*Source: DTN News / Bloomberg By Andrea Rothman
(NSI News Source Info) PARIS, France - July 29, 2009: Airbus SAS is sticking to plans to put its A350 into service by 2013 even as the company struggles to build the airli
ner at the desired weight and faces potential certification difficulties.
“The calendar is tight, it’s ambitious and we’re still on track,” Louis Gallois, chief executive officer of Airbus parent European Aeronautic, Defence & Space Co. said in an interview today after announcing second-quarter earnings. Getting the plane approved for flying involves certifying the greater use of composite materials.
The plane, which will seat 314 people in its initial A350- 900 version, will compete with Boeing Co.’s 250-seat 787 Dreamliner and the larger 777. The 787 is the first to have a fuselage and wings built mainly of composite plastics. Boeing’s delays in getting its plane into service highlight challenges in completing designs that use the new technology, which makes the plane lighter than a traditional aluminum model.
Boeing has blamed disruptions to the 787 on parts shortages, defects, redesigns and problems with suppliers. The aircraft has yet to fly, after missing a June 30 first-flight target. A new delivery timetable hasn’t been set. The lessons learned by Boeing cause some analysts to question whether Airbus’s schedule is realistic.
“We have the A350 entering service in 2015,” two years after the company says it will be ready, said Richard Aboulafia, vice president at the Teal Group, a Fairfax, Virginia-based forecaster and consulting company. “They’re breaking new ground with the A350, just as Airbus did on the A380 and Boeing’s doing on the 787, and all those came out later than planned.”
A380 Lessons
After the Airbus A380 double-decker slipped more than two years behind schedule, the Toulouse, France-based EADS unit looked elsewhere in the parent company to find a leader for the A350 program, picking Didier Evrard, an executive previously with the MBDA missile joint venture.
“I am particularly satisfied with the program management, which is a significant improvement compared with past programs,” Gallois said. “We are fighting against weight as is everybody in the business, and we still have some technical challenges ahead of us, but we’re on track for the time being.”
Airbus is struggling to make the A350 as light as customers want. Weight affects how far the plane can fly, how much it can carry, and how much fuel is used.
EADS posted a 69 percent rise in second-quarter earnings as it delivered more planes and said 2009 deliveries will at least match the year-earlier level.
Growing Cash Pile
Earnings before interest, taxes, depreciation, amortization and exceptionals rose to 656 million euros ($936 million), the Paris- and Munich-based company said today in a statement. Free cash flow advanced 20 percent to 1.17 billion euros in the first half as airline buyers made “limited” demands for financing help.
“I simply did not expect them to be hanging on to the cash like this,” said Sandy Morris, an analyst at ABN Amro in London who recommends buying EADS shares. “The second-quarter performance is particularly good, and they raised free-cash-flow guidance a bit.”
EADS rose 30 cents, or 2.3 percent, to 13 euros in Paris trading, extending the stock’s gain in the last 12 months to 8.5 percent. Boeing, EADS’s only competitor in making the largest airliners, has declined 32 percent in a year.
Airbus, which contributes two-thirds of revenue at EADS, handed over more planes even as the airline industry suffers billions of dollars in losses because the global recession is sapping travel demand. The planemaker delivered 138 aircraft in the quarter compared with 116 a year earlier and intends to deliver at least as many planes in 2009 as in 2008, when it shipped 483.
Plane Demand ‘Alive’
“The market is still alive,” Gallois said today on a conference call with analysts.
Yan Derocles, an analyst at Oddo Securities in Paris, said he was disappointed not to have more information about negotiations on the A400M, given that defense ministers for the seven countries that ordered the plane met a week ago to discuss the project.
Delays in building the A400M led to 715 million euros in costs in last year’s second quarter, and 191 million euros in the first six months. The model is four years behind schedule.
EADS said today it welcomed the commitment of A400M customers to the program and is “continuing to work hard” to bring the plane back on track. The order from the seven governments is valued at 20 billion euros.
A400M Effect
Aboulafia said the fate of the A350 is tied to the A400M. If Airbus gets a new contract for the military plane it will have to invest significantly to get it into service. EADS is planning its first A400M test flight by December. The U.K., France and Germany are among the countries with a combined 180 A400Ms on order.
Gallois also said today that Boeing’s problems in getting the 787 to market are helping Airbus sell A330s, the twin-engine plane that earlier took market share from Boeing’s 767, driving the competitor to develop the 787.
“The 787 problems support the A330,” he said. “They don’t really help the A350 because for that plane, there are no delivery slots left until around 2015, 2016,” he said.
Gallois said there was a “severe” price war when Boeing started selling the 787, but that Airbus has “returned to a level of pricing that’s more reasonable.”
Even so, the planemaker said the outlook for airline orders is more fragile than for military planes.
Airlines Challenged
“There is no clear sign of stabilization since traffic and yield deterioration as well as funding conditions are challenging airlines’ financials,” EADS said in a statement.
Airbus had pledged as much as 1 billion euros in customer financing to help carriers buy planes. EADS said that while the group’s order book still shows overbooking for coming years, it will be prudent in making forecasts given declining traffic at most airlines.
The International Air Transport Association forecast in June that deliveries by Airbus and Boeing may drop by as much as 30 percent in 2010.
The company said today that 2009 handovers will at least match last year’s. Airbus Chief Operating Officer John Leahy said last month that 2009 plane deliveries will be “flat.”
“We’re 18 months into the credit crunch, nine months into the financial crisis, and I might have thought it feasible that deliveries would drop like a stone,” ABN Amro’s Morris said. “It could be that they come down 10, even 20 percent. But for a 13 euro share price that’s not bad news.”
A380 Schedule
Net income for the second quarter increased 76 percent to 208 million euros from 118 million euros. Sales rose 19 percent to 11.7 billion euros.
Airbus scaled back its full-year schedule for the 525-seat A380 superjumbo in May, saying it will deliver 14 of the double- decker airliners in 2009 instead of the 18 that were planned. Gallois said today that A380 costs are “still higher than expected.”
Gallois said Airbus is examining remedies for the A380. “The learning curve is still too steep for the moment,” he said. “We’re spending too much money for each plane and we must see how this learning curve brings us to an average price per plane that we can rely on.”
Even so, Gallois told analysts that Airbus has built a “more robust” customer base for 2010 deliveries and that it isn’t changing output plans.
“Our backlog still sustains the current level of production rates,” the CEO said. “We are not in the situation of previous crises. The level of cancellation is very limited.”
Plane Total
Asked by an analyst whether delivering 500 planes might be possible based on projections from handover schedules, Gallois said he wouldn’t rule out that number. The difference between 483 and 500 planes may represent more than $1 billion in revenue depending on which type of aircraft are made.
Gallois said the A400M is the company’s “biggest issue” and that negotiations with buyers will be “tough.”
Governments buying the A400M granted Airbus on July 24 an extension through December to renegotiate. EADS today said it aims to reduce further loss on the program, adding that the full financial consequences won’t be known until negotiations are complete. That’s expected by the end of the year.
The seven countries that placed the order for the A400M turboprop in 2003 had the right to drop the contract in April 2009 if the model hadn’t made its first test flight. Officials granted a three-month moratorium on any decision before extending it to the end of the year.
ner at the desired weight and faces potential certification difficulties.
“The calendar is tight, it’s ambitious and we’re still on track,” Louis Gallois, chief executive officer of Airbus parent European Aeronautic, Defence & Space Co. said in an interview today after announcing second-quarter earnings. Getting the plane approved for flying involves certifying the greater use of composite materials.
The plane, which will seat 314 people in its initial A350- 900 version, will compete with Boeing Co.’s 250-seat 787 Dreamliner and the larger 777. The 787 is the first to have a fuselage and wings built mainly of composite plastics. Boeing’s delays in getting its plane into service highlight challenges in completing designs that use the new technology, which makes the plane lighter than a traditional aluminum model.
Boeing has blamed disruptions to the 787 on parts shortages, defects, redesigns and problems with suppliers. The aircraft has yet to fly, after missing a June 30 first-flight target. A new delivery timetable hasn’t been set. The lessons learned by Boeing cause some analysts to question whether Airbus’s schedule is realistic.
“We have the A350 entering service in 2015,” two years after the company says it will be ready, said Richard Aboulafia, vice president at the Teal Group, a Fairfax, Virginia-based forecaster and consulting company. “They’re breaking new ground with the A350, just as Airbus did on the A380 and Boeing’s doing on the 787, and all those came out later than planned.”
A380 Lessons
After the Airbus A380 double-decker slipped more than two years behind schedule, the Toulouse, France-based EADS unit looked elsewhere in the parent company to find a leader for the A350 program, picking Didier Evrard, an executive previously with the MBDA missile joint venture.
“I am particularly satisfied with the program management, which is a significant improvement compared with past programs,” Gallois said. “We are fighting against weight as is everybody in the business, and we still have some technical challenges ahead of us, but we’re on track for the time being.”
Airbus is struggling to make the A350 as light as customers want. Weight affects how far the plane can fly, how much it can carry, and how much fuel is used.
EADS posted a 69 percent rise in second-quarter earnings as it delivered more planes and said 2009 deliveries will at least match the year-earlier level.
Growing Cash Pile
Earnings before interest, taxes, depreciation, amortization and exceptionals rose to 656 million euros ($936 million), the Paris- and Munich-based company said today in a statement. Free cash flow advanced 20 percent to 1.17 billion euros in the first half as airline buyers made “limited” demands for financing help.
“I simply did not expect them to be hanging on to the cash like this,” said Sandy Morris, an analyst at ABN Amro in London who recommends buying EADS shares. “The second-quarter performance is particularly good, and they raised free-cash-flow guidance a bit.”
EADS rose 30 cents, or 2.3 percent, to 13 euros in Paris trading, extending the stock’s gain in the last 12 months to 8.5 percent. Boeing, EADS’s only competitor in making the largest airliners, has declined 32 percent in a year.
Airbus, which contributes two-thirds of revenue at EADS, handed over more planes even as the airline industry suffers billions of dollars in losses because the global recession is sapping travel demand. The planemaker delivered 138 aircraft in the quarter compared with 116 a year earlier and intends to deliver at least as many planes in 2009 as in 2008, when it shipped 483.
Plane Demand ‘Alive’
“The market is still alive,” Gallois said today on a conference call with analysts.
Yan Derocles, an analyst at Oddo Securities in Paris, said he was disappointed not to have more information about negotiations on the A400M, given that defense ministers for the seven countries that ordered the plane met a week ago to discuss the project.
Delays in building the A400M led to 715 million euros in costs in last year’s second quarter, and 191 million euros in the first six months. The model is four years behind schedule.
EADS said today it welcomed the commitment of A400M customers to the program and is “continuing to work hard” to bring the plane back on track. The order from the seven governments is valued at 20 billion euros.
A400M Effect
Aboulafia said the fate of the A350 is tied to the A400M. If Airbus gets a new contract for the military plane it will have to invest significantly to get it into service. EADS is planning its first A400M test flight by December. The U.K., France and Germany are among the countries with a combined 180 A400Ms on order.
Gallois also said today that Boeing’s problems in getting the 787 to market are helping Airbus sell A330s, the twin-engine plane that earlier took market share from Boeing’s 767, driving the competitor to develop the 787.
“The 787 problems support the A330,” he said. “They don’t really help the A350 because for that plane, there are no delivery slots left until around 2015, 2016,” he said.
Gallois said there was a “severe” price war when Boeing started selling the 787, but that Airbus has “returned to a level of pricing that’s more reasonable.”
Even so, the planemaker said the outlook for airline orders is more fragile than for military planes.
Airlines Challenged
“There is no clear sign of stabilization since traffic and yield deterioration as well as funding conditions are challenging airlines’ financials,” EADS said in a statement.
Airbus had pledged as much as 1 billion euros in customer financing to help carriers buy planes. EADS said that while the group’s order book still shows overbooking for coming years, it will be prudent in making forecasts given declining traffic at most airlines.
The International Air Transport Association forecast in June that deliveries by Airbus and Boeing may drop by as much as 30 percent in 2010.
The company said today that 2009 handovers will at least match last year’s. Airbus Chief Operating Officer John Leahy said last month that 2009 plane deliveries will be “flat.”
“We’re 18 months into the credit crunch, nine months into the financial crisis, and I might have thought it feasible that deliveries would drop like a stone,” ABN Amro’s Morris said. “It could be that they come down 10, even 20 percent. But for a 13 euro share price that’s not bad news.”
A380 Schedule
Net income for the second quarter increased 76 percent to 208 million euros from 118 million euros. Sales rose 19 percent to 11.7 billion euros.
Airbus scaled back its full-year schedule for the 525-seat A380 superjumbo in May, saying it will deliver 14 of the double- decker airliners in 2009 instead of the 18 that were planned. Gallois said today that A380 costs are “still higher than expected.”
Gallois said Airbus is examining remedies for the A380. “The learning curve is still too steep for the moment,” he said. “We’re spending too much money for each plane and we must see how this learning curve brings us to an average price per plane that we can rely on.”
Even so, Gallois told analysts that Airbus has built a “more robust” customer base for 2010 deliveries and that it isn’t changing output plans.
“Our backlog still sustains the current level of production rates,” the CEO said. “We are not in the situation of previous crises. The level of cancellation is very limited.”
Plane Total
Asked by an analyst whether delivering 500 planes might be possible based on projections from handover schedules, Gallois said he wouldn’t rule out that number. The difference between 483 and 500 planes may represent more than $1 billion in revenue depending on which type of aircraft are made.
Gallois said the A400M is the company’s “biggest issue” and that negotiations with buyers will be “tough.”
Governments buying the A400M granted Airbus on July 24 an extension through December to renegotiate. EADS today said it aims to reduce further loss on the program, adding that the full financial consequences won’t be known until negotiations are complete. That’s expected by the end of the year.
The seven countries that placed the order for the A400M turboprop in 2003 had the right to drop the contract in April 2009 if the model hadn’t made its first test flight. Officials granted a three-month moratorium on any decision before extending it to the end of the year. 
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