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OU812
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A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:02 am

The A380 freighter program may be in jeopardy . The commercial airliner A380 will go on . While this program may currently be lethargy . Airbus's goal is simple ,though it may be perfunctory for the rest of this decade. However , all that is needed to keep this program a float is a steady stream of sales . Which appears not to be an issue .


http://msnbc.msn.com/id/15642210/

Troubled Airbus jet could be bargain for airlines
Much-delayed superjumbo A380 on sale now for carriers that can wait

"My advice to airlines would be don't bail out. Stay on board and use your leverage to get all the bells and whistles you want for free,'' Greenslet said.

“By the time the airlines get through raking Airbus over the coals, we wouldn’t be the least bit surprised if the launch-order A380 pricing wound up being in the $100 million range,’’ Hamilton wrote in a recent report to clients. “Getting the A380 for this little amount would be the deal of the century.’’
 
ikramerica
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:09 am

Another thread from the "duh" department.

Of course, at this point, launch customer jets are a steal. Between the change in the dollar value and the penalty payments, customers with launch contracts are not going to end them if for no other reason than they are getting cheap, new capacity.

It's the later orders and the new carriers that are in jeopardy. Airbus can't sell ALL the a380s for $100 million. Each sale would put them further in debt on the project.

That's why SQ and QF aren't going to go anywhere, and EK will take at least their first batch (25?). AF and LH as well. But VS, KE, MH, EK (second order), and others are the orders in jeopardy, and new carriers for the type are going to be hard to convince at this point...
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:11 am

Well if you can wait, chances are you can get a very good deal on either an A388 or a 748I, especially since it's not yet guaranteed that the A388 or the 748I will be available come 2010 - Airbus because they may not fix the problems as quickly as they hope and Boeing as they could conceivably run into their own issues as they push the 787 out the door.
 
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N328KF
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:16 am

This makes me wonder why FedEx didn't try to do a deal on their slots (which had to be heavily discounted) to push them off on someone else.
“In the age of information, ignorance is a choice.”
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OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:31 am

Quoting Ikramerica (Reply 1):
Another thread from the "duh" department.

No need to be pontificate my friend . However , it appears this news angers you :-The thought of the A380 program having some ebullience .

Quoting N328KF (Reply 3):
This makes me wonder why FedEx didn't try to do a deal on their slots (which had to be heavily discounted) to push them off on someone else.

T7's are laudable ! Simply put , the 777F is a tough a/c to beat !
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:36 am

Quoting N328KF (Reply 3):
This makes me wonder why FedEx didn't try to do a deal on their slots (which had to be heavily discounted) to push them off on someone else.

Most (if not all) contracts do not allow the carrier to re-sell their production slots. Airbus probably offered FX compensation for shifting their slots back to move up other customers, but FX either had a no=penalty cancellation clause or told Airbus that if they gave them their money back, they could have the slots and Airbus agreed.
 
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N328KF
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:38 am

Quoting Stitch (Reply 5):
Most (if not all) contracts do not allow the carrier to re-sell their production slots.

Fine, then they can pull a Delta and have the aircraft delivered and turn them around right away to the new owner.
“In the age of information, ignorance is a choice.”
-Donny Miller
 
ikramerica
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 10:57 am

Quoting OU812 (Reply 4):
No need to be pontificate my friend . However , it appears this news angers you :-The thought of the A380 program having some ebullience .

Such important words and yet you missed the point of my comment!

I meant that, DUH, the A380 is not going to be canceled, and DUH, the early frames are cheap.

But the rest of the premise is false. The A380 CAN'T be a bargain for everyone who has or will order it, otherwise Airbus WOULD be better off shutting the program down right now.

PS - pontificate is not an adjective. It is a verb or a noun. And you really can't have "some" ebullience. It's kind of an all or nothing thing, otherwise you'd use a different word. Unless you think I am partially full of tempered joy or lackluster energy? That's what you are saying there, in a bizarre way...
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Jpax
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 11:05 am

Quoting Ikramerica (Reply 7):
PS - pontificate is not an adjective. It is a verb or a noun. And you really can't have "some" ebullience. It's kind of an all or nothing thing, otherwise you'd use a different word. Unless you think I am partially full of tempered joy or lackluster energy? That's what you are saying there, in a bizarre way...

When I first read it, it reminded me of someone typing a paper in Microsoft Word and using the synonym function to pick out a big word. It sounds idiotic, or according to my thesaurus, phlegmatic.

Spelling and grammar around here are must haves. Using 'big words' that don't belong is just ludicrous, sorry, farcical.
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 11:28 am

Quoting Jpax (Reply 8):
Spelling and grammar around here are must haves. Using 'big words' that don't belong is just ludicrous, sorry, farcical.

This is most up setting . Especially since this is coming from someone 1/2 my age & living in the same county as I .

Quoting Ikramerica (Reply 7):
Such important words and yet you missed the point of my comment!

I meant that, DUH, the A380 is not going to be canceled, and DUH, the early frames are cheap.



Quoting Ikramerica (Reply 7):
But the rest of the premise is false. The A380 CAN'T be a bargain for everyone who has or will order it, otherwise Airbus WOULD be better off shutting the program down right now.

Apparently I have . My apologies Ikramerica . However , I must ask [since you seem to be such a shabby-genteel A-netter] What in your estimations will Airbus be selling the A380s today for ?
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 3:02 pm

Quoting N328KF (Reply 6):
Fine, then they can pull a Delta and have the aircraft delivered and turn them around right away to the new owner.

Which would be who, exactly? Their competition at UPS?

I don't see SQ or EK accepting a freighter when they want to carry passengers, after all.  Smile
 
Curmudgeon
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 4:37 pm

Quoting Stitch (Reply 10):
Quoting N328KF (Reply 6):
Fine, then they can pull a Delta and have the aircraft delivered and turn them around right away to the new owner.

Which would be who, exactly? Their competition at UPS?

I don't see SQ or EK accepting a freighter when they want to carry passengers, after all.

...And ordering the plane with 550 jump seats would probably make someone suspicious  Wink
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astuteman
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 4:54 pm

Quoting OU812 (Thread starter):

Wouldn't be so bad if the story was at least accurate, but it's not. Airbus did not declare a $6.1Bn loss as a result of the delays.

It's also interesting, that, despite all the pricing rhetoric contained in the story, Airbus still expect to return E33M + ($40m) in operating profit per frame from Frame 65 onwards, (the earlier frames suffering from launch discounts and production cost escalation).

Nothing like a nice, soft target, is there?

Quoting Ikramerica (Reply 1):
Another thread from the "duh" department.

Good summary  checkmark 

Regards
 
anstar
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 8:06 pm

Quoting OU812 (Thread starter):

“By the time the airlines get through raking Airbus over the coals, we wouldn’t be the least bit surprised if the launch-order A380 pricing wound up being in the $100 million range,’’ Hamilton wrote in a recent report to clients. “Getting the A380 for this little amount would be the deal of the century.’’

Exactly why any launch customers (ie SQ,QF, EK) would be stupid to cancel and go for 748I's.
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 9:36 pm

Quoting Astuteman (Reply 12):
It's also interesting, that, despite all the pricing rhetoric contained in the story, Airbus still expect to return E33M + ($40m) in operating profit per frame from Frame 65 onwards, (the earlier frames suffering from launch discounts and production cost escalation).

Nothing like a nice, soft target, is there?

Indeed,
And that target is 420 . A target that may never be hit . So your equation above may be completely irrelevant !

Quoting ANstar (Reply 13):
Quoting OU812 (Thread starter):

"By the time the airlines get through raking Airbus over the coals, we wouldn't be the least bit surprised if the launch-order A380 pricing wound up being in the $100 million range,'' Hamilton wrote in a recent report to clients. "Getting the A380 for this little amount would be the deal of the century.''

Exactly why any launch customers (ie SQ,QF, EK) would be stupid to cancel and go for 748I's.

Due to the discernible chaos in the A380 program . Airbus lacks negotiating leverage when attempting to sell new frames . This shouldn't be so for a niche a/c like the A380 .
 
astuteman
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 11:18 pm

Quoting OU812 (Reply 14):
So your equation above may be completely irrelevant !

The fact that Airbus still state that they expect to make $40m per frame from frame 65 onwards is irrelevant?

If you say so................
 
manu
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 11:22 pm

Quoting Curmudgeon (Reply 11):

...And ordering the plane with 550 jump seats would probably make someone suspicious Wink

Do all of the seats come with the nice covering and forward-looking views? If so sign me up for a flight on that A/C!
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 11:33 pm

Quoting Astuteman (Reply 15):
The fact that Airbus still state that they expect to make $40m per frame from frame 65 onwards is irrelevant?

If you say so................

Yes !

It will only be relevant after the 420th delivered A380 . If I offended you by comparing you to Noel Forgeard in the other thread . I apologize .
 
Ken777
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RE: A380 Here To Stay-Great Bargain For Airlines!

Fri Nov 10, 2006 11:49 pm

It's clear that the 380 will be financially challenged for Airbus with regards to the launch customers. The real challenge for Airbus will be in the orders that follow. First off will be the options held by launch Airlines and these will probably be a very good prices.

Then there will be new sales for a plane that is having major problems right now, including weight problems. Airlines are probably going to be waiting to see how the 380 actually performs in daily use, with only major financial incentives from Airbus available to overcome this decision delay.

Then there is, of course, the fact that the 380's "competitor" has changed from the 744 to the 748i. Just the availability of a significantly upgraded competitor is going to impact Airbus' ability to maximize the long term margins for the plane.

Overall I believe the 380 has been pushed into a position where the original financial dreams (projections?) for the plane are now more than a little optimistic.
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 1:20 am

Quoting Ken777 (Reply 18):
Overall I believe the 380 has been pushed into a position where the original financial dreams (projections?) for the plane are now more than a little optimistic.



Quoting Ken777 (Reply 18):
Then there is, of course, the fact that the 380's "competitor" has changed from the 744 to the 748i. Just the availability of a significantly upgraded competitor is going to impact Airbus' ability to maximize the long term margins for the plane.

Intriguing,
At one time there was much talk regarding the A380 being a dominate niche airliner. So a simple stretch to the old 747 was enough to thwart that scenario .
 
474218
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 1:40 am

Quoting Astuteman (Reply 12):
It's also interesting, that, despite all the pricing rhetoric contained in the story, Airbus still expect to return E33M + ($40m) in operating profit per frame from Frame 65 onwards, (the earlier frames suffering from launch discounts and production cost escalation).

That $40m profit from each airframe after number 65 has to go to pay the A380 program development costs. After that Airbus has built and sold 355 more airframes (at a profit of $40m each) they will have then paid off all development costs. Then and only then (after the 420th airframe) will the A380 program start turning a profit.
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 1:50 am

Quoting 474218 (Reply 20):
That $40m profit from each airframe after number 65 has to go to pay the A380 program development costs. After that Airbus has built and sold 355 more airframes (at a profit of $40m each) they will have then paid off all development costs. Then and only then (after the 420th airframe) will the A380 program start turning a profit.

I imagine the figure of $40 million per plane applies only to frames MSN066 through MSN166. And that is probably an average, so the total contribution will be $4 billion. We don't know what new sales will be at. We can assume they'll be "given away", but we can also assume they'll sell for "list". The reality is, of course, somewhere in the middle.

Even Airbus' own "420 figure" is an approximate, yet people bandy it about as if it was the 11th Commandment. That number may be based on the minimum Airbus will sell an A380 for going forward. If Airbus can command more, then that number shrinks. So 420 may very well be a "worst case" number based on the current situation.
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 1:56 am

Quoting Stitch (Reply 21):
So 420 may very well be a "worst case" number based on the current situation.

Do you see Airbus selling 250 additional A380s' in 6 years ?
 
c680
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 2:00 am

Quoting Ikramerica (Reply 1):
Airbus can't sell ALL the a380s for $100 million. Each sale would put them further in debt on the project.

You do not have the full economic analysis. Airbus must make a decision based upon the position they find themselves in today, not from the point of view of 5 years ago.

Airbus has already spent a very sizable amount of money on design, development and infrastructure (factories) to build A380. Design and development are 100% allocated to A380. Some of the infrastructure cost could be re-allocated to other projects, but I suspect that much of it is A380 specific. All of this money is out the door. If A380 is canceled, then the entire project to date is a loss.

You have to look at the actual cost per unit of production, plus additional development cost divided by the number of contracted units to determine of they can truly "afford" to sell them for $100mm per copy. If they can not, and that is all they can get per frame, then they should cancel the project. I think they can do it, so they should proceed and reduce their losses.... However...

There is another factor. If they do proceed, they will have to commit additional engineering resources. That has an opportunity cost associated with in in the form of A350XWB. By proceeding with A380, the place A350XWB in jeopardy due to capital and engineering resources constraints.

This is why management is not as easy as it seems.

I suspect that very few outside Airbus have the required data to make anything other than an educated guess.

Bottom line: Airbus should have never started A380. Ego, politics, and poor judgement drove this decision.
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 2:01 am

Quoting OU812 (Reply 22):
Do you see Airbus selling 250 additional A380s' in 6 years?

Anything is possible. Honestly, I'm not worried by the current lack of sales of the A388 or 748 as of late. The 748 is not available for at least three years, and the A388 for at least four. Airlines don't have to make a decision in the next year, to say nothing of this year or last year.

If sales for one or both remain slow by 2009-2010, that is when I would start to worry.
 
timboflier215
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 2:11 am

Quoting OU812 (Reply 19):
At one time there was much talk regarding the A380 being a dominate niche airliner. So a simple stretch to the old 747 was enough to thwart that scenario .

So far I don't see the 748I having much impact on the A380. Its Airbus' v v v poor managment of the whole program which has dealt it such a severe blow. Airbus has shot itself, rather than being shot by Boeing. If you see what I mean.
 
dallasnewark
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 2:15 am

Quoting Astuteman (Reply 15):
The fact that Airbus still state that they expect to make $40m per frame from frame 65 onwards is irrelevant?

If you say so................

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Areopagus
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 2:23 am

Quoting OU812 (Reply 19):
So a simple stretch to the old 747 was enough to thwart that scenario .

The 747-8I is no simple stretch.
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 3:01 am

Quoting Stitch (Reply 24):
Anything is possible. Honestly, I'm not worried by the current lack of sales of the A388 or 748 as of late. The 748 is not available for at least three years, and the A388 for at least four. Airlines don't have to make a decision in the next year, to say nothing of this year or last year.

If sales for one or both remain slow by 2009-2010, that is when I would start to worry.

Perhaps I should have asked this question :

Is it feasible for the VLA market to require 250 A380 sales in the next 10 years , with the 747-8i being offered as well ? Roughly 25 A380s' per year !
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 3:30 am

Quoting OU812 (Reply 28):
Is it feasible for the VLA market to require 250 A380 sales in the next 10 years, with the 747-8i being offered as well?

Yes I believe it is. All it takes is 747 operators to decide they want something bigger to replace 250 of their 747s. Is that feasible? I believe it is.

I still believe the pressure is on the 747-8 more then it is the A380-800 when it comes to those operators who wish to go larger. I know we talk about "capacity gaps" between the 773/A346 and A388, but most of this can be handled - and handled favorably, mind you - through expansion of frequencies or adjustment of existing frequencies (replace a 744 and 772/A343 with two 773s/A346s/787s/A350s), and not only by replacing a 744 with a 748.

So where the demand for a VLA will be may very well trend towards the largest option available. We also talk about "CASM" and the fact that the 748I may have lower CASM then the A388 now, but the A388 can stuff more seats then a 748 so, down the road, a 700-seat A388 could very well offer lower CASM then a 500-seat 748. And when it comes to RASM, as premium cabins become more luxurious and take up more space, the A388 can carry more of them, or carry the same amount without as adversely impacting the other cabins through "space poaching".

In the end, the A388 appears to offer more flexibility then the 748, at least in terms of passenger service. That flexibility comes with some trade-offs, yes, but as long as the positives more then offset the negatives...

[Edited 2006-11-10 20:00:59]
 
LHRSpotter
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 3:58 am

Quoting Stitch (Reply 29):
Quoting OU812 (Reply 28):
Is it feasible for the VLA market to require 250 A380 sales in the next 10 years, with the 747-8i being offered as well?

Yes I believe it is. All it takes is 250 current 747 operators to decide they want something bigger. Is that feasible? I believe it is.

You don't even need 250 current "747" operators. All you need is twenty or thirty operators who between them have 250 widebodies, need larger capacity, don't have a lot of slots and prefer (or their government told them to buy) a european product.
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 4:01 am

Quoting LHRspotter (Reply 30):
You don't even need 250 current "747" operators. All you need is twenty or thirty operators who between them have 250 widebodies, need larger capacity, don't have a lot of slots and prefer (or their government told them to buy) a european product.

That is what I meant.  Smile

I edited my post to make that clear, but thanks for catching the incongruity.  Smile
 
miamix707
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 4:08 am

Quoting Stitch (Reply 29):
Yes I believe it is. All it takes is 250 current 747 operators to decide they want something bigger. Is that feasible? I believe it is.

there isn't anywhere near 250 747 operators. only about 65. Most of those operators having only a few examples.

Therefore I think it's illogical sales of the A380 would ever reach anywhere near 420 units.
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 4:13 am

Quoting MIAMIx707 (Reply 32):
there isn't anywhere near 250 747 operators. only about 65. Most of those operators having only a few examples.

See above. I expressed myself incorrectly. Of all the 747s currently in service, I do not believe it is impossible that 250 of them will be replaced with something bigger and I also believe that it is not impossible the A388 will be favored over the 748 in most, if not all, of those cases.

It may be unlikely in either or both cases, but not impossible. I'm just not as comfortable as others to deal in "absolutes" at this early stage.
 
ikramerica
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 4:29 am

Quoting OU812 (Reply 9):
Apparently I have . My apologies Ikramerica . However , I must ask [since you seem to be such a shabby-genteel A-netter] What in your estimations will Airbus be selling the A380s today for ?

As long as nothing else goes wrong, 250 frames to just the current customers is very likely (thought the FX cancelation makes that a bit harder).

In addition, selling a total of 450-500 over 20 years is doable, though I would believe that if it took that long, the breakeven number would also be at about 450-500.

Selling 750 is just not going to happen without a significant investment into new engines and materials, and a redesign/stretch. And even then, it's not a lock.

And 750 is the number Airbus is using to prove the program is worth doing at all, even with only a 13% ROI.

Every new frame they sell at a price lower than they originally planned pushes the break even further away, and also makes the program as a whole less and less worthwhile. Thus, they can't afford to offer a bargain jet...

Quoting C680 (Reply 23):
You do not have the full economic analysis. Airbus must make a decision based upon the position they find themselves in today, not from the point of view of 5 years ago.

It doesn't matter.

You can't continue to sell your product at a loss indefinitely to pull you out of financial trouble.

There's an expression for this: "We lose money on every sale, but we make it up on volume."

Translation, if the more you sell, the more you lose, you either have to charge more, cut costs dramatically, or shut down.

Airbus can't sell frames 200-750 at a loss. Instead of paying off a $16 billion investment, you are DOUBLING the hole by frame 750, to $32 billion. (rough numbers).

You can sell it at cost forever if all you care about is not going broke, but you do that for too long, and investors and creditors will start to doubt you and refuse to give you any more money.

So you must start selling your planes at a profit (per frame). You must reach your promises margin figure. Thus the premise that the A380 is a "bargain" for anyone who orders one today, or even for those customers who ordered frames 75-150, is just false. The jet IS a bargain for SQ, QF, LH, AF and EK (for at least 1/2 of their order). And those five are not going to cancel (and 2 have committed to more). You can already see that FX, VS and others didn't get that same "bargain" price and thus they feel it's more cost effective to cancel, or defer forever. And even EK is looking to other options to replace capacity on their later deliveries.

But for BA, for example, the A380 would not be a bargain at all, especially when compared to the "launch prices" Boeing would offer them on the 748i. Airbus just can't afford to compete on price with the launch customer orders for the 748i. Nor could boeing afford to continue to offer 748i at "launch prices" after the initial launch customers.
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LHRSpotter
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 4:32 am

Quoting MIAMIx707 (Reply 32):
Therefore I think it's illogical sales of the A380 would ever reach anywhere near 420 units.

I am sure that some people in Airbus have spent months and years with computers and calculators doing the sales projections in the very early stages of the programme. They must have concluded that the demand is or will be there in 10 or 20 years.

Let's not forget that when the A380 enters service there is the odd chance that most operators will be VERY happy with it. If the operators of 150 airframes (for which there will be a ready second hand markets as freighters) replace them with the same if slightly improved product 12-15 years after EIS you have a sales figure which exceeds the brake-even 65 units five times over. Suddenly 420 A380s seem achievable over a long period.
 
Ken777
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 4:59 am

Quoting MIAMIx707 (Reply 32):
there isn't anywhere near 250 747 operators. only about 65. Most of those operators having only a few examples.

The smaller operators probably have no chance to get discounts that are anywhere near "steep". Airbus needs each new order to bring in some significant gross margins, even if they do have to compete with the 748i. The larger operators like BA are in line for some very good launch pricing and Airbus would probably not give away the margins they need to cover R&D expenses.

Quoting Ikramerica (Reply 34):
Airbus just can't afford to compete on price with the launch customer orders for the 748i. Nor could boeing afford to continue to offer 748i at "launch prices" after the initial launch customers.

I would assume that both A & B will settle into normal discounts after Boeing picks up their launch customers. At that time we should be able to see how both planes compete in an on-going market.

The problem that Airbus has during this period is the lower R&D costs that the 748i carries. Boeing can make the pricing on the 748i exceptionally competitive - especially with the 7458F picking up a huge chunk of the common development costs.

If the 748i turns out to be as good in operation as Boeing thinks it will be then Airbus is going to face a very difficult time generating the margins needed to clear the R&D investment.
 
OU812
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 6:41 am

Something worth mentioning .
How can Boeing counter or more to the point , take advantage of Airbus's A380 dilemma , now & in the near to distanced future ? Could the 787 be a factor ?

Also , the commercial aviation industry has just gone through a BULL market . No additional A380s' were sold . Has Airbus's A380 missed out on this run ?
 
miamix707
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 7:24 am

Quoting LHRspotter (Reply 35):
I am sure that some people in Airbus have spent months and years with computers and calculators doing the sales projections in the very early stages of the programme. They must have concluded that the demand is or will be there in 10 or 20 years.

When was the A380 launched, in 2000? In that same year it was thought the new e-economy would take over everything and.. that never happened. Many economists/analysts were wrong, and Airbus could have been way off too, it happens.

I don't know if they spent "years" calculating but the reality back then isn't the same reality today, as shown by the order book and who knows in 10-20 years. Most likely back then all those projections indicated the Japanese, Asian and other large carriers worldwide would logically order this plane.

Now the reality of 2006 and beyond seems to indicate that basically for the A380, most (if not all) the airlines that would buy this plane new have ordered it already) and with a few of them there's even doubt they'll operate it.
 
LHRSpotter
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 7:30 am

Quoting OU812 (Reply 37):
How can Boeing counter or more to the point , take advantage of Airbus's A380 dilemma , now & in the near to distanced future ? Could the 787 be a factor ?

Without being an expert I personally think that Boeing should use all the confusion and the "challenging" marketing situation Airbus is in to compete on the narrowbody segment which is where the bulk of the orders in the industry come from.
Now is probably the best time to win back a few large customers with strong 737 orders and to possibly introduce a 150 - 160 seat mini-787 version of a future replacement for the whole 737 family with full cockpit commonality with the 787.
Considering the record sales of the 787 many airlines that bought them will want to be able to buy a smaller aircraft that the same crews could operate with minimum additional training much like the Airbus A320, A330 and A340.
 
redflyer
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 7:48 am

Quoting N328KF (Reply 3):
This makes me wonder why FedEx didn't try to do a deal on their slots (which had to be heavily discounted) to push them off on someone else.



Quoting Stitch (Reply 5):
Airbus probably offered FX compensation for shifting their slots back to move up other customers, but FX either had a no=penalty cancellation clause or told Airbus that if they gave them their money back, they could have the slots and Airbus agreed.

It could be because FX decided they don't need the A380. The announcement from Boeing was sudden and unexpected, which leads me to think FX was souring (for whatever reason) on the WhaleJet long before this latest round of delays.

Quoting LHRspotter (Reply 35):
I am sure that some people in Airbus have spent months and years with computers and calculators doing the sales projections in the very early stages of the programme. They must have concluded that the demand is or will be there in 10 or 20 years.

"10 or 20 years" is too far into the future to invest ~$15 billion on. There are too many variables -- meaning risks -- thinking demand will materialize so far into the future.

I'm not saying you're statement is wrong. On the contrary, I think Airbus in fact did the same thing. And that is where they went off the tracks. They built something for a market that does not yet exist, but they hoped that it eventually would. They took a gamble and they lost. The only question remaining is, by how much?
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
 
LHRSpotter
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 7:50 am

Quoting MIAMIx707 (Reply 38):
When was the A380 launched, in 2000? In that same year it was thought the new e-economy would take over everything and.. that never happened. Many economists/analysts were wrong, and Airbus could have been way off too, it happens.

I don't know if they spent "years" calculating but the reality back then isn't the same reality today, as shown by the order book and who knows in 10-20 years. Most likely back then all those projections indicated the Japanese, Asian and other large carriers worldwide would logically order this plane.

Now the reality of 2006 and beyond seems to indicate that basically for the A380, most (if not all) the airlines that would buy this plane new have ordered it already) and with a few of them there's even doubt they'll operate it.

All calculations and analysis would've taken place long before the programme was launched and a lot of things have happened since: 9/11, AA587, Iraq to name a few but air travel is still on the up, the airlines still need the capacity and people still want to travel further and cheaper.
The Japanese carriers never ordered the A380 but EK and Etihad did plus airlines like Kingfisher did not even exist at the time so clearly new opportunities open up. Every business venture is risky, some more than others but at the moment the programme is near completed. The order book is not the issue here and if it wasn't for the wiring problems the SQ A380s would already be roaring above our house near LHR every day.

If and when the airlines begin to operate the A380 and report that it performs as it should and reduces their cost base as planned the order book will start filling up again.
 
ikramerica
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 8:02 am

Quoting Ken777 (Reply 36):
I would assume that both A & B will settle into normal discounts after Boeing picks up their launch customers. At that time we should be able to see how both planes compete in an on-going market.

That's how I see it.

Assuming the 748i wins any customers at all, those customers will get preferred pricing. I truly see BA and UA as those customers, and Airbus can not afford to compete on price with Boeing on those two customers. There are more than enough 748F frames sold already that the idea of a launch discount there is already out the window

But after those two pax carriers are covered (and I believe it will be those two, but some people are totally sold on LH or CX), the true test of the VLA market as a whole comes into play.
Of all the things to worry about... the Wookie has no pants.
 
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Stitch
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 8:13 am

Quoting OU812 (Reply 37):
How can Boeing counter or more to the point, take advantage of Airbus's A380 dilemma, now & in the near to distanced future? Could the 787 be a factor?

I believe the 777 and the 787 are benefiting from Airbus' focus on the A3XX/A80 program this past decade.

Quote:
Also, the commercial aviation industry has just gone through a BULL market. No additional A380s' were sold. Has Airbus's A380 missed out on this run?

One should note that this "bull market" has been mostly in large regional jets, narrowbodies and, to a lesser extent, particular models of widebodies (A332, 773ER, 787-8). It has not been a general increase across all markets.
 
LHRSpotter
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 8:18 am

Quoting RedFlyer (Reply 40):
"10 or 20 years" is too far into the future to invest ~$15 billion on. There are too many variables -- meaning risks -- thinking demand will materialize so far into the future.

I'm not saying you're statement is wrong. On the contrary, I think Airbus in fact did the same thing. And that is where they went off the tracks. They built something for a market that does not yet exist, but they hoped that it eventually would. They took a gamble and they lost. The only question remaining is, by how much?

I kindly disagree. A basic calculation shows that to return an investment of $15 billion in a product with list price of $200 million you need to sell 75 units. And if this takes years to achieve so be it.

During these years jobs will be provided for thousands of workers in several countries. When governments pull the strings rather than investors alone this is very important.

And if Airbus goes past the break-even point and continues making A380s for many years (which is still a strong possibility) they may just turn the $40 million profit per frame (after the first 75!) they are hoping for.

And if there is no market for the product the european governments will help making it. I can see BA, LH, IB and AF order A380s rather than 748s. And with the Russians entering the picture the market may just become right.
 
redflyer
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 8:33 am

Quoting LHRspotter (Reply 44):
A basic calculation shows that to return an investment of $15 billion in a product with list price of $200 million you need to sell 75 units.

If you say so.

Now I know why Airbus' market projections were so rosey.

 Yeah sure
A government big enough to take away a constitutionally guaranteed right is a government big enough to take away any guaranteed right. A government big enough to give you everything you need is a government big enough to take away everything you have.
 
dambuster
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 8:35 am

Quoting LHRspotter (Reply 44):
And if there is no market for the product the european governments will help making it. I can see BA, LH, IB and AF order A380s rather than 748s. And with the Russians entering the picture the market may just become right.

Agreed, however there are other important airlines such as KL that won't necessarily go for the 380... so it's basically as you said down to LH, AF etc... somehow I do not expect more orders for the moment.
The other problem is that airlines who have 744s, aren't willing to change to the 380, at least most of them (for obvious reasons) so we should expect 748i orders from them which apparently isn't happening too soon.
 
Areopagus
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 8:40 am

Quoting LHRspotter (Reply 44):
A basic calculation shows that to return an investment of $15 billion in a product with list price of $200 million you need to sell 75 units.

75 units if you can get the full list price and it costs nothing to produce.
 
LHRSpotter
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 9:00 am

Quoting RedFlyer (Reply 45):
Quoting LHRspotter (Reply 44):
A basic calculation shows that to return an investment of $15 billion in a product with list price of $200 million you need to sell 75 units.

If you say so.

Now I know why Airbus' market projections were so rosey.

It was you RedFlyer that quoted $15 billion as the investment outlay. I just did the math based on current cost per frame ($295 - 300 million adjusted with the reported compensations the manufacturer has to make for the delays).

Quoting Dambuster (Reply 46):
The other problem is that airlines who have 744s, aren't willing to change to the 380, at least most of them (for obvious reasons) so we should expect 748i orders from them which apparently isn't happening too soon.

I am thinking about a large operator like BA in ten years' time when the 744s and even the first 777s will be due for a replacement. Now if the wings and engines are made in the UK (again I go there but can't help it) wouldn't any government push it's flag carrier to order A380s? I think it might.

Then I'm thinking about Putin getting a (smallish) stake in EADS and a couple of new "global" (EK type) airlines starting up in oil rich Russia connecting US and Europe with East and South Asia. I don't think that they will go 748i.

Then god knows what will happen in China in ten years' time but chances are they might want to go BIG as well (especially freight) and if they don't produce some "copy" of the MD12 they might also order the whale jet.

All just speculation of course...
 
474218
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RE: A380 Here To Stay-Great Bargain For Airlines!

Sat Nov 11, 2006 9:11 am

Quoting LHRspotter (Reply 44):
I kindly disagree. A basic calculation shows that to return an investment of $15 billion in a product with list price of $200 million you need to sell 75 units.

How much does it cost to produce those 75 A380's you sold for $200 million each? The best return any airframe manufacture could hope for is 10% so each A380 cost $180 million to produce leaving $20 million profit. Now you have to sell 750 A380's not 75, to cover that $15 billion investment.

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