Aside from the traffic issues and the reality that no A380 can break-even at 65% (as Airbus would have some believe), getting credit to pay for the big airplane has proved equally difficult. Critics have been quick to predict production rate cuts on the Boeing 737, ranging from a single unit adjustment to ridiculous “analyses” of 40% or more being lopped off of current rates. Of course that hasn’t happened, largely because the double-booked slots have meant where one customer defers, another is waiting in the wings to take up an earlier delivery position. The same rings true on the A320 lines in Toulouse and Hamburg too.
In contrast, Boeing’s low rate, coupled with the (relative) ease of finance for a sub-$90m airplane is far simpler to arrange in contrast to an A380 (not least because of the variable discounting Airbus provided to entice orders in the first place).
The engineering challenges have also hampered Airbus’ ability to stabilise production.
Based on the original plan, Airbus had hoped to produce 45 A380s by 2010. In a way, the deferrals have certainly aided longevity into the A380 because had Airbus managed to get to that goal, the backlog would have been completed in a record five years or so.
As it is, deferrals have added significant costs to that longevity. Battling with wiring redesigns, cabin customisation costs through lack of standardised features alongside performance enhancements and tackling the additional several ton weight excess has proved more costly than envisaged. The business proposition for the A380 was never a good one when the idea was first drummed up in the mid-1990’s.
It’s even worse today.
There is a low prospect of break-even (some bizarrely suggest), no chance of profitability and now lacks new orders while entering its third year without a new customer.
Boeing’s 747-8 family hasn’t had much luck either, but thus far aside from one VIP cancellation, the program has not seen wide-scale deferrals, despite 78 of the firm orders being for the 747-8F in a freight market that is worse than passenger traffic.
Of course, it’s very easy to shout out about cancelling the 747-8 program just because it’s entered a forward loss position when the A380 has been sat in that quagmire since day one!
The financial drain across EADS is also a big concern.
Significant cost overruns on the A330MRTT and A400M, a multi-billion dollar black hole in the A350XWB and penalty payments to consider for a range of delays across the EADS businesses – the pressure next year will be to maintain delivery rates and thereby maintain revenue.
The A320 production rate is all but a certainty to come down next near from its current inflated rates – big customers like AirAsia seem to be deferring swathes of airplanes every few months and that trend will continue until a rebound occurs.
The A330 too is on a knife-edge despite its brief sales surge in the wake of the 787 delays.
Critically, Airbus has adjusted rates four times in 2009. What does that tell you about the business proposition of this airplane? It certainly puts the delays of the 787 into a bit of perspective when that is the much sought-after airplane, not the A380.
From a planned 18 deliveries at the start of 2009, it now concedes that “one or two” will slip into next year. Only seven deliveries have been made in ten months thus far this year.
If Airbus delivers just twelve units next year it will be nothing short of a miracle. 2010 is the year of pain, waiting to hit airlines, passengers and airplane manufacturers. Credit will be hard to come by, passenger traffic will continue to wane and oil price volatility will continue to erode the business model of every customer that has signed the dotted line for the inflexibility of the A380.
Further deferrals of the A380 are probably more of a certainty than deliveries are for next year and that has to be of paramount concern – because its upon delivery when money changes hands and EADS/Airbus need every centime they can get a hold of to plug the financial hole that is getting bigger, not smaller.
Sunday, November 01, 2009
DTN News: A380 Still A Big Headache For Airbus
DTN News: A380 Still A Big Headache For Airbus
~Analysis by: GLG Expert Contributor
~Analysis of: Airbus may delay A380 deliveries
~Published at: www.reuters.com
*Source: DTN News / Int'l Media
(NSI News Source Info) WASHINGTON, USA - November 1, 2009: Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
Summary
There’s no question that the A380 is an engineering feat. However, its market prospects have been diminishing all the time, and the concerns at Airbus continue to grow, particularly financially.
Analysis
The A380 has had a challenging 2009.
2010 looks just a difficult, if not worse.
With over half the backlog from over half the customer base deferring deliveries against a backdrop of devastating traffic and yield evaporation, it is of little surprise that Lufthansa is now going to push back its A380 deliveries. This lands Airbus with an almighty headache as to what its FY10 output should be on the big, unloved quadjet.Aside from the traffic issues and the reality that no A380 can break-even at 65% (as Airbus would have some believe), getting credit to pay for the big airplane has proved equally difficult. Critics have been quick to predict production rate cuts on the Boeing 737, ranging from a single unit adjustment to ridiculous “analyses” of 40% or more being lopped off of current rates. Of course that hasn’t happened, largely because the double-booked slots have meant where one customer defers, another is waiting in the wings to take up an earlier delivery position. The same rings true on the A320 lines in Toulouse and Hamburg too.
In contrast, Boeing’s low rate, coupled with the (relative) ease of finance for a sub-$90m airplane is far simpler to arrange in contrast to an A380 (not least because of the variable discounting Airbus provided to entice orders in the first place).
The engineering challenges have also hampered Airbus’ ability to stabilise production.
Based on the original plan, Airbus had hoped to produce 45 A380s by 2010. In a way, the deferrals have certainly aided longevity into the A380 because had Airbus managed to get to that goal, the backlog would have been completed in a record five years or so.
As it is, deferrals have added significant costs to that longevity. Battling with wiring redesigns, cabin customisation costs through lack of standardised features alongside performance enhancements and tackling the additional several ton weight excess has proved more costly than envisaged. The business proposition for the A380 was never a good one when the idea was first drummed up in the mid-1990’s.
It’s even worse today.
There is a low prospect of break-even (some bizarrely suggest), no chance of profitability and now lacks new orders while entering its third year without a new customer.
Boeing’s 747-8 family hasn’t had much luck either, but thus far aside from one VIP cancellation, the program has not seen wide-scale deferrals, despite 78 of the firm orders being for the 747-8F in a freight market that is worse than passenger traffic.
Of course, it’s very easy to shout out about cancelling the 747-8 program just because it’s entered a forward loss position when the A380 has been sat in that quagmire since day one!
The financial drain across EADS is also a big concern.
Significant cost overruns on the A330MRTT and A400M, a multi-billion dollar black hole in the A350XWB and penalty payments to consider for a range of delays across the EADS businesses – the pressure next year will be to maintain delivery rates and thereby maintain revenue.
The A320 production rate is all but a certainty to come down next near from its current inflated rates – big customers like AirAsia seem to be deferring swathes of airplanes every few months and that trend will continue until a rebound occurs.
The A330 too is on a knife-edge despite its brief sales surge in the wake of the 787 delays.
Critically, Airbus has adjusted rates four times in 2009. What does that tell you about the business proposition of this airplane? It certainly puts the delays of the 787 into a bit of perspective when that is the much sought-after airplane, not the A380.
From a planned 18 deliveries at the start of 2009, it now concedes that “one or two” will slip into next year. Only seven deliveries have been made in ten months thus far this year.
If Airbus delivers just twelve units next year it will be nothing short of a miracle. 2010 is the year of pain, waiting to hit airlines, passengers and airplane manufacturers. Credit will be hard to come by, passenger traffic will continue to wane and oil price volatility will continue to erode the business model of every customer that has signed the dotted line for the inflexibility of the A380.
Further deferrals of the A380 are probably more of a certainty than deliveries are for next year and that has to be of paramount concern – because its upon delivery when money changes hands and EADS/Airbus need every centime they can get a hold of to plug the financial hole that is getting bigger, not smaller.
Aside from the traffic issues and the reality that no A380 can break-even at 65% (as Airbus would have some believe), getting credit to pay for the big airplane has proved equally difficult. Critics have been quick to predict production rate cuts on the Boeing 737, ranging from a single unit adjustment to ridiculous “analyses” of 40% or more being lopped off of current rates. Of course that hasn’t happened, largely because the double-booked slots have meant where one customer defers, another is waiting in the wings to take up an earlier delivery position. The same rings true on the A320 lines in Toulouse and Hamburg too.
In contrast, Boeing’s low rate, coupled with the (relative) ease of finance for a sub-$90m airplane is far simpler to arrange in contrast to an A380 (not least because of the variable discounting Airbus provided to entice orders in the first place).
The engineering challenges have also hampered Airbus’ ability to stabilise production.
Based on the original plan, Airbus had hoped to produce 45 A380s by 2010. In a way, the deferrals have certainly aided longevity into the A380 because had Airbus managed to get to that goal, the backlog would have been completed in a record five years or so.
As it is, deferrals have added significant costs to that longevity. Battling with wiring redesigns, cabin customisation costs through lack of standardised features alongside performance enhancements and tackling the additional several ton weight excess has proved more costly than envisaged. The business proposition for the A380 was never a good one when the idea was first drummed up in the mid-1990’s.
It’s even worse today.
There is a low prospect of break-even (some bizarrely suggest), no chance of profitability and now lacks new orders while entering its third year without a new customer.
Boeing’s 747-8 family hasn’t had much luck either, but thus far aside from one VIP cancellation, the program has not seen wide-scale deferrals, despite 78 of the firm orders being for the 747-8F in a freight market that is worse than passenger traffic.
Of course, it’s very easy to shout out about cancelling the 747-8 program just because it’s entered a forward loss position when the A380 has been sat in that quagmire since day one!
The financial drain across EADS is also a big concern.
Significant cost overruns on the A330MRTT and A400M, a multi-billion dollar black hole in the A350XWB and penalty payments to consider for a range of delays across the EADS businesses – the pressure next year will be to maintain delivery rates and thereby maintain revenue.
The A320 production rate is all but a certainty to come down next near from its current inflated rates – big customers like AirAsia seem to be deferring swathes of airplanes every few months and that trend will continue until a rebound occurs.
The A330 too is on a knife-edge despite its brief sales surge in the wake of the 787 delays.
Critically, Airbus has adjusted rates four times in 2009. What does that tell you about the business proposition of this airplane? It certainly puts the delays of the 787 into a bit of perspective when that is the much sought-after airplane, not the A380.
From a planned 18 deliveries at the start of 2009, it now concedes that “one or two” will slip into next year. Only seven deliveries have been made in ten months thus far this year.
If Airbus delivers just twelve units next year it will be nothing short of a miracle. 2010 is the year of pain, waiting to hit airlines, passengers and airplane manufacturers. Credit will be hard to come by, passenger traffic will continue to wane and oil price volatility will continue to erode the business model of every customer that has signed the dotted line for the inflexibility of the A380.
Further deferrals of the A380 are probably more of a certainty than deliveries are for next year and that has to be of paramount concern – because its upon delivery when money changes hands and EADS/Airbus need every centime they can get a hold of to plug the financial hole that is getting bigger, not smaller.
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