leave the rest of the market to the A330T.

So it strikes me as prudent for EADS to continue to invest in the program.

Correct, winning the USAF order would be great for EADS, but there is still plenty of money to be made selling the A330T to other nations in the world.

Thanks,
Mush
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jacobin777
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 12:38 am

Quoting Stitch (Reply 11):
EADS and (especially) Airbus' "fundamentals" still look quite good, at least for the near term, if for no other reason then their $200 billion USD backlog. Yes, Airbus is not adding to it as aggressively as they have in the past, but they are. And yes, some A388 and A388F orders might be cancelled, but the impact should not be critical.

200 billion at list prices..and they don't get paid a lot of it until they hand over the "keys" to the plane...not to mention, it costs money to build those planes..

Just as important would be to see what profit margins are ex-A380...

The impact on the A380 cancellations are huge, as it will add more years to break even (i.e.-to make up for those sales)..and since it will take more years to break even, it will take more frames to break even....
"Up the Irons!"
 
astuteman
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 1:40 am

Quoting NAV20 (Reply 7):
Since that time (in October) EADS has had to pay out $US4.3B. in cash to BAE for the purchase of their stake. How will EADS show that on the profit-and-loss?

I would understand the BAE buyout to be a capital transaction. I don't think it would affect the P+L much, if at all.

FWIW, EADS have stated that the effects of the BAE buyout our not contained in these Q3 figures, but will be reflected in the year end figures.

Quoting OU812 (Reply 10):
If I am not mistaken , the A380 will be a salient drag on their profits until 2010---ish !

They've indeed said 2010 is the first year to see profitable frames.

Ironically, after that, the A380 will generate much of the operating profits and cashflow needed to finish development of the A350XWB  Smile

Quoting Curmudgeon (Thread starter):

Thanks for the links, Curmudgeon,  checkmark 

Regards
 
F4N
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 1:46 am

Quoting Mush (Reply 14):
Correct, winning the USAF order would be great for EADS, but there is still plenty of money to be made selling the A330T to other nations in the world.

To all:

Could you perhaps enlighten me as to who these countries are? The USAF is the prize. How many other tanker sales are even remotely in the offing?

regards,

F4N
 
scouseflyer
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 1:47 am

Quoting Jacobin777 (Reply 15):
200 billion at list prices..and they don't get paid a lot of it until they hand over the "keys" to the plane...not to mention, it costs money to build those planes..

They have a pile of cash (reported to be €6billion) from which they can "borrow" to finance the building of the planes and if that cash runs dry - they can borrow to build a plane - I they go to HSBC or who ever and say I'm have an order for a plane that will cost me €25 million to build can I borrow that for 180 days - bank says yes and gets back €26 million in 6 months time - that's how businesses can work on very low cash reserves if required.
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 1:57 am

Quoting F4N (Reply 17):
Could you perhaps enlighten me as to who these countries are? The USAF is the prize. How many other tanker sales are even remotely in the offing?

Currently, Italy and Japan have chosen the KC-767. And Australia has joined the UK in choosing the A330MRTT.

As to who will take others, I imagine France and Germany might want new tankers to support the A400M on ferry ops.
 
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N328KF
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 1:57 am

Quoting F4N (Reply 17):
Could you perhaps enlighten me as to who these countries are? The USAF is the prize. How many other tanker sales are even remotely in the offing?

Furthermore, the other candidates have recently chosen or have airframes that are New EnoughTM(RAF, RAAF, RCAF, Luftwaffe, Italy, JSDAF, RSAF). OK, there's a one or two players left, such as France. How many orders could that possibly entail?

Quoting Stitch (Reply 19):
As to who will take others, I imagine France and Germany might want new tankers to support the A400M on ferry ops.

Germany has a fleet of shiny new A310 tankers. France is the only big dog left other than the U.S. and Russia.

[Edited 2006-11-08 18:04:22]
“In the age of information, ignorance is a choice.”
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 2:06 am

Quoting Jacobin777 (Reply 15):
200 billion at list prices..and they don't get paid a lot of it until they hand over the "keys" to the plane...not to mention, it costs money to build those planes..

Yes, but Airbus has cash on hand to pay suppliers to provide the parts to complete planes and deliver them to customers, which generates new cash to continue the cycle.

Quoting Jacobin777 (Reply 15):
The impact on the A380 cancellations are huge, as it will add more years to break even (i.e.-to make up for those sales)..and since it will take more years to break even, it will take more frames to break even....

For the A380, it is indeed a "Catch-22"-type situation in terms of break-even and program RoI projections.

However, while much has been made of Airbus' "cash crunch", a significant majority of the monies have already been spent. It's not like Airbus has to spend tens of billions of additional Euros on the project to complete it. This "crunch" is just monies that they were expecting to come from deliveries between 2006 and 2009 now being deferred to between 2007 and 2010.

Quoting Astuteman (Reply 16):
Ironically, after that, the A380 will generate much of the operating profits and cashflow needed to finish development of the A350XWB.

Which makes it all the more critical that the A380 start generating them in 2010. Strong A320 and lukewarm A330 sales can't fund the necessary product development Airbus needs.

Quoting Scouseflyer (Reply 18):
They have a pile of cash (reported to be €6billion) from which they can "borrow" to finance the building of the planes and if that cash runs dry - they can borrow to build a plane - I they go to HSBC or who ever and say I'm have an order for a plane that will cost me €25 million to build can I borrow that for 180 days - bank says yes and gets back €26 million in 6 months time - that's how businesses can work on very low cash reserves if required.

 checkmark 
 
jacobin777
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 2:18 am

Quoting Scouseflyer (Reply 18):

They have a pile of cash (reported to be €6billion) from which they can "borrow" to finance the building of the planes and if that cash runs dry - they can borrow to build a plane - I they go to HSBC or who ever and say I'm have an order for a plane that will cost me €25 million to build can I borrow that for 180 days - bank says yes and gets back €26 million in 6 months time - that's how businesses can work on very low cash reserves if required.

They need cash to pay bills, loans, etc...not to mention, their Bond rating might be downgraded, which will make it much more difficult to raise needed capital...in fact, Airbus has been basically stating the same thing I've been mentioning....that is why they have trouble launching the A350XWB...they are trying to figure out how to get money to launch the plane...

Quoting Stitch (Reply 21):
However, while much has been made of Airbus' "cash crunch", a significant majority of the monies have already been spent. It's not like Airbus has to spend tens of billions of additional Euros on the project to complete it. This "crunch" is just monies that they were expecting to come from deliveries between 2006 and 2009 now being deferred to between 2007 and 2010.

I agree, most of the money is already spent, but until Airbus doesn't start handing "the keys" over, its still going to be a financial as well as a labour drain..there are no two ways around this....

Those planes will be sitting around until 2007 and people, loans, etc. have to be paid..
"Up the Irons!"
 
F4N
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 2:52 am

Quoting N328KF (Reply 20):
Furthermore, the other candidates have recently chosen or have airframes that are New EnoughTM(RAF, RAAF, RCAF, Luftwaffe, Italy, JSDAF, RSAF). OK, there's a one or two players left, such as France. How many orders could that possibly entail?

To all:

My point exactly. I wouldn't count on the 330T as any kind of cash cow to supplement or replace revenue from the commercial side. If they lose the USAF, only little fish are left. Of course, France will buy Airbus. Russia, no way.

BTW, with the dems taking control of the House and tied in the Senate, the USAF program is open to question.

F4N
 
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N328KF
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 3:28 am

Quoting F4N (Reply 23):
BTW, with the dems taking control of the House and tied in the Senate, the USAF program is open to question.

Well, to be fair, there were two components to Boeing's stock rally yesterday, only one of which was due to the FX acquisition. The other part was due to the fact that Wall Street believes that Democrats would be friendly to Boeing, both on the civil sides and to the KC-767 effort.
“In the age of information, ignorance is a choice.”
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BoomBoom
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 3:48 am

Quote:
A380 Breakeven 11 Years away

With the revised breakeven point of 420 A380s, this means it will be 11 years before Airbus will start making money on the airplane—to the end of the third quarter in 2017, at projected production rates of slightly more than four per month when the full stream of deliveries are finally achieves in 2011.

http://www.leeham.net/filelib/ScottsColumn110706.pdf
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OU812
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 4:07 am

Quoting Stitch (Reply 21):
Yes, but Airbus has cash on hand to pay suppliers to provide the parts to complete planes and deliver them to customers, which generates new cash to continue the cycle.

If EADS/Airbus are so replete with cash . Then why I must ask , are the French & German governments coming to the aid of EADS ?

http://biz.yahoo.com/ap/061016/france_airbus.html?.v=1&printer=1

France Vows Aid to Airbus A380 Suppliers
Monday October 16, 12:15 pm ET
France Pledges Aid to Suppliers Stricken by Airbus A380 Delays


http://www.spiegel.de/international/0,1518,446902,00.html

German Government to Help Stricken Airbus Suppliers
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 4:22 am

Quoting OU812 (Reply 26):
If EADS/Airbus are so replete with cash. Then why, I must ask, are the French & German governments coming to the aid of EADS?

Because EADS/Airbus needs to spend tens of billions on the A350XWB, A320E, A320RS, and A330F programs. If they want to bring those programs to fruition within the next decade, they will need cash infusions from capital markets and/or governments because the cash expected to be generated by A388 deliveries is being deferred.

Airbus could easily just defer serious work on those programs until after 2010, but that would put them at the mercy of Boeing across their entire product line.
 
airfrnt
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 4:46 am

Quoting NAV20 (Reply 9):
The cash sum quoted doesn't take account of pension fund liabilities for which EADS will henceforward assume responsibility, Slz396. But even using your 'cash only' figure, it still seems likely to push EADS into a substantial loss for Year 2006 as a whole? So why don't they say so?

There is a difference between cash acquisitions (which is basically what this is) versus profit and loss. The cash acquisition is a capital expense, like buying a building. Therefore it affects the cashflow portion of the business, but not the profit and loss numbers.

Quoting Astuteman (Reply 16):

I would understand the BAE buyout to be a capital transaction. I don't think it would affect the P+L much, if at all.

Exactly.

Quoting Astuteman (Reply 16):
Ironically, after that, the A380 will generate much of the operating profits and cashflow needed to finish development of the A350XWB

The key word here is operationally. That means per frame they actually make money. However, that is still very much dependent on the order numbers. If A380 orders don't start coming in, Airbus will be sitting in 2011 with a 15 billion dollar axe hanging over their head.
 
jacobin777
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 5:50 am

Quoting BoomBoom (Reply 25):
Quote:
A380 Breakeven 11 Years away

With the revised breakeven point of 420 A380s, this means it will be 11 years before Airbus will start making money on the airplane—to the end of the third quarter in 2017, at projected production rates of slightly more than four per month when the full stream of deliveries are finally achieves in 2011.

http://www.leeham.net/filelib/Scotts...6.pdf

That's if they even sell 420......and with FX cancelling and with time decay of money, it will take more than 420 to sell....

Quoting Stitch (Reply 27):
Because EADS/Airbus needs to spend tens of billions on the A350XWB, A320E, A320RS, and A330F programs. If they want to bring those programs to fruition within the next decade, they will need cash infusions from capital markets and/or governments because the cash expected to be generated by A388 deliveries is being deferred.

Airbus could easily just defer serious work on those programs until after 2010, but that would put them at the mercy of Boeing across their entire product line.

That's the whole point Stitch...they may have $6billion in the bank, but they have a 'ell alot of expenses also.hence the $6 billion not being enough..
"Up the Irons!"
 
OU812
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 6:46 am

Quoting Stitch (Reply 21):
Yes, but Airbus has cash on hand to pay suppliers to provide the parts to complete planes and deliver them to customers, which generates new cash to continue the cycle.



Quoting Stitch (Reply 27):
Because EADS/Airbus needs to spend tens of billions on the A350XWB, A320E, A320RS, and A330F programs. If they want to bring those programs to fruition within the next decade, they will need cash infusions from capital markets and/or governments because the cash expected to be generated by A388 deliveries is being deferred.

Stitch,
You appear to be tripping over your own statements . I must allude that Airbus does not have the cash on hand . Throughout the A380 cataclysm , there has been constant talk of Launch Aid & now multiple governments coming to the aid of Airbus . Two situations that would mean Airbus was not raking in the dough . Though your statement above is done in a most ostentatious manner , it is itinerant .
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 8:32 am

Quoting Jacobin777 (Reply 29):
That's the whole point Stitch...they may have $6billion in the bank, but they have a 'ell alot of expenses also.hence the $6 billion not being enough..



Quoting OU812 (Reply 30):
Stitch,
You appear to be tripping over your own statements. I must allude that Airbus does not have the cash on hand. Throughout the A380 cataclysm, there has been constant talk of Launch Aid & now multiple governments coming to the aid of Airbus. Two situations that would mean Airbus was not raking in the dough. Though your statement above is done in a most ostentatious manner, it is itinerant.

I'm trying to explain a complex situation that many want to reduce to a simple one. And when you try and reduce it to a simple one, contradictions are going to occur.

Quite simply, Airbus has sufficient cash on hand to fund current operations. They do not need a government bail-out or loan to keep operating in their current form. They can complete fixing the A388 and build and deliver the frames already in TLS and HAM. They can also build and deliver the frames of the A320, A330 and A340 already at TLS and HAM. They can pay their employees and suppliers for the work and parts they need to complete those frames. And as they complete those frames, those monies will help fund the next set of paychecks and supplier invoices to keep building A320s, A330s, A340s and A380s that remain on order.

However, Airbus does not have sufficient cash on hand to fund the A320E, the A320RS, and the A350XWB development programs simultaneously. They probably would not even if the A380 program was on schedule and delivering planes now, but they'd have a few billion more to play with before 2010 instead of after.

So Airbus has some choices to make:

  • They can continue with the status quo, waiting until the A380 deliveries are up to speed to start generating the billions they will need to fund the A320RS and A350XWB programs (since the A320E will probably become superfluous by then).
  • They can choose to start funding one of the three projects at whatever rate they can afford with projected revenues. In such a situation, the A320E would make the most sense as it offers the most immediate RoI and could help strengthen Airbus' position in the narrowbody market prior to the next generation planes coming, maximizing sales while they can.
  • They can choose to fund all three projects at a reduced rate so as to be better able to leverage the additional funds available post-2010.
  • They can seek additional capital in closed or open markets to bridge the revenue shortfall the A380 delivery delays have imposed upon them.


I don't see that as ostentatious nor itinerant, frankly. I see it as the reality of the situation facing Airbus. And that situation is not terminal, especially in the near term.

[Edited 2006-11-09 01:03:37]
 
airfrnt
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 8:53 am

Quoting Jacobin777 (Reply 29):
That's if they even sell 420......and with FX cancelling and with time decay of money, it will take more than 420 to sell....

Actually, it may take less. The reason is that all of Airbus's contracts were up to the damages cap, presumably including this contract. If they replace this contract with a new contract, with different damage terms, it will be more profitable.
 
jacobin777
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 9:06 am

Quoting Stitch (Reply 31):
However, Airbus does not have sufficient cash on hand to fund the A320E, the A320RS, and the A350XWB development programs simultaneously. They probably would not even if the A380 program was on schedule and delivering planes now, but they'd have a few billion more to play with before 2010 instead of after.

Ok..now I got you..makes sense now... thumbsup 

Personally, I think the best thing Airbus could have done was build the A350 old and improve the A330's as well as introduce the A330 tanker...would have costed less, and have gotten a decent enough return to at least start funding better planes....

Now that they want to go with the A350XWB, all I have to say is that it better be a good plane or Airbus is in a lot of trouble...

Quoting AirFrnt (Reply 32):
Actually, it may take less. The reason is that all of Airbus's contracts were up to the damages cap, presumably including this contract. If they replace this contract with a new contract, with different damage terms, it will be more profitable.

There are two assumptions there...1)there were damage caps (but I think I might have to agree with you on this 2)they will be selling more frames to make it up (which I think they will).....however, freighter versions usually sell for more than pax versions, so that might negate some of the positives they would get...

All-in-all, you bring up some valid points.... Smile
"Up the Irons!"
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 9:22 am

Quoting Jacobin777 (Reply 33):
Personally, I think the best thing Airbus could have done was build the A350 old and improve the A330's as well as introduce the A330 tanker...would have costed less, and have gotten a decent enough return to at least start funding better planes...

Alas, I'm not sure they could afford to have done that, and it might not have been the best use of what capital they could afford since the 787 was showing much greater strength.

Hindsight being 20-20, the A350XWB is the plane Airbus should have launched in 2000, not the A380. At the moment, it looks like Airbus let their own pride and hubris get the better of them and therefore misread the market to justify the desire to make the biggest plane possible and outsell what was presumed to be the last member of the 747 family to secure "the title" on both counts.

Fortunately for Airbus, the market has time to evolve into an A380-friendly one and meet their preconceptions.

Unfortunately for Airbus, the market also has time to evolve into something entirely different and perhaps A380-hostile.

Which market will be the one (or how much of each will be in effect) I do not believe we will know until probably around 2015...
 
jacobin777
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 9:30 am

Quoting Stitch (Reply 34):
Hindsight being 20-20, the A350XWB is the plane Airbus should have launched in 2000, not the A380. At the moment, it looks like Airbus let their own pride and hubris get the better of them and therefore misread the market to justify the desire to make the biggest plane possible and outsell what was presumed to be the last member of the 747 family to secure "the title" on both counts.

I've only been saying this for the past few years, but there are only a select few who have either bothered to listen or have  flamed  me for stating this a few times..

Quoting Stitch (Reply 34):
Fortunately for Airbus, the market has time to evolve into an A380-friendly one and meet their preconceptions.

Er, disagree with you on this....this plane was was "last generation"...its already considered "old" by technological standards....So far, the market has spoken, and there is a big possibility the A380 program won't even break even.. no //

Quoting Stitch (Reply 34):

Unfortunately for Airbus, the market also has time to evolve into something entirely different and perhaps A380-hostile.

And that is exactly what is happening...FX's A380 cancellation is proof of it...

Quoting Stitch (Reply 34):
Which market will be the one (or how much of each will be in effect) I do not believe we will know until probably around 2015...

We already do, look at sales of the A380 versus those of the B787, which is the fastest selling widebody in history.....possibly breaking even before EIS..now if that's not incredible then I don't know what is...on the other hand, the A380 is turning out to be one financial disaster..not only in terms of a financial sink-hole, but also in terms of a resource sink-hole, as well as lost opportunities...

Cheers...
"Up the Irons!"
 
NAV20
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 10:35 am

Quoting Astuteman (Reply 16):
would understand the BAE buyout to be a capital transaction. I don't think it would affect the P+L much, if at all.

On the capital side, Astuteman, it will indeed increase the capital value of the company for EADS shareholders; and also increase their dividends at the end of 2007, since BAE's 20% share of Airbus profits won't have to be paid out. But the 'profit and loss' for any given year is basically 'cash in minus cash out.' I don't see how the October payment to BAE can be counted as anything else but 'cash out.'

Please understand that I am NOT saying that the transaction itself is in any way unwise, it will almost certainly benefit shareholders in the longer term (provided that EADS eventually returns to normal profitability). I'm just saying that the timing couldn't be worse, from EADS' point of view.

Quoting Scouseflyer (Reply 18):
They have a pile of cash (reported to be €6billion) from which they can "borrow" to finance the building of the planes

First of all, EADS is required by its terms of trade to maintain a cash balance of not less than E3B. at all times. So only half the reported E6B. will be available for spending.

Secondly, and more important, EADS costs about E3B. per month to run (2006 forecast E37B.). So even E6B. in 'spare' cash would only fund two months of normal operations. Profits in aviation are relatively low - last year EADS made a net profit (i.e. after interest and tax) of only E1.676B. Nothing wrong with that, Boeing's profits are similarly low. But, allowing for the loss already made in the third quarter, and factoring in both the one-off BAE payment and the delay in A380 deliveries, one has to conclude that it is highly unlikely that EADS will end up showing a profit this year.

On another thread, it's recorded that Hans-Peter Ring (one of the good 'uns among Airbus managers) has indicated that up to a further E1B. may fall due for payment as compensation to the airlines which ordered the 'old new' A350 - also in the current quarter. If that eventuates it can only make the profit-and-loss for 2006 look even more dismal.

However, simply by decllining to publish any up-dated 2006 'outlook' figures, EADS have 'got away with it' for now. A classic piece of 'mushroom management.' They won't have to publish their last-quarter 2006 results until about March next year, so they are free to leave the ordinary shareholders (and everyone else) in the dark until then.

Perhaps we'd all better meet up again in three months or so to discuss what actually happened?  Smile
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
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N328KF
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 10:50 am

Quoting Stitch (Reply 34):
Hindsight being 20-20, the A350XWB is the plane Airbus should have launched in 2000, not the A380.

To be fair, in 2000, not even Boeing had the capability to proceed with something along the lines of the 787 or A350 Mark VI, let alone Airbus.
“In the age of information, ignorance is a choice.”
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 11:56 am

Quoting Jacobin777 (Reply 35):
I've only been saying this for the past few years, but there are only a select few who have either bothered to listen or have  flamed  me for stating this a few times...

Well it's not something Airbus and A380 customer aficionados want to hear. It casts aspersions on the airliner and the customers who ordered it. It is no different when Boeing aficionados get their hackles up when folks claim the Sonic Cruiser and AA's "three year order" were just PR moves to deflect attention from the A380.

Quoting Jacobin777 (Reply 35):
Er, disagree with you on this....this plane was was "last generation"...its already considered "old" by technological standards....So far, the market has spoken, and there is a big possibility the A380 program won't even break even..  no 

Well I'm not sure the market has had enough time to speak. The 748I is a mix of "old" and "new" (mainly due to her engines) technological standards, and the market has not responded warmly to her as of yet, either. However, I don't think the market will need to wait till 2020 to speak. Perhaps not even 2015. It could be as early as 2010. If the 748I doesn't sell by then, it won't. And if A380 sales remain stagnant by then, they will remain so for the remainder of that decade.

Quoting N328KF (Reply 37):
To be fair, in 2000, not even Boeing had the capability to proceed with something along the lines of the 787 or A350 Mark VI, let alone Airbus.

I should clarify my statement a bit. I am not saying Airbus should have had the A350XWB as it exists now, but they should have been building a 777 - a large widebody twinjet - to replace the A340 family, instead of pushing forward with the A345 and A346 and A343E. Even if it had mirrored the 777 in operating economics, we'd have seen a re-hash of the 737/A320 battle.
 
OU812
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 11:56 am

Quoting Stitch (Reply 31):
I don't see that as ostentatious nor itinerant, frankly.

Ostentatious : extravagant ,flamboyant,done in a flashy manner.

If you took this word negatively . It wasn't meant to be used as so .

Quoting Stitch (Reply 31):
I'm trying to explain a complex situation that many want to reduce to a simple one. And when you try and reduce it to a simple one, contradictions are going to occur.

Understood !
I must expunge my itinerant comment . Nicely done in reply 31 . Though , I do not share your optimism you have towards Airbus ? IMHO , the A380 project will only cost Airbus/EADS/EU taxpayers !
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 12:13 pm

Quoting OU812 (Reply 39):
If you took this word negatively. It wasn't meant to be used as so.

Understood.  Smile

Quoting OU812 (Reply 39):
Though, I do not share your optimism you have towards Airbus? IMHO, the A380 project will only cost Airbus/EADS/EU taxpayers!

I guess it is optimism, at the basic level. I admire this company's technical ability and their products (as I do Boeing's), yet I find the A380 program's failures and setbacks sobering.

Yet they also sadden me, as I have come to believe it didn't have to be this way. I am slowly coming to believe Airbus looked at Boeing and saw the "past" (the 747) and not the "future" (the 777) and then decided to surpass the "past" because it was more glamorous, and so launched the A380. And to do so, it may be that Airbus reached too far, too fast.

Looking back with my own 20-20 hindsight, I focus not on the wins Airbus was getting with the A380 vs. the 74X's with a handful of 747 operators, but on the fact that the majority of 747 operators were not ordering either plane, instead adding 777s, A330s, and A340s.

Was the market rejecting the VLA concept even before it was launched? Did Boeing see the "writing on the wall" while Airbus ignored it because they wanted the A380 to the "biggest"? Or is Airbus prescient, and world air travel will come to the A380?

I can't answer that question now, and don't wish to idly speculate with the lack of information I currently have at my disposal to trend with...
 
jacobin777
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 1:33 pm

Quoting Stitch (Reply 38):

Well it's not something Airbus and A380 customer aficionados want to hear. It casts aspersions on the airliner and the customers who ordered it. It is no different when Boeing aficionados get their hackles up when folks claim the Sonic Cruiser and AA's "three year order" were just PR moves to deflect attention from the A380.

But Stitch, you can't build a business model and spend billions of dollars of people's tax payer money on "wishing" and "afcionados"..there has to be a business case for it, and if it doesn't work, its better to get rid of it (I think Airbus was too far into the A380 program before the proverbial "freight train" hit)...

Boeing knew quickly that the Sonic Cruiser wasn't going to sell to well, and since they are a private company, they were able to put the brakes on and shift directions...

Quoting Stitch (Reply 38):
Well I'm not sure the market has had enough time to speak. The 748I is a mix of "old" and "new" (mainly due to her engines) technological standards, and the market has not responded warmly to her as of yet, either. However, I don't think the market will need to wait till 2020 to speak. Perhaps not even 2015. It could be as early as 2010. If the 748I doesn't sell by then, it won't. And if A380 sales remain stagnant by then, they will remain so for the remainder of that decade.

I agree....we won't need to wait too long to see what happens, but the 748 has the fast selling freighter, which has better margins than pax frames and will sell enough to return a positive ROI..and that is what is important...

Quoting Stitch (Reply 38):
I should clarify my statement a bit. I am not saying Airbus should have had the A350XWB as it exists now, but they should have been building a 777 - a large widebody twinjet - to replace the A340 family, instead of pushing forward with the A345 and A346 and A343E. Even if it had mirrored the 777 in operating economics, we'd have seen a re-hash of the 737/A320 battle.

There were a lot of efficienies however with using the A300/A310 line (tooling, resources, etc)...they saved a lot of money-which they were able to pass to their customers.......it wasn't their fault that the price of kerosene has gone up so high..that being said, they basically didn't have a complete answer though to the 777, which was selling briskly even back in 1999/2000...developing a 777 category plane would have allowed them to be more competitive and offered a better product...

That being said, I think hubris was what got them...read the comments from Airbus management (Forgeard, Leahy, etc) the past 5-6 years, and it became apparent they thought "squat" of Boeing....

Quoting Stitch (Reply 40):

I guess it is optimism, at the basic level. I admire this company's technical ability and their products (as I do Boeing's), yet I find the A380 program's failures and setbacks sobering.

The A380 is an amazing machine, and I certainly can't wait to spot some @ SFO, LHR.. biggrin ...

Quoting Stitch (Reply 40):
Yet they also sadden me, as I have come to believe it didn't have to be this way. I am slowly coming to believe Airbus looked at Boeing and saw the "past" (the 747) and not the "future" (the 777) and then decided to surpass the "past" because it was more glamorous, and so launched the A380. And to do so, it may be that Airbus reached too far, too fast.

 checkmark ...Hubris+arrogance=lots of trouble...

Quoting Stitch (Reply 40):
Looking back with my own 20-20 hindsight, I focus not on the wins Airbus was getting with the A380 vs. the 74X's with a handful of 747 operators, but on the fact that the majority of 747 operators were not ordering either plane, instead adding 777s, A330s, and A340s.

It was apparent to both Airbus and Boeing...afterall, the A330's, 340's and 777's were selling like hotcakes, while the 747 sales started to slow down quite a bit...

Quoting Stitch (Reply 40):

Was the market rejecting the VLA concept even before it was launched?

 yes 

Quoting Stitch (Reply 40):
Did Boeing see the "writing on the wall" while Airbus ignored it because they wanted the A380 to the "biggest"?

 yes  yes 

Quoting Stitch (Reply 40):
Or is Airbus prescient, and world air travel will come to the A380?

 no 

Quoting Stitch (Reply 40):
I can't answer that question now, and don't wish to idly speculate with the lack of information I currently have at my disposal to trend with...

You don't need to answer that question friend, the market has spoken by making the 787 the fastest selling widebody in history... Wink


Cheers... Smile
"Up the Irons!"
 
astuteman
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 6:04 pm

Quoting Stitch (Reply 21):
Quoting Astuteman (Reply 16):
Ironically, after that, the A380 will generate much of the operating profits and cashflow needed to finish development of the A350XWB.

Which makes it all the more critical that the A380 start generating them in 2010. Strong A320 and lukewarm A330 sales can't fund the necessary product development Airbus needs.

That's how I see it. From 2010 onward, cashflow from every other current programme is likely to be declining. Cashflow from A380 in 2010 + is CRITICAL.  checkmark 

Quoting Stitch (Reply 31):
Airbus has sufficient cash on hand to fund current operations. They do not need a government bail-out or loan to keep operating in their current form.

 checkmark 

Quoting Stitch (Reply 31):
However, Airbus does not have sufficient cash on hand to fund the A320E, the A320RS, and the A350XWB development programs simultaneously

 checkmark  again

Quoting Jacobin777 (Reply 33):
Now that they want to go with the A350XWB, all I have to say is that it better be a good plane or Airbus is in a lot of trouble...

In spades  checkmark 

Quoting Stitch (Reply 34):
Hindsight being 20-20, the A350XWB is the plane Airbus should have launched in 2000, not the A380. At the moment, it looks like Airbus let their own pride and hubris get the better of them and therefore misread the market to justify the desire to make the biggest plane possible and outsell what was presumed to be the last member of the 747 family to secure "the title" on both counts.

I have REAL trouble with this one.
From my perspective, seeing the way Airbus was positioned, and the market response to its products from 2000 - 2003, I can't see how Airbus would have decided to do anything different - even if they didn't proceed with the A380!

A320's - given.
A330 - excellent aircraft gaining traction in the market
A340 - A340NG's in development, and at the time gaining good traction in the market too.

I honestly think Airbus undertook the A380 because it was the logical next step (for them) at the time, short of twiddling their thumbs.(There's no doubt the wanted to too  Smile )
It "completed" a product range.
Sure, the A340NG didn't have the fuel burn of the up-and-coming big T7's, but production commonality, as Jacobin said, allowed them to make a good aircraft VERY cheap to buy. When fuel prices were low, this would have made the A340NG VERY attractive to airlines - it was a sensible decision AT THE TIME.

Airbus were subsequently blind-sided by
*the huge spike in fuel prices (to be fair to them, so were the airlines who bought these planes..)
*the better-than-expected performance of the 777
*the innovation of the 787

I'm going to go out on a limb here, and say, if it weren't for the production delays, I think the A380 would right now be looking OK (not brilliant) as an investment decision.
With a B/E of 270, I think without the production delays, many, if not most of the options would already be in place, current orders would be around 220-230, and the programme would be looking quite capable of going into the black.
(I don't think Airbus ambitions would have been realised, but 300+ sales would have been a "nice little earner  Smile )
On top of that, Airbus would have been looking at operating profit contributions of c. E1Bn in 2007, and E1.5Bn from 2008 onwards (while the orders lasted), just from the A380, positioning them just nicely for a response to the 787.

Can I come down now?  Smile

Quoting NAV20 (Reply 36):
But the 'profit and loss' for any given year is basically 'cash in minus cash out.

 rotfl .
Sorry about the laugh - NAV.
You must know better than that!
There's absolutely NO relationship whatsoever "year-on-year" between cash and profit.

Regards
 
OU812
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 9:30 pm

Quoting Astuteman (Reply 42):
I honestly think Airbus undertook the A380 because it was the logical next step (for them) at the time, short of twiddling their thumbs.(There's no doubt the wanted to too )

Logical ?
NO WAY ! It was pure conjecture on the officious EU politicians part [please note I did not say people in Airbus/EADS ] Boeing not building a super jumbo was logical . Boeing was circumspect & continued to improve their a/c while people involved in Airbus decision making were mercenary .

Quoting Astuteman (Reply 42):
Sure, the A340NG didn't have the fuel burn of the up-and-coming big T7's, but production commonality, as Jacobin said, allowed them to make a good aircraft VERY cheap to buy. When fuel prices were low, this would have made the A340NG VERY attractive to airlines - it was a sensible decision AT THE TIME.

Once these neophytes {EU politicians} entrenched themselves in Airbus to the degree they have back in the late 90's -2000-ish . Logic became much less of the equation in decision making . Airbus became myopic & still to this day do not have anything to counter Boeing's widebodies & will not until mid next decade .That's almost 20 years to counter the 777 . Yet you attest that the A380 was logical when their widebodies are archaic !

Quoting Astuteman (Reply 42):
Can I come down now?

Yes ! Just like Noel Forgeard & the other 2 EADS Co-CEO's who stepped down so graciously ! All due to one areoplane !

 wink 
 
astuteman
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 10:10 pm

Quoting OU812 (Reply 43):
Yet you attest that the A380 was logical when their widebodies are archaic !

The "was" and "are" are significant.
The Airbus widebody line most certainly "wasn't" archaic back in 2000, and the market conditions of the time.
They "are" now, perhaps, compared to the 787, and 773ER/772LR
In some ways I'd still consider them pretty modern aircraft (in particular the A330).

If you want to criticise Airbus for a lack of foresight, feel free, and I certainly won't disagree. But bear in mind that the airlines that ordered the A330/A340NG and A380 in droves in the 2000-2003 period were equally myopic.
(Ordering which dried up when fuel prices spiked).

If you think that, by any stretch of the imagination, without the A380, Airbus would actually have launched, in 2000 a large twin which wouldn't get COMPLETELY blown away by the 787 today, then I'd have to disagree.

At best, you'd get a "slightly" better A340, which, from sharing fuselage size with its siblings, would still probably be inferior to the 773ER/772LR (and thus also blown away by the 787).
To understand that comment demands an understanding of the production engineering culture prevelant in Airbus at the time.

And the A330? Who in their right mind would even consider, back in 2000,
replacing what was probably at that time the most efficient medium sized widebody on the market, so soon into its lifecycle?
Can't see it myself.  no 

Quoting OU812 (Reply 43):
Boeing was circumspect & continued to improve their a/c

FWIW in the early part of this decade, Boeing Commercial Aircraft had precious little spare cash to spray around on aircraft development. "Circumspect" ? Undoubtedly. They had no choice.
What they did spend, they spent superbly, BTW  checkmark 

Quoting OU812 (Reply 43):
It was pure conjecture on the officious EU politicians part

FWIW, the decision to proceed with the A380 was made by Airbus, NOT by "officious EU politicians".

Your political rhetoric will almost certainly gain a lot of traction here on A-net, though  Smile.
I don't buy it.
Regards
 
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Stitch
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 11:06 pm

Jacobin777 and Astuteman, I do see your points on the A345 and A346 and agree with them, at least in principle. They were indeed "inexpensive" ways for Airbus to extend the A340 product line, but I don't see the A340NG as being as successful for Airbus as the 737NG was for Boeing due to the inherent better operating economics and dispatch reliability of a twin vs. a quad. Think if Boeing had sent the "727NG" against the A320. I don't think we'd be seeing a 50-50 split in orders.

But please keep reading below...

Quoting Astuteman (Reply 42):
I honestly think Airbus undertook the A380 because it was the logical next step (for them) at the time, short of twiddling their thumbs. It "completed" a product range...it was a sensible decision AT THE TIME.

I am sure it did, which is why I noted hindsight is always 20-20.  Smile And as such, I am not really trying to rag on Airbus or the A380 with my comments. In 2000, I was certainly impressed with how the plane was coming together and the orders it was securing. And I felt it was superior to the 747 offerings Boeing was setting against it. So I am not saying "I told you so" by any stretch.

I understand Airbus felt they needed something bigger then the A340 and matching the 747 in capacity would probably have been superfluous. So they reasonably went larger, but not insanely so, which shows prudence in my mind, even if their production schedule looks to have been a bit too ambitious in the end.

And hey, if Airbus had never built the A346, I imagine Boeing wouldn't have built the 773ER because it eats into 744 sales (as does the A346). So the A346 drove the development of larger and more efficient twins, including the A350XWB, Y3, and perhaps the 787-11, which is a benefit to the industry.  thumbsup 

Quote:
I'm going to go out on a limb here, and say, if it weren't for the production delays, I think the A380 would right now be looking OK (not brilliant) as an investment decision.

And I would join you on that limb. Heck, I'm willing to go out a bit now, as I still am not convinced it isn't one, at least until 2010 rolls around and I have more info.

Quote:
With a B/E of 270, I think without the production delays, many, if not most of the options would already be in place, current orders would be around 220-230, and the programme would be looking quite capable of going into the black.

If the plane hits her numbers in customer config on customer missions, I can agree with that.

Quote:
Can I come down now? Smile

Let me give you a hand.  Smile
 
F4N
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RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Thu Nov 09, 2006 11:19 pm

Quoting Stitch (Reply 40):
That being said, I think hubris was what got them...read the comments from Airbus management (Forgeard, Leahy, etc) the past 5-6 years, and it became apparent they thought "squat" of Boeing....

To all:

An interesting comment. If I think back to my earlier years on this board, it is not difficult to see why, either. I think it would not be an understatement to characterise Forgeard and Leahy as "imperious". These men believed in themselves and what they were doing. Airbus rose to primacy in commercial aviation during this period and they were selling a/c in droves, overtaking Boeing in orders and soon enough, deliveries. In contrast, Boeing's unimaginative management, obsessed with "shareholder value" and gaining ascendency in the defense market, seemed unable or unwilling to commit to anything new in commercial aviation. Any wonder why the management culture at Airbus took on the somewhat megalomaniac characteristics it did and why there seemed to be no limits to what Airbus could accomplish?

If anything, I think the Board of Directors at EADS shares alot more of the blame than they are getting for not excercising their fiduciary responsibilities
and reigning in their minions. What happened to governance? But then again, maybe the stars were tooo bright for them, also.

regards,

F4N
 
airfrnt
Posts: 2174
Joined: Fri Jul 02, 2004 2:05 am

RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Fri Nov 10, 2006 1:01 am

Quoting Jacobin777 (Reply 33):

There are two assumptions there...1)there were damage caps (but I think I might have to agree with you on this

No assumption there. Airbus announced the fact that there were both damage caps, and that the caps had been fully hit.

Quoting Jacobin777 (Reply 33):
they will be selling more frames to make it up (which I think they will)

I imagine the same torturous experience on the A380 that Lockheed had with the L-1011 and Boeing had with the 717. They will struggle to hit the magic 420 number for breakeven, and won't hit the 700+ order they needed for a 13% RoI. Even worse for Airbus their cash hedges are running out at the exact time the dollar is weakining.


Quoting Stitch (Reply 34):

Hindsight being 20-20, the A350XWB is the plane Airbus should have launched in 2000, not the A380. At the moment, it looks like Airbus let their own pride and hubris get the better of them and therefore misread the market to justify the desire to make the biggest plane possible and outsell what was presumed to be the last member of the 747 family to secure "the title" on both counts.

There is simply no way Airbus could or would have launched a A350 in 2000. The A330/A340 timing was a bit off (they didn't get enough of the 767/757 replacement market that Boeing is taking advantage of now), but on paper the 330/340 looked well positioned to take the widebody market from Boeing.

But then the A340 started underperforming it's targets (the 345/346 in particular) while the 777 started overperforming. Fuel skyrocketed. etc.

Unlike Astuteman, I do see (and I think you can find historical evidence for) Airbus being caught up a bit in their own myth, when deciding to build the A380. But I also agree that Airbus might not have had any other choice.

Airbus didn't also have the advantage of Boeing's long history with the 747. They didn't know that Boeing was worried about future long term VLA trends.

Quoting NAV20 (Reply 36):
But the 'profit and loss' for any given year is basically 'cash in minus cash out.' I don't see how the October payment to BAE can be counted as anything else but 'cash out.'

?

Sorry NAV20, these are two separate (but important) things. P+L is a operational result, while cash position is a combination of many things, not the least of which is shareholder equity, loans, and certainly P+L. Airbus can have a perfectly great P+L year, and end down in cash position. Likewise, Airbus can have a dreadful quarter, and cash position gets better.

Quoting Astuteman (Reply 42):

I'm going to go out on a limb here, and say, if it weren't for the production delays, I think the A380 would right now be looking OK (not brilliant) as an investment decision.

To some degree Airbus would have overreached at some point. It could have been a follow up 389, or the 380F, or whatever.

I am going to go out on a lib in the other direction, and postulate that the nature of the A380 made it ever so much more likely that production problems would be hit. The A380 really only has one or two generational changes in it, but everything is so much larger in scale. The A340 experience should have provided warning signals that Airbus's integration work needed help. It is almost inevitable given Airbus's recent widebody history and the size of the A380 that there would be SNAFUs at some point.

And realize that the entire problem with the electrical systems is not only because of integration woes, but because it is what Leahy had to promise to get airlines to buy into it in the first place. If Leahy hadn't promised the QE2 in the air, with all of the electrical customization I still think the program would be in trouble, but not as deep trouble as it is in now.
 
astuteman
Posts: 7146
Joined: Mon Jan 24, 2005 7:50 pm

RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Fri Nov 10, 2006 1:22 am

Quoting AirFrnt (Reply 47):
Unlike Astuteman, I do see (and I think you can find historical evidence for) Airbus being caught up a bit in their own myth, when deciding to build the A380

Funnily enough, despite my earlier comments, AirFrnt, I'm not inclined to disagree (hopefully without contradicting myself).

Quoting Stitch (Reply 40):
And to do so, it may be that Airbus reached too far, too fast.

Or with this. (Thanx for the replies BTW  Smile )

There was obviously (to me) a genuine argument somewhere for going forward with the A380, but I perceive, like yourselves, that Airbus thought they had become invulnerable, and got careless.

Quoting AirFrnt (Reply 47):
I am going to go out on a limb in the other direction, and postulate that the nature of the A380 made it ever so much more likely that production problems would be hit. The A380 really only has one or two generational changes in it, but everything is so much larger in scale. The A340 experience should have provided warning signals that Airbus's integration work needed help. It is almost inevitable given Airbus's recent widebody history and the size of the A380 that there would be SNAFUs at some point.

This, my friend is a superb point.

I've heard many people say there is nothing special about the A380 - it's just bigger.
And yet, having built big things all my life, I can safely say, that as the product size goes upwards, the difficulty factors in (some) production spheres rise exponentially, and what was a breeze on a 320, OK on a 330, but hurt a bit on a 340, can really catch you out on a 380, if the necessary vigilance is not rigorously applied.

It obviously wasn't, and the consequences stand before us.

It's a shame, and it's a damned stupid way to screw up such a great business.
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

RE: Airbus Woes Push Eads Into Red...Q3 Loss .

Fri Nov 10, 2006 1:47 am

Quoting AirFrnt (Reply 47):
Airbus didn't also have the advantage of Boeing's long history with the 747. They didn't know that Boeing was worried about future long term VLA trends.

Actually they did..the sales numbers have been out there a while for everyone to see....

Quoting Astuteman (Reply 48):
I've heard many people say there is nothing special about the A380 - it's just bigger.
And yet, having built big things all my life, I can safely say, that as the product size goes upwards, the difficulty factors in (some) production spheres rise exponentially, and what was a breeze on a 320, OK on a 330, but hurt a bit on a 340, can really catch you out on a 380, if the necessary vigilance is not rigorously applied.

 checkmark ...I was reading a comment by someone in Boeing who basically stated the same thing....its not just the size of the aircraft, but the dynamics involved, which aren't linear...but rather exponential..

Of course, given your line of work, you know about these things 1st hand... Wink
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