Amedeo Firms Up 20x A380's (Part 1)

JerseyFlyer · Thu Feb 13, 2014 12:39 pm

Quoting ferpe (Reply 47):
Now who is right?

Very odd! I thought it was likely we would see the 11 abreast tried out for the first time on this order, and was waiting to see if the floor would be raised to accommodate that.

Airbus will be hoping that they can sell say 5 new A380s to a client, who will also take 5 from Amedeo for earlier delivery. This is often the pattern with other frames but Airbus has not until now persuaded a lessor to buy.

par13del · Thu Feb 13, 2014 12:58 pm

Quoting Ruscoe (Reply 46):
So the "firm" order will not become a firm contract, until Amadeo has the finance, and they won't get the finance unless they have customers,
so all round it is fairly safe for both Amadeo and Airbus.

So you are saying something else has to be signed before the planes will actually be built, which includes the ordering and paying for lead build items?
A firm order to Airbus is a firm order with financial implications, at least so I thought.

NAV20 · Thu Feb 13, 2014 1:12 pm

Quoting par13del (Reply 51):
So you are saying something else has to be signed before the planes will actually be built

As far as I can see, par13del, Amadeo are acting as Airbus's 'leasing agent,' and they have a dual role. On the one hand they negotiate the leasing terms; on the other, they form companies for each 'project,' and sell shares in each venture company to ordinary small investors.

It's the last bit that worries me - because of the short lease terms, 12 years or so. There is no way in the world, as far as I know, even 'compounded,' by which a mere 8.5% annual return could get any 'small investors' their money back after just a 12-year lease?

[Edited 2014-02-13 05:15:12]

JetBuddy · Thu Feb 13, 2014 1:16 pm

This article has some more info:

http://www.flightglobal.com/news/art...ing-will-boost-a380-appeal-395861/

"Amedeo aims to unlock demand for the A380 and secure operators outside the existing customer base by concentrating on simpler, higher density configurations which will also help keep reconfiguration costs low - a vital consideration in the leasing sector.

We have agreements with Airbus [about the cost of reconfigurations] if we are starting from the right configuration in the first place, and that broadly is all-economy downstairs and premium configurations upstairs,” he says. “That makes reconfigurations no more costly than an A330.”"
Lapidus says that in such a configuration the A380 can carry over 600 passengers and points out that Emirates is planning to introduce a 619-seat layout on its aircraft next year. “That’s with 19in wide seats at 10-abreast.”

He adds that 11-abreast configurations are “on the table” with potential customers which will add up to another 35 seats on the main deck.

Amedeo is yet to secure any customers for the A380s, but hopes to sign its first leases within a year. Target customers are those “large network carriers – the world’s top 10 airlines - who do not have the A380”.

mjoelnir · Thu Feb 13, 2014 1:23 pm

I think there is ll to much talk about ramping down. Emirates wants its ordered frames soon, delivery of the first of the fifty in 2017, the deliveries of the older orders will acelerate. If the first frames of the Amedeo order are expected to be delivered in 2016, Singapore wants its 5 extra frames from 2017 I see Airbus starting to ramp up rather than down, going from 30 a year to 36 a year.
The backlog is now 201 frames, if we subtract Virgin, Hong Kong, Transaero, Austral there are about 180 left, a backlog of 6 years bringing the A380 to 2019 without added orders. I know that every ordered A380 will be the last one ordered

but a 6 years backlog has historical seen been very solid and the backlogs we are seeing in the moment for the narrow body´s and the B787 and A350 can not be taken as the standard.
IMO Emirates talking about a upgraded A380 is regarding a next batch after the 50 ordered now.

Flying-Tiger · Thu Feb 13, 2014 1:24 pm

Quoting Nav20 (Reply 52):
It's the last bit that worries me - because of the short lease terms, 12 years or so. There is no way in the world, as far as I know, even 'compounded,' by which a mere 8.5% annual return could get any 'small investors' their money back after just a 12-year lease?

German KG financing models have extensively been used in the past for exactly this purpose. Other way are syndicated investments - just take a look on Doric´s website and see how many new planes they have been financed. Apparently they are able to raise the finance as required.

As far as I understand Doric has plenty of time to arrange the actual financing of the order as - except for the downpayment - the planes will only be paid for when they are actually delivered. That means that there is no requirement to put 8 billion on the table right away but spread over several years. With such an asset management house behind it this should be possible to arrange.

Don´t forget: the private market is currently flush with money and is looking for safe heaven investments with proper returns. Large assets seem to be a good market at the moment - and attracting enough investors seems possible.

There is certainly a risk associated with this order, but I think that Doric has at least part of the pipeline already blocked with clients, and thinks that the risk they are taking is managable. Same goes for Airbus - they are certaily not interested in a non-performing large client.

BaconButty · Thu Feb 13, 2014 2:06 pm

Quoting Nav20 (Reply 52):
It's the last bit that worries me - because of the short lease terms, 12 years or so. There is no way in the world, as far as I know, even 'compounded,' by which a mere 8.5% annual return could get any 'small investors' their money back after just a 12-year lease?

We don't know how these investments will be structured, but if previous Doric investment vehicles are anything to go by then the aircraft will be acquired by a mix of shareholders capital and loans (62/38 in one case). The income from the leases is used to pay the management fees, pay down the loans (usually a year or so earlier than the lease ends) and provide a return of c.9% to shareholders. So after 12 years you have the frame, and any residual cash from the last 18 months after the loans were paid down - presumably for re-configuring the frame for sale or the next lease. In the absolute worst case you keep the cash and part it out. But the key thing is that investors don't stump up for the full purchase price of that aircraft. It's not risk free, of course, and the current deal may be structured completely differently.

Then again, we both discussed all this in more detail a few months ago.
A-380 Future After Leases Expire (by CALTECH Nov 23 2013 in Civil Aviation)
Not enough to alleviate your "worries" though.

clickhappy · Thu Feb 13, 2014 2:10 pm

Quoting Flying-Tiger (Reply 55):
Don´t forget: the private market is currently flush with money and is looking for safe heaven investments with proper returns.

Actually, the market is awash in "hot money," and all that money is chasing yield. Fueled more and more by increasing risk.

N14AZ · Thu Feb 13, 2014 3:13 pm

Quoting Flying-Tiger (Reply 26):
Guess we should take a look into the corner of those airlines who had signalled interest e.g. LoIs, MoUs etc - these are obvious candidated for leased A380. Vietnam Airlines, Air Austral, Virgin Atlantic come to my mind.

SV also said they analyse the A 380, although I am not sure if they usually buy aircrafts rather than leasing them.

Quoting Stitch (Reply 15):
Media exposure?

True, something I had not thought about. Whenever did a leasing company announce the new flagship for an airline... So most probably we will NOT learn from Amedeo who will lease their A 380s but from the respective airline first.

So we are now at 324 firm orders (or firm + "speculative" firm orders

). I wonder when the A 380 will overtake the A 340 in terms of airframes ordered (A 340: 377).

B-HOP · Thu Feb 13, 2014 3:38 pm

Lets get back to whom are the small operators (numerically) whom would operate those frames:

My money would be put on:

GA (they mentioned that several times they need VLA)
PR (You look at Middle East/LAX) flights
Pullmantur Air (With better interors or filling a larger liner, afterall their frames are kept busy in low season for hajj)
TK (when new IST is ready)
Don't know why but I think one of the WB low cost carrier would skip 77W/359 and move directly to 380 and hit 600 seats as slots for key time flights were hard to obtain
AAX/Scoot
SA
KQ (their 77W already seat more than -400)
CX (yes, if financally make sense, no balance sheet value write off in economic recession (happened with -400 post 11/9), routes they could use the frames.

Those are the small ones I could think of, as long as the terms are reasonably long (5 years+), it could still be a sound investment

Kev

Stitch · Thu Feb 13, 2014 3:51 pm

Quoting PlaneInsomniac (Reply 42):
There is a world of difference between helping with marketing efforts and publicly announcing an order as firm when it is not (as has been implied above).

When Amedeo states that it is a "speculative order", they mean they have ordered the planes without a customer to lease them. They've ordered the planes and now they have to find customers for them prior to delivery if they don't want to have to park them.

ILFC, GECAS and other lessors currently have "speculative" orders on their books for the A350, 777 and 787 as not every single frame they have on order had an attached customer. Witness DY recently leasing four 787-9s from ILFC yesterday - before then, those four 787-9s were a speculative order by ILFC, who - correctly - speculated they could place them with customers prior to delivery.

Quoting Ruscoe (Reply 46):
Surely this is a conditional contract with Airbus, and imo the condition will be "subject to finance". They are not going to get 5 billion from investors, so they will have to have finance, and no prudent bank will lend it based on "speculation".

Every contract is conditional subject to finance. Airbus and Boeing only require a deposit at the MoU stage, followed by another deposit when the sales contract is signed and the order becomes official (and is subsequently recorded on the OEM's books). Therefore, it is not required that a customer have all their financing in place at the time the sales contract is signed.

For example, I believe that only 20 of LH's order for 34 777-9s have been booked by Boeing because LH likely cancelled their 20 purchase options for the 747-8 and applied those monies as deposits to secure the first 20 777-9s. LH themselves have said they are securing financing for the deal and once they do, I expect them to firm the final 14 frames at which point they will be recorded by Boeing as a firm order.

As for securing said financing, I am sure there are capital funding sources that are more than happy to speculatively fund Amedeo's speculative endeavor. After all, those same funding sources were more than happy to fund the purchase of a slew of aircraft from their operators to be leased back at them under Doric Asset Finance and the folks who ran DAF now run Amedeo.

Quoting Nav20 (Reply 52):
As far as I can see, par13del, Amadeo are acting as Airbus's 'leasing agent,' and they have a dual role. On the one hand they negotiate the leasing terms; on the other, they form companies for each 'project,' and sell shares in each venture company to ordinary small investors.

You are confusing Amedeo with Doric Asset Finance.

Doric Aircraft Finance buys planes (including, but not limited to, A380-800s) from operators (including, but not limited to, Emirates) and leases them back to the operator. To finance those purchases, they use a mix of commercial loans from banks and the sale of shares in the airframe through their Nimrod Air Limited subsidiaries.

Amedeo buys planes direct from Airbus and seeks to place them on direct lease with operators. Their funding source will most likely be entirely commercial loans from banks.

cougar15 · Thu Feb 13, 2014 5:04 pm

Quoting tyler81190 (Reply 38):
But what happens when EK starts returning their A380s? They don't keep aircraft for very long and this could be problematic for airbus once they are returned... Will there be a market for second hand A380s?

... the F conversion will come along and UPS & Fedex will lick their fingers... Young Frames etc....

tortugamon · Thu Feb 13, 2014 5:26 pm

Quoting Stitch (Reply 15):
Media exposure?

You could definitely be right. They certainly got a lot more in Singapore then they would elsewhere.

Quoting tyler81190 (Reply 40):
Who in their right mind would pay full price to airbus when they can get second hand on the cheap?

Well to be fair, not many airlines of any mind outside of Emirates are buying as of late.

Quoting EPA001 (Reply 44):
It may seem to you so, but EK wants the newly ordered A380's as soon as possible.

No. They can't even accept them before sometime in 2016 because they have a new IFE system that won't be available before then. And half of the 50 unit order is for replacement so they will need to arrive when they are getting rid of their first batch so this will require precise timing and certainly not ASAP.

Quoting EPA001 (Reply 44):
The B777-X order will be delivered to EK over a 10-12 year timeframe.

You will have to find me the source that says that EK's order is scheduled for deliveries up to 2032/2033. This would have to be a first that an airline booked deliveries 20+ years in advance. Call me skeptical.

Quoting mjoelnir (Reply 54):
if we subtract Virgin, Hong Kong, Transaero

I think Transaero is fully on board. They recently confirmed it publicly and they have seating thought through, I think they are 'a go'. I am personally excited to see an airline put 652 seats in an A380.

Quoting B-HOP (Reply 59):
CX (yes, if financally make sense, no balance sheet value write off in economic recession (happened with -400 post 11/9), routes they could use the frames.

If CX wanted to buy one frame I think Airbus would take that call and not tell them to talk to Doric or whoever.

From the article it sounded like they are targeting the largest airlines without A380s. So I see that UA, DL, AA, MU, CA, TK, AC, KL, ANA, JAL, SU, and AI. Not sure how many will be interested but my guess is their primary targets are in here somewhere.

Quoting cougar15 (Reply 61):
.. the F conversion will come along and UPS & Fedex will lick their fingers...

If they aren't licking their proverbial fingers at the available of extremely cheap 744s that are available by the dozen then I don't see that changing with an A380 conversion; that is until the cargo market picks up again and then I could definitely see a change.

tortugamon

Unflug · Thu Feb 13, 2014 6:53 pm

Quoting Ruscoe (Reply 46):
Surely this is a conditional contract with Airbus ... So the "firm" order will not become a firm contract, until Amadeo has the finance

Do you have any source to back your theory that this firm order is not a firm contract, or that it is different from any other firm orders?

Ab345 · Thu Feb 13, 2014 7:39 pm

Quoting tortugamon (Reply 62):
You will have to find me the source that says that EK's order is scheduled for deliveries up to 2032/2033.

Correct me if I'm wrong here EPA001 but I think he meant 10-12 year timeframe from the order announcement. That would put deliveries from 2023 onward? If we assume that EIS would be 2020-2021 (without delays) then 2023 would fit more or less

Ab345 · Thu Feb 13, 2014 7:47 pm

Quoting tortugamon (Reply 62):
I think Transaero is fully on board. They recently confirmed it publicly and they have seating thought through, I think they are 'a go'. I am personally excited to see an airline put 652 seats in an A380.

Indeed Transaero is very much on-board and they will be the 3rd carrier along LH and KE that will operate both the 388 and the 748. Plus you are talking about an airline that flies a 744 to CFU and RHO

tyler81190 · Thu Feb 13, 2014 9:12 pm

Quoting art (Reply 41):
Emirates?

EK is the airline that that would be dumping all of these A380s back into the market after 12 years of use.

Quoting tortugamon (Reply 62):
Well to be fair, not many airlines of any mind outside of Emirates are buying as of late.

Exactly, what will happen to the market when dozens of A380s hit, which are slightly used? Has something like this happened before? An airline dumps a lot of huge, specialty planes that weren't a huge hit with many airlines?

EPA001 · Thu Feb 13, 2014 9:14 pm

Quoting Ab345 (Reply 64):
Correct me if I'm wrong here EPA001 but I think he meant 10-12 year timeframe from the order announcement. That would put deliveries from 2023 onward? If we assume that EIS would be 2020-2021 (without delays) then 2023 would fit more or less

Maybe that is what they meant at the time the MoU was announced. But having 150 airplanes delivered in a short time is unlikely, especially since they still have so much new airplanes still coming to them, including B77W's and 75 A350's.

So over how many years will EK take delivery of the B777-X? The A380's they want fairly soon, we know that.

Ruscoe · Thu Feb 13, 2014 9:34 pm

Quoting Unflug (Reply 63):
Do you have any source to back your theory that this firm order is not a firm contract,
or that it is different from any other firm orders?

No, just my theory as you say.

As an example, in Australia anyway, if you buy a house, and sign a contract, it is a firm order for a house, but you can insert a clause in the contract "subject to finance".
If finance is available you must proceed with the contract, but if you can't get finance the contract does not proceed.

It's really just common sense because the sale is not going to go ahead without finance anyway.

Ruscoe

tortugamon · Thu Feb 13, 2014 9:48 pm

Quoting Ab345 (Reply 64):
Correct me if I'm wrong here EPA001 but I think he meant 10-12 year timeframe from the order announcement. That would put deliveries from 2023 onward? If we assume that EIS would be 2020-2021 (without delays) then 2023 would fit more or less

EK is expecting their first 779 in 2021. They will have 175 77Ws that they intend on replacing with 777xs and at least 90 of them will need to be replaced before 2025 when they reach 12 years old and that assumes zero growth. Once we know deliveries for 2014 onward we will have a better idea on the remaining 60 but I am pretty confident it won't take 7 additional years.

Quoting tyler81190 (Reply 66):
Exactly, what will happen to the market when dozens of A380s hit, which are slightly used? Has something like this happened before? An airline dumps a lot of huge, specialty planes that weren't a huge hit with many airlines?

It will be interesting to witness. There is a lot of speculation but not many answers. I think it will be relatively harmless at the beginning and I don't think it will get really interesting until into the 2020s a ways when EK starts really dropping them off lease. EK has the ability to keep them for beyond 12 years for a fee which could (unlikely) happen. Current operators with similar configurations could step up for the deal. Lots of things can happen and it will be interesting.

Quoting Ruscoe (Reply 68):
It's really just common sense because the sale is not going to go ahead without finance anyway.

I have no reason to believe this either but I still do. Airbus wants a partner on this and wants to sell the frames not collect deposits from a partner that is trying to help them sell frames. I see this order as an agreement or an understanding with Airbus and publicity for Amedeo and they are partners in this together.

tortugamon

PW100 · Thu Feb 13, 2014 10:19 pm

Quoting tyler81190 (Reply 66):
EK is the airline that that would be dumping all of these A380s back into the market after 12 years of use.

Clearly you missed the irony . . .

Scipio · Thu Feb 13, 2014 11:01 pm

Quoting N14AZ (Reply 1):
Who said it's a "speculative order"?

As others pointed out, Amedeo did. I think the reason why they said this is to make it absolutely clear that Nav20 has been wrong all along. Nav20 has written about 1,000 posts repeating over and over again that the Doric order would not be firmed up before the frames would be placed with specific carriers.

Nav--time for the humble pie that you promised to eat.

Quoting PlaneInsomniac (Reply 42):
Airbus has received more than 70 A380 orders in less than three months?

70 orders in three months, yes. This is a fact, again as pointed out by others. Do you have a problem with this fact?

I think it is time for the medical science to recognize "A380 hatred" as a mental disease. It seems to be a disease that causes people who are otherwise presumably nice, intelligent, sociable, productive and responsible citizens, to suffer cognitive dysfunctions whenever the topic of discussion is the A380.

The disease goes as far as making people believe that there must be some behind-the-scenes crime or conspiracy involved whenever a company places an order for A380s...

Quoting PlaneInsomniac (Reply 8):
This doesn't make any sense unless the companies have further economic ties which have not been disclosed. (Which would likely be illegal.)

Having said this...

Quoting ferpe (Reply 47):
The Amedeo article in AW says there would be 573 seats INCLUDING 11 abreast on the main deck economy section, the Airbus press release says 573 seats when at standard 10 abreast, both 3 class with the same seat number divisions between the classes as far as I can see

I was also looking forward to more definite and precise information from Amedeo about their seating arrangements. On past occasions, they talked about 11-abreast seating with a raised floor. Airbus's statement that the economy class seats will be standard 18.5" ones, seems to indicate that there will be no 11-abreast seating. As far as I know, there was also no mention in Singapore about the raised floor...

racercoup · Fri Feb 14, 2014 12:42 am

Quoting scbriml (Reply 29):
Yes, it's terrible - 70 firm orders in less than three months. Airbus must be very worried.

Let's see 50 mostly replacements and now this Doric what ever it is deal.... you won't be seeing many more orders for the next 3 years. IMHO

I think Airbus is and was very worried, this program is so under water as to need a snorkel

NAV20 · Fri Feb 14, 2014 2:02 am

Quoting Stitch (Reply 60):
You are confusing Amedeo with Doric Asset Finance.

Please see above, Stitch - it's the same company, just a change of name?

speedbored · Fri Feb 14, 2014 3:15 am

Quoting Nav20 (Reply 73):
Please see above, Stitch - it's the same company, just a change of name?

No, Nav, Stitch is correct, you are confusing two different companies.

There were previously two separate "Doric" finance companies, namely "Doric Asset Finance" and "Doric Lease Corporation".

Doric Asset Finance is still called Doric Asset Finance and is the company that EK has used for sale and leaseback finance of some of their aircraft.

Doric Lease Corp has been renamed Amedeo and is the company that has placed the firm order with Airbus to buy 20 aircraft of their own for speculative leasing.

Stitch · Fri Feb 14, 2014 3:16 am

Quoting Nav20 (Reply 73):
Please see above, Stitch - it's the same company, just a change of name?

Doric Asset Finance, as part of it's portfolio, buys commercial airliners from operators and leases them back to them. I believe this is a German registered company (Doric Gmbh is the parent). As part of the funding for those purchases, they take out commercial loans (usually from German banks) as well as sell stock in the aircraft (as an asset) on the Channel Islands Stock Exchange and on the Specialist Fund Market of the London Stock Exchange.

In 2013, Doric Gmbh created an independent company in Ireland called Doric Lease Corp. This company's purpose was to purchase commercial airliners direct from the OEM and then lease them to customers - "speculative leasing". From what I have read, it appears German law does not allow this so that is why the company was registered in Ireland (which does).

For whatever reason, a dispute arose between Doric Gmbh and Doric Lease Corp on the use of the Doric name. As part of a legal settlement, Doric Lease Corp changed their name to Amedeo.

[Edited 2014-02-13 19:18:52]

NAV20 · Fri Feb 14, 2014 5:27 am

Quoting speedbored (Reply 74):
Doric Lease Corp has been renamed Amedeo and is the company that has placed the firm order with Airbus to buy 20 aircraft of their own for speculative leasing.

Quoting Stitch (Reply 75):
For whatever reason, a dispute arose between Doric Gmbh and Doric Lease Corp on the use of the Doric name. As part of a legal settlement, Doric Lease Corp changed their name to Amedeo.

Thanks, guys, makes things (a little) clearer.

I expect that you'll recall that my basic worry about 'Doric' has always been that they appear to have been getting their working capital from small investors who will only have secure income for twelve years - which opens up the possibility that, if the aeroplanes concerned cannot be resold, the investors could lose at least a proportion of the capital they've invested?

Which of the two companies currently does this? Or do they both do it?

[Edited 2014-02-13 21:33:51]

Stitch · Fri Feb 14, 2014 5:34 am

Quoting Nav20 (Reply 76):
I expect that you'll recall that my basic worry about 'Doric' has always been that they appear to have been getting their working capital from small investors who will only have secure income for twelve years...

For Doric Gmbh, it looks to be about half of the capital is raised via commercial bank loans and half of raised via stock exchange investors.

Quoting Nav20 (Reply 76):
...which opens up the possibility that, if the aeroplanes concerned cannot be resold, they could lose at least a proportion of the capital they've invested?

The risk of loss of capital looks to be only if the company leasing the plane defaults on the lease less than 10 years in (as the leasing rate is designed to recover all capital within 10 years).

Quoting Nav20 (Reply 76):
Which of the two companies currently does this? Or do they both do it?

Doric Gmbh - the company that buys planes from operators and re-leases them - uses a mix of commercial bank loans and stock market investors to fund the purchases.

I am guessing Amedeo used commercial bank loans to cover the MoU and sales contract deposits.

scbriml · Fri Feb 14, 2014 6:32 am

Quoting racercoup (Reply 72):
I think Airbus is and was very worried

What exactly are they worried about? They now have over six years of production backlog.

Unflug · Fri Feb 14, 2014 9:28 am

Quoting scbriml (Reply 78):
What exactly are they worried about? They now have over six years of production backlog.

But they shouldn't! Isn't that enough reason to be worried?

chiad · Fri Feb 14, 2014 10:42 am

Quoting racercoup (Reply 72):
I think Airbus is and was very worried, this program is so under water as to need a snorkel

Quoting scbriml (Reply 78):
What exactly are they worried about? They now have over six years of production backlog.

With secured orders to last until 2020 it's enough for a possible A380NEO to about.
IMHO the A380 will be around for as long as the B747 has endured with as many orders.
Remember that the B747-100 program had "only" some 200 orders (with all its different versions).
The B747-200 program had almost 400 orders I think.

IMO the A380NEO program compares to the B747-200 with its upgraded engines.

Time will tell.

brindabella · Fri Feb 14, 2014 10:44 am

Quoting EPA001 (Reply 20):
Even though they call the order speculative at this time, they must feel confident about the progress of their talks with potential customers. Otherwise they would not have firmed up the commitments they agreed on with Airbus in 2013.

Quoting par13del (Reply 28):

I still think the question is valid, what's the catch? As another poster mentioned, this is a multi-billion order, that's some risk to take.

Quoting Flying-Tiger (Reply 55):
Don´t forget: the private market is currently flush with money and is looking for safe heaven investments with proper returns. Large assets seem to be a good market at the moment - and attracting enough investors seems possible.

There is certainly a risk associated with this order, but I think that Doric has at least part of the pipeline already blocked with clients, and thinks that the risk they are taking is managable. Same goes for Airbus - they are certaily not interested in a non-performing large client.

I would think that from the great distance of a.net, the only attitude to take is that A have sold 20 units to Amedeo via a proper contract.

I also take on board the good point made by Stitch above that the other big Leasing firms routinely place "speculative" orders with the OEMs for big numbers of planes for reasons of securing delivery/securing a good price/whatever.

But I also consider that it's not quite so simple as all that:
For a Leasing firm to place "speculative" orders for A320/737s is really ho-hum. Barely any risk at all.
Placing orders for A350/787 would be a greater risk in that neither has yet reached the level of operational reliability/customer satisfaction enjoyed by the narrowbodies.
Also the units are far pricier ... greater reward=greater risk!
To start with, the A380, of course, has a great record already with the flying public and with EK.
At least some of the other majors, however, seem to have experienced problems with integrating the big beasts into year-round schedules which actually make money for their owners.
And these heavier-than-air machines are very big and cost a lot of money, both to buy and then to fly.
And there is, at the time of writing, no resale market at all, and no A380F conversion available.
So the risk to a Leasing firm of a "speculative" order for A380s would have to be at a greater level again, IMHO.

The greatest threat that I can see is that Amedeo may have made a substantial mistake by declaring to the world that the order is "speculative"; I think that this is a very unsound thing for Amedeo to have done.

Let's picture a possible scenario:
At some future time, Amedeo unfortunately finds itself under time-pressure to perform on it's Contract to A.
Furthermore, it now finds that the airline CEO sitting across the negotiating table is a really tough bargainer - say like a M O'Leary, for argument's sake.
The tough bargainer has of course come fully armed with the knowledge that Amedeo is under time-pressure and has no other competing buyer.

In such a scenario, I would predict a very painful negotiation for Amedeo, with all the profit-margin being transferred straight from A to M O'Leary.
Or even worse than that.

Probably wrong - if Doric/Amedeo/whoever are as successful as it seems they are, then maybe I'm making too much of it.

But declaring the order to be "speculative" still remains a very strange thing to have done, IMO.

cheers Bill

art · Fri Feb 14, 2014 11:56 am

I can understand that Amedeo have placed firm orders for 20 and have paid deposits on those. Unless they have customers lined up how do they know when they need deliveries? Do they have access to enough capital to be able to take deliveries if they have not placed the aircraft?

I can see how they raise capital to buy an A380 from an airline and lease it back to the airline but raising the funds to buy an A380 without having a guaranteed lessee seems a completely different ball game to me.

The A380 is very much a niche aircraft with a limited number of potential customers. Any potential customer can buy an A380 and sell it to a willing lessor (eg Amedeo) so why should Amedeo start buying A380's unless they believe they are better at securing some potential customers than Airbus? Apart from saving an airline the need to raise the funds to purchase the aircraft itself before selling the frame to a leasing company, what else can Amedeo offer?

I note that Amedeo intends configuring its A380's to carry a larger number of passengers in a generic configuration that will reduce the cost of re-configuring for a different lessee (and possibly oufitting the aircraft in the first place). Do Amedeo think it will be easier to place higher capacity aircraft? Perhaps they foresee an untapped market for a higher capacity configuration - but so do Airbus, it seems. Perhaps they are betting on an increase in demand for VLA's in the coming years and will be able to offer early delivery if they have slots booked.

Good news for Airbus that they have got Amedeo on board but I'm a bit confused by this order unless Amedeo can take aircraft on a very flexible basis.

NAV20 · Fri Feb 14, 2014 12:15 pm

Quoting brindabella (Reply 81):
But declaring the order to be "speculative" still remains a very strange thing to have done, IMO.

Bill, I think you have to consider the 'alternative view.' If they'd simply announced the order 'without qualification' - given that their business is based on 'on-selling' - their share price would probably have sky-rocketed - and they'd probably have found themselves in deep trouble with the stock exchanges. In my view they did the right thing.

Quoting art (Reply 82):
I'm a bit confused by this order unless Amedeo can take aircraft on a very flexible basis.

My guess, art, is that the manufacturers find Amedeo to be quite 'useful' up to now? I've no doubt that they enjoy some sort of 'escape clause' if one is ever required?

Tony

[Edited 2014-02-14 04:20:13]

cougar15 · Fri Feb 14, 2014 12:34 pm

Quoting brindabella (Reply 81):
And there is, at the time of writing, no resale market at all, and no A380F conversion available.
So the risk to a Leasing firm of a "speculative" order for A380s would have to be at a greater level again, IMHO.

I dont share this opinion, how long did it take Boeing to offer an 'F'version of the initial 747? Airbus have a number of subsidaries specializing in conversions ! The plans are there, the Tools were made for an A380F!
Being in that line of work, Integrators often fly multiple Equipment of 74F size on the same route due to the volumes they have! And their volumes continue to grow!
Sorry, but appart from the second Hand market for PAX Versions - and it will be there, (we seem to always forget in these discussiuons that we are still only just on the tailend of global recessions that has more or less plaqued things since 2008), who is to say that no existing or potential new Operator would be interested in these, then rather cheap & well maintained Frames?
And by this time, Economies may well have recovered, but Slot restrictions will NOT!

As for the ´F Conversion´ and the Argument that it won´t happen, because Integrators have a stack of 744F´s to choose from that nobody wants, well - my Company is presently trying to ridd themselves of 744´s versus the 777 as the Generation gap makes them uneconomical in comparisem! Lets face it, even the 744 is now a 25 year old design, and give or take 10 tons payload chews almost 25% more fuel than a 777 on the same missions!

I will stick to my opinion on this, I believe the A380 will come to ' enjoy´ F Conversions and that suddenly makes the ´what after EK..´ discussion a whole different animal!

[Edited 2014-02-14 04:49:36]

[Edited 2014-02-14 04:53:51]

par13del · Fri Feb 14, 2014 12:59 pm

Quoting brindabella (Reply 81):
I would think that from the great distance of a.net, the only attitude to take is that A have sold 20 units to Amedeo via a proper contract.

Which is fine for Airbus, I think the general tone of most posters is about Amedeo and what it will do with the a/c, since these are purchased from Airbus on manufacture they will not be white tails.

Quoting cougar15 (Reply 84):
I dont share this opinion, how long did it take Boeing to offer an 'F'version of the initial 747? Airbus have a number of subsidaries specializing in conversions ! The plans are there, the Tools were made for an A380F!

In relation to a strictly A380 thread sure, but in this case I think the general thoughts are on Amedeo and what they will the pax versions that they have just ordered.

bennett123 · Fri Feb 14, 2014 1:04 pm

http://www.ch-aviation.com/portal/ne...ter-a380-fleet-with-further-orders

"13FEB2014

Asiana Airlines (OZ, Seoul Incheon) will acquire at least fourteen A380-800s and other aircraft from Airbus Industrie (AIB, Toulouse Blagnac) through 2018 as part of plans to fight the growing threat of South East Asia's LCCs. "A growing challenge from low-cost carriers is a stark reality facing almost all full-service airlines around the world," Chief Executive Kim Soo-cheon told The Wall Street Journal. "They will continue to be a challenge for many years to come, but I see a great potential in long-haul services, where budget carriers, by nature, have little access." The Korean carrier currently has six A380s on order of which two are due in June, two are due next year with the final pair due in 2017. The twin-deck aircraft will be deployed on the carrier's flagship Seoul Incheon to Los Angeles Int'l route in July with New York JFK and Frankfurt Int'l to follow".

This is one possibility that no one seems to have considered.

Seems unlikely to be co incidence.

parapente · Fri Feb 14, 2014 1:32 pm

Re Reply 86
Look spot on.
BTW to get to F furt from Seoul do you do 'over the top'?

racercoup · Fri Feb 14, 2014 1:39 pm

Quoting tim73 (Reply 45):
A380 has pretty much already paid back the development costs, if you include the much more smoother development of A350. They obviously learned from mistakes in A380 development.

Where is this coming from. Airbus was hoping to break-even on production in mid 2015. They not only have not paid back development cost, they still lose money on every Whalejet they deliver.

brindabella · Fri Feb 14, 2014 1:40 pm

Quoting Nav20 (Reply 83):
Quoting brindabella (Reply 81):
But declaring the order to be "speculative" still remains a very strange thing to have done, IMO.

Bill, I think you have to consider the 'alternative view.' If they'd simply announced the order 'without qualification' - given that their business is based on 'on-selling' - their share price would probably have sky-rocketed - and they'd probably have found themselves in deep trouble with the stock exchanges. In my view they did the right thing.

Hi Nav.

I take your point that by saying nothing Amedeo were in danger of mis-informing the market.

Unblemished corporate citizenship, indeed!

However I believe my underlying point stands - that Amedeo have potentially jammed themselves into a difficult spot if they are confronted with a hard-nosed airline negotiator who picks his moment.
It all goes to the wisdom(?) of signing a Contract based on "speculative" sales in the first place.
I think it is axiomatic that the units will be very, very cheap to Amadeo;
Very, very tempting!

But as I also pointed-out, an A380 "speculative" order is in an altogether higher risk-category than a "speculative" A350/787 order, for instance.
And a "speculative" A320/737 order is just plain ho-hum.

EG, according to posts here on a.net, the aforementioned M O'L has been noteable for getting Boeing to "give" him bucketloads of ultra-cheap 737s by carefully picking his ground & timing - and good luck to him!

M O'L:

Boeing:

cheers Bill

par13del · Fri Feb 14, 2014 1:42 pm

Quoting bennett123 (Reply 86):
A growing challenge from low-cost carriers is a stark reality facing almost all full-service airlines around the world,"

Quoting bennett123 (Reply 86):
The twin-deck aircraft will be deployed on the carrier's flagship Seoul Incheon to Los Angeles Int'l route in July with New York JFK and Frankfurt Int'l to follow".
This is one possibility that no one seems to have considered.

Well since the LCC's are booming and they are not operating this route now, what I see is the full service carriers abandoning the markets which they marginally served which created the business / market for the LCC's in the first place.
When someone starts deploying an A380 on a route dominated by narrow body a/c with frequency I will say that the battle is joined, most LCC's are using narrow body a/c, only time will tell whether a/c like the 787 / A350 will become mainstays for LCC business.

Finn350 · Fri Feb 14, 2014 1:43 pm

Quoting bennett123 (Reply 86):
This is one possibility that no one seems to have considered.

Seems unlikely to be co incidence.

Do I understand correctly that Asiana has ordered 6 A380s previously and will increase its order to 14? That would be great news.

However, I doubt these would be Amedeo frames as Asiana is already a direct customer to Airbus and has its own cabin configuration, and the first Asiana A380 is about to be delivered.

brindabella · Fri Feb 14, 2014 1:43 pm

Quoting parapente (Reply 87):

Nah.
Up by, say Ulan Bator.

cheers Bill

brindabella · Fri Feb 14, 2014 1:51 pm

Quoting cougar15 (Reply 84):
I will stick to my opinion on this, I believe the A380 will come to ' enjoy´ F Conversions and that suddenly makes the ´what after EK..´ discussion a whole different animal!

Hi cougar,

I have no problems with any of that.

But the Amedeo execs have to deal with what they actually know, right now; otherwise it becomes a gamble.

Which might work-out just fine! Who knows?

But if they get it wrong:

Big time.

And if you're playing with stakes at the A380 level, it might only take one mistake!

But I hope I'm wrong!

cheers Bill

N14AZ · Fri Feb 14, 2014 2:44 pm

Quoting racercoup (Reply 72):
Let's see 50 mostly replacements

??? Mostly replacements? Do you have any source? Right now, EK has not even 50 A 380s and you think all the additional 50 airframes are for mostly replacement only?

Quoting racercoup (Reply 72):
I think Airbus is and was very worried, this program is so under water as to need a snorkel

This statement is most probably as correct as your statement above...

col · Fri Feb 14, 2014 2:51 pm

This company has purchased A380 from airlines before. They know the market. They have bought 20 new ones to lease out to other airlines to grow this side of the business. If you are successful at something you grow it. Speculation is part of business, I would love to know of any successful business that did not speculate.

Anyway, the more 380's the better for me for travelling.

mjoelnir · Fri Feb 14, 2014 3:18 pm

Quoting racercoup (Reply 88):
Quoting tim73 (Reply 45):
A380 has pretty much already paid back the development costs, if you include the much more smoother development of A350. They obviously learned from mistakes in A380 development.

Where is this coming from. Airbus was hoping to break-even on production in mid 2015. They not only have not paid back development cost, they still lose money on every Whalejet they deliver.

The plan was program break even at 250 frames. The additional unplanned cost, as there are development production and cost like wing repair, are said to be about 6 billion Euro. So if we think about each frame "paying back" 100 million development cost Airbus would need additional 60 Frames, that would bring us to 310 frames. If each frame pays 60 million development cos it would go to 350 frames for program break even.
We are now at 324 frames ordered and 124 frames delivered.

As Airbus has written of the development, additional production and other cost, the program is said to produce profit and positive cash flow for Airbus starting in 2015.

tortugamon · Fri Feb 14, 2014 4:44 pm

Quoting N14AZ (Reply 94):
??? Mostly replacements? Do you have any source? Right now, EK has not even 50 A 380s and you think all the additional 50 airframes are for mostly replacement only?

I recall EK saying 25 were destined for replacement.

Quoting bennett123 (Reply 86):
Asiana Airlines (OZ, Seoul Incheon) will acquire at least fourteen A380-800s and other aircraft from Airbus Industrie (AIB, Toulouse Blagnac) through 2018

I don't think this should be confused for 14 A380s but rather their 6 A380s and 8 A350s that they already have on order. It is poorly written and got me too.

tortugamon

cougar15 · Fri Feb 14, 2014 4:55 pm

Quoting mjoelnir (Reply 96):
As Airbus has written of the development, additional production and other cost, the program is said to produce profit and positive cash flow for Airbus starting in 2015.

Fully agree with this, and I feel the Backlog is a healthy one for a supposed dead ´4 Holer!' ! Plus, as other members have mentioned in various threads - the knowledge transfer from these, sometimes hard lessons, will prove invaluable for Airbus´s current (new) and future Projects!

As for this ´speculative order´, well, again, the GFC seems to finally be resolved, ´regular Slots´ would not be available for years to come and maybe this lessor is just a little bit cleverer, than we are all giving them credit for..........?
What do ´the Gerries' know that we don´t............? Who is to say that they don´t already have clients lined up, who, for reasons of ´market perceptions´, 'Shareholder values´, 'Union issues´ or whatever (etc etc etc) are not ready to commit to the Frame (publically) today, but sure as heck want it tomorrow?

[Edited 2014-02-14 09:00:44]

[Edited 2014-02-14 09:03:07]

Heavierthanair · Fri Feb 14, 2014 5:00 pm

G´day

Quoting tortugamon (Reply 98):
and 8 A350s that they already have on order

Per the Airbus order and delivery spreadsheet Asiana has 30 A 350´ies on order.

Remember, they have to do catch-up with Korean, who also have the B 747-8 on order

Cheers

Peter

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