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2006-10-29 Europe
Major Airbus A380 customer sending in the auditors
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Posted by Steve White 2006-10-29 00:00|| || Front Page|| [11134 views since 2007-05-07]  Top

#1 Sending in the auditors is very much like using a house inspector when you have put in an offer on a house. If you are looking for a good reason to get out of the deal, the inspection ( or in this case the audit) will certainly give you what you need to get out.

As weve just seen with Virgin, it seems the contracts for the A380 are laden with lots of 'quit clauses' that are there to try to bind the airlines to that aircraft. Sending in the auditors is the first step towards freeing the airline from those clauses.

Emirates Air has roughly a third of the A380 airframes that have been ordered to date. If Emirates walks away from this comittment, Singapore Air, who holds another third of the ordered airframes would likely start to dump their contract at the same time. This would be very similar process to what happened on the Concorde. When the original orders for the Concorde began to fall, they all fell at once, leaving only the nationalized airlines of the two key manufacturing countries as the eventual operators of the aircraft; originally even obscure airlines such as Braniff had orders for the Concorde. The lesson from this is that until the aircraft is delivered, anything and everything can go wrong. The longer the period from order to delivery, the greater chance that A) something will go wrong or B) Macro things like the world economy or the politics of the countries involved will change and as a result the order becomes impossible to fulfill.

The 747, touted today as an example of a profitable airframe for its builder and for the airlines that fly it, nearly bankrupted Boeing to develop and took almost 10 years for the line to pay off.

It was a risk, a huge risk that could have easily gone wrong. Where the 747 suffered from several crashes during the first 10 years during the 1970s, in todays litigious world a single A380 crash for any reason could doom both the program and the manufacturer. It goes without saying that the chances that an aircraft will crash early in the development process or during its first 10 years is very high indeed. A single crash of an Aircraft with 555 people on board would be devastating to the economy of Europe. One word of warning, our economy would also suffer. Alcoa is the largest supplier of aircraft grade aluminum, its quarterly results have already been impacted by the troubles at Airbus.

Bear in mind as well that every contract that Airbus loses on the A380 drops the total revenue on which to make the A350, which is the only new aircraft from Airbus that airlines continue to show a desire to see built.

The fact is that Airbus has committed to building an aircraft for which there is no market at a time when 90% of airlines have no profits to invest.

The A380 will go down in history as the Aircraft that destroyed Airbus, and with it the dream of a Pan-european social welfare " third way" company.

Short Version: Buy Boeing.
Posted by frank martin">frank martin  2006-10-29 01:44|| www.varifrank.com]">[www.varifrank.com]  2006-10-29 01:44|| Front Page Top

#2 

If the price is right....
Posted by tzsenator 2006-10-29 09:26||   2006-10-29 09:26|| Front Page Top

#3 http://news.yahoo.com/s/afp/20061029/ts_afp/australiaairline

Ooops, sorry - missed the link
Posted by tzsenator 2006-10-29 09:27||   2006-10-29 09:27|| Front Page Top

#4 Frank M,

Alcoa's issues have more to do with metal markets stabalizing a bit. A380 does impact some, but, the industry as a whole has been moving to LTAs with the suppliers to avoid the spot market buys (which consumption globally has driven cost way up) - instead of 90/10 spot/lta the situtation is more like 60/40 or 70/30 now.

True, an A380 going down will be a litigous mess. There is however a far more common problem; cancellations and delays. Will be very interesting to see what happens as an A380 sits for mechanical or other reasons and the operator scrambles to handle the flux.
Posted by bombay">bombay  2006-10-29 10:09||   2006-10-29 10:09|| Front Page Top

#5 originally even obscure airlines such as Braniff had orders for the Concorde.

Jeez! Really? Do tell.....
Posted by Shipman 2006-10-29 10:57||   2006-10-29 10:57|| Front Page Top

#6 Alcoa has little to worry about. Boeing will pull in the slack when the orders roll in.

EADS, what would we expect from a French/Euro company that has sold a large stock chunk to Russia? A tank of an aircraft and a company that announced defeat before the first aircraft is in service. No surprise here.

I only wonder about the 315 or so helicopters the US Army as awarded EADS to build under the LUH program. I read it made it through protest. Now the American taxpayer is going to get to live through our defence department trying to keep EADS alive so our troop will have their aircraft.
Posted by 49 Pan">49 Pan  2006-10-29 11:14||   2006-10-29 11:14|| Front Page Top

#7 As I recall, those helicopters are being built in Alabama. Could be wrong.
Posted by Steve White">Steve White  2006-10-29 11:32||   2006-10-29 11:32|| Front Page Top

#8 
Isn't this beginning to look like a metaphor for the EU as a whole? A big bloated, non functioning steaming pile that's going nowhere fast.
Posted by macofromoc 2006-10-29 11:36||   2006-10-29 11:36|| Front Page Top

#9 EADS is building a factory in Mississippi for the assembly. Like Toyota in KY does for Japan, American labor will build the profit line for the French and Russians.

More importantly is the parts line. Helicopters are costly to maintain and with the French controlling the logistics of the our fleet they can control a slice of out Army's mobility by creating cost increases and shortages. Or god forbid the company threatens to go under after delivering the fleet, forcing us to bail them out. We will be held captive to this turkey and the political winds of France.
Posted by 49 Pan">49 Pan  2006-10-29 11:39||   2006-10-29 11:39|| Front Page Top

#10 Fram Braniff's Wikipedia Entry:

"As part of Braniff's supersonic dreams, the airline started service in 1979 between Dallas/Fort Worth and Washington, D.C., to Paris and London on interchange flights with Air France and British Airways. Flights between Dallas/Fort Worth and Washington Dulles airports were commanded by Braniff cockpit and cabin crews (including Braniff captains Manton Fain, Glenn Shoop, and Dean Smith) while British or French crews would take over for the remaining segment to Europe. Over U.S. soil, the Concorde was limited to Mach 0.95, though crews often flew just above Mach 1; the planes flew at Mach 2 over open water.

"...Unfortunately, the Concorde service proved a fiscal disaster for Braniff. Though Braniff initially charged only a $10 premium over standard first-class fare to fly Concorde - and later removed the surcharge altogether - the 100-seat plane often flew with no more than 15 passengers. Meanwhile, Boeing 727s flying the same route were filled routinely. Consequently, Concorde service ended little more than a year after it began."

"...Although many postcards show a Braniff Concorde, the Braniff livery was never applied to both sides of a Concorde; there are reports of a Concorde painted in Air France livery on one side and Braniff livery on the other, however."

I know. Surprised the hell out of me too!
Posted by frank martin">frank martin  2006-10-29 12:22|| www.varifrank.com]">[www.varifrank.com]  2006-10-29 12:22|| Front Page Top

#11 Two quickies:
1) Late reports last week spoke of A380 not seeing deliveries until 2013. That would pretty much kill it, without auditors getting involved
2) If the 787 pans out the way Boeing expects, look for a major shift from aluminum aircraft to composites. That will have a larger effect on the metals market that the failure of jsut one aircraft model.
Posted by USN,Ret 2006-10-29 12:48||   2006-10-29 12:48|| Front Page Top

#12 Though Braniff initially charged only a $10 premium over standard first-class fare to fly Concorde - and later removed the surcharge altogether - the 100-seat plane often flew with no more than 15 passengers. Meanwhile, Boeing 727s flying the same route were filled routinely.

Concorde bodies were quite narrow and subsequently the plane was cramped feeling. Not surprised people would exchange a longer, more comfortable flight for one that is uncomfortable but shorter.,
Posted by lotp 2006-10-29 13:29||   2006-10-29 13:29|| Front Page Top

#13 Actually 2008 is till the EIS for Singapore Airlines A380 which will fly the LHR-SIN-SYD route as far as I know rather than 2011. However from what I hear and have read in other places the companies wont dump the Whalejet because they are potentially making more in penalties from Airbus than if they were actually flying the frames now.
Posted by Valentine 2006-10-29 14:14||   2006-10-29 14:14|| Front Page Top

#14 Embarcero, is that the Brazilian builder?

I wonder if I should buy stock?
Posted by anonymous2u 2006-10-29 15:32||   2006-10-29 15:32|| Front Page Top

#15 the plane is 5.5 tons overweight

As the old saying goes:

"What do you mean 'over-engineered'? The handheld version is designed to fit in the back of a pickup truck!"

Almost six extra tons portends a whole lot of missing seats, lower fuel reserves, lost engine hours or reduced luggage and freight capacity.

Isn't this beginning to look like a metaphor for the EU as a whole? A big bloated, non functioning steaming pile that's going nowhere fast.

You may be more right than you can imagine, macofromoc

The A380 will go down in history as the Aircraft that destroyed Airbus, and with it the dream of a Pan-european social welfare " third way" company.

I'm beginning to hope you may be right, frank martin. In light of how Europe continues to endanger this world with its triangulation against American interests and constant appeasement of Islam, it might be best if something like the A380 sank them now, before Muslim demographics take possession of the continent.
Posted by Zenster">Zenster  2006-10-29 16:29||   2006-10-29 16:29|| Front Page Top

#16 In an AP story posted on the seattlePI.com site today, in addition to the auditors already mentioned, Emirates has canceled their A340 order and wants 777s instead. Citing high operating costs, could this be the first twist in the Airbus death spiral? There was also a passing mention about Emirates also interested in the 747-8 pax version. Sounds like they are lining everything up to jettison anything Airbus.
Posted by USN,Ret 2006-10-29 21:02||   2006-10-29 21:02|| Front Page Top

#17 I have been on Frontier's Airbus A319 aircraft and I must say they are quite nice.
Posted by Brett 2006-10-29 22:23||   2006-10-29 22:23|| Front Page Top

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