Losing The Backlog?
June 22nd, 2009
Prior to the Paris Air Show starting last week, comments by Airbus CEO Tom Enders were sure to have ruffled a few feathers and caused some eyebrows to rise.
With both the aerospace and airline industries battling to recover from the worst economic downturn in memory, Enders remarks that Airbus “could cope” with up to 1000 orders being cancelled from its bulging backlog of over 3500 units again highlights the reliance of financially weak airlines making up its client base and its continued approach for market share, seemingly at any cost.
Just take a look at the make-up of some of the announcements made last week at the show. (Link)
Of course, announcing yet-to-be-firmed MOU’s has become an inherent trademark for Airbus while showcasing at Le Bourget every two years, but the cavalier attitude to potentially losing up to a third of your backlog should make the hairs on the backs of necks stand up.
Orders thus far have been sparse this year - it will be interesting to see whether or not these “commitments” actually materialise as firm orders in just over six months time.
A view of the static display at the Paris Air Show 2009 (More pics here)
Image copyright/owned by FleetBuzz Editorial.com
Across the Atlantic, Boeing has itself been in-and-out of positive territory for orders this year, in part weighed down by 787 orders being dropped, taking its tally for the year so far to 66 cancellations.
That’s only half the story of this year so far.
In a long overdue change of tack, Enders did follow Boeing’s VP Marketing Randy Tinseth’s lead by about the need to protect the backlog.
“The priority is not to get new orders but to maintain those we have and turn them into deliveries,” he said.
Critically, Airbus’ ability to survive with up to 1000 lost orders is not in question, however there are two key areas for reflection. Firstly, that the French Government backed 5bn Euro acts as an incentive as “lender of last resort” to those airlines who are struggling with financing their purchases to remain committed to their contracts and secondly, that losing triple or quadruple-digit orders will play havoc with production rates and agitate the wider supply chain, particularly as both Airbus and Boeing use many of the same companies for various components on their airplanes.
From reducing its artificially higher-than-produced A320 rate already, Airbus’ biggest two exposed jets are the A380 and A320 families. The love-hate relationship between the Franco-German constituents of Airbus would surely be tested if rates on the A320 line were adjusted downward again. Overbooking aside, the likelihood of another A320 production cut before the first quarter of 2010 is out is pretty high.
Adding pressure to Airbus is the production line in Tianjin, China. Many Chinese carriers have looked to defer airplanes as far out as possible while they aim to trim capacity, shore up demand and try to focus on yield management. This added headache for Airbus will only get worse as time goes on.
Bizarrely, Airbus spoke of increasing production too - this at a time when industry consensus is focussing on production and deliveries to go down.
“We are ready to raise our production again, and that is one of the challenges, to increase production when it is needed,” said EADS CEO Louis Gallois. To “raise” rates less than a year before previously announced cuts have been enacted is a dubious story in itself, n’est pas?
Boeing has so far resisted cuts to the 737, in part largely down to reshuffled slots in the wake of the IAM strike it suffered last fall and because deferrals have been backfilled by other customers continuing to take deliveries.
For all the glitz and glamour (and rain) of last weeks show, Airbus still quite hasn’t learnt the lesson that these events are not just for headline-grabbing. Granted, celebrating forty years of commercial success in the market is one thing, dismissing a third of your order book is quite another.
Entry Filed under: Airbus, Airbus A318, Airbus A319, Airbus A321, Airbus A330, Airbus A330-200, Airbus A330-300, Airbus A340, Airbus A340-200, Airbus A340-300, Airbus A340-600, Airbus A350, Airbus A350-800, Airbus A350-900, Airbus A350XWB, Airbus A380-800, Boeing, Boeing 737-700, Boeing 737-800, Boeing 737-900ER, Boeing 737NG, Boeing 747, Boeing 747-8 Intercontinental, Boeing 747-8F, Boeing 747-8I, Boeing 767, Boeing 777, Boeing 777-200LR, Boeing 777-300ER, Boeing 777F, Boeing 787, Boeing 787 Dreamliner, Boeing 787-3, Boeing 787-8, Boeing 787-9, Boeing Commercial Airplanes, Randy Tinseth, Tom Enders
57 Comments Add your own
1. Vero Venia | June 22nd, 2009 at 07:12
Back in October 2008 I wrote this coment in Randy’s blog http://boeingblogs.com/randy/archives/2008/10/tough_quarter.html#comment-44195
Some friends and colleagues told me that I was too pessimistic. I wrote a blog entry about their reactions here http://verovenia.wordpress.com/2008/12/19/pessimist-or-realist/
The biggest trouble is not cancellations but deferrals. If airlines massively defer the delivery of their ordered aircraft then come financial troubles. If a manufacturer loses income but must keep the same spending, then it needs to burn its cash or they have to to make new debts.
These blog entries summarize the situation:
http://verovenia.wordpress.com/2008/12/19/pessimist-or-realist/
http://verovenia.wordpress.com/2009/02/16/simple-math/
http://verovenia.wordpress.com/2009/02/27/whitetail-hunters/
In any case, cancellations and deferrals are normal reaction to the severe air traffic slow down.
2. Leelaw | June 22nd, 2009 at 09:49
Apparently more “low margin/no margin” deal-making of Mr. Leahy at Le Bourget. This has been the case at countless air shows since his rise to prominence as Mr. Forgeard’s key enabler in the late nineties, yet today Airbus remains mired with a ZERO “enterprise value” as reflected in the price of EADS shares with no realistic hope of earnings growth coming from “Busco” in sight. The financial markets just yawn at these very stale tactics of air show “sales jamborees” these days. Why Mr. Leahy continues to get a free ride on the coattails of Jean Pierson and his predecessors ‘ very real accomplishments to perpetuate the financial shambles he and the “empire building” Mr. Forgeard have built upon the solid foundation they inherited remains a mystery. Sheesh, what’s the lesson here, if banging your head against the wall doesn’t work - then bang even harder?
3. keesje | June 22nd, 2009 at 10:21
I think it is entirely clear who lost orders sofar in this crises and who is in risk of loosing some more.
“The writing is in the wall for Boeing and they don’t care. They’re too busy having lunches and dinners,” CEO Akbar Al Baker told the news service, adding that QR’s issues have “gone way beyond” compensation. “Boeing doesn’t realize how much they’re hurting their customers’ plans. They’re very much mistaken if they think we’re going to give them much more time on the issue. Then Boeing will be left with a load of parked planes. It may be that we become an exclusive Airbus customer.”
http://atwonline.com/news/other.html?issueDate=6%2F22%2F2009
Earlier opinions on the quality of the Airbus and Boeing backlogs on thios webside seem to have been incorrect.
On China carriers ; indeed they try to defer orders. To sketch it as a big Airbus problem is a half truth.
http://www.eturbonews.com/8279/chinese-airline-787-not-good-enough
4. Vero Venia | June 22nd, 2009 at 11:25
Re: 2. keesje | June 22nd, 2009 at 10:21
Qatar “ordered” 30 787 and 80 A350. This time he threatens to cancel the 787 and the 777. Next time he may threaten to cancel a part of the A350 order or even the A380 order.
The reality is that he ordered too many aircraft in an overcrowded sky. He needs to do something if he does not want to lose more billions.
5. Vero Venia | June 22nd, 2009 at 11:37
The problem is not the size of the backlog.
Airbus or Boeing can live with a backlog worth 4 years of production as long as buyers take delivery of their aircraft (and pay) in a timely manner.
The trouble starts when airlines don’t need the aircraft and refuse to take delivery of the aircraft. If you can deliver only 70% of your production, you end up with huge inventory.
So the first important thing that counts is the adequateness between the production and deliveries. Then orders must continue to come in regularly to keep the backlog ample enough for a good planning.
I am still shocked by the fact that Airbus and Boeing let the backlog grow to such a ridiculous size.
6. ikkeman | June 22nd, 2009 at 11:53
WOW, you mean Airbus might actually do something like contingency planning - taking a good, hard look at it’s orderbook and identifying risk and oppertunity? and the same with production rates… Diabolical. Thank gawd BigB doesn’t lower itself to such practical levels and keeps resisting the market by holding 737 rates steady… (ofcourse they might just have done the exact same thing and concluded the costs for slowing and then speeding up the production line is higher than the potential cost of the risk of having to park some birds for a short while… but that would indicate the kind of prudent planning Airbus apparently engages in)
1. Leelaw | June 22nd, 2009 at 09:49
is that the exact same comment I saw on PI???
and what is it with you and the “zero enterprise value” line. We’ve heard it before, and I’ll be the last to say it isn’t true - but who cares. Production is going, profit is being made - the SOLE purpose of a company is SHOULD NOT be shareholder public relations.
7. Macius | June 22nd, 2009 at 12:17
It’s not exactly that A or B grown their backlogs too much - there seams to be lots of “virtual orders” from many “funny” airlines, like QR or Emirates - yes, they did ordered, but who can tell how long they’ll be able to take their planes and have any profit out of them? So I think, that both A and B realise how much some of their clients are really worth, but they are taking those orders “just in case”. After all, who wants to loose billions? So probably there are two different backlogs - one for real, the other more in sci-fi category
That’s why Airbus says they can loose 1k orders - they never thought they will deliver those planes, anyway.
Just my 0.02 EUR
8. Leelaw | June 22nd, 2009 at 12:47
“is that the exact same comment I saw on PI???”
No, it’s substantially rewritten, not a cut n paste.
“but who cares”
Investors, heaven forbid they get anything approaching a fair shake. Of course the “new mantra/rationalization” in response to failure and stagnation is that Airbus isn’t chasing short term/short sighted earnings just to “please”investors. The reality is there’s no evidence that Mr. Leahy’s clearly failed marketing schema will be yielding meaningful earnings in the mid-term and/or long-term, not to mention the earnings growth necessary to fund nascent development programs.
9. MPTA-098 | June 22nd, 2009 at 12:57
While the talkers in the “commentariat” keep on pontificating about Darth Airbus, the doers keep on doing what they usually do, regularily buying new airplanes. This time around, Darth Dick is buying new A333s. Dick, the analyst, is right that the A330 is benefitting tremendously from the 7-seriously-delayed-7 “dreamliner”.
Darth Dick:
Virgin Atlantic Orders 10 Airbus A330-300s For $2.1B
http://online.wsj.com/article/BT-CO-20090622-703384.html
Dick:
http://www.aiaa.org/aerospace/images/articleimages/pdf/18%20-%20Industry%20Insights_MAY2009.pdf
These 787 problems have basically been a windfall for Airbus. They have resulted in badly needed revenue and the breathing room needed to create a competitive response. Since the 787 delays were first announced, Airbus has enjoyed record
A330 demand. A total of 142 net orders were recorded in 2008, on top of 198 in 2007. The latter represent the highest order level yet achieved by any
Airbus twin-aisle jet. Many of these have gone to leasing customers, who are enjoying relatively high A330 lease rates compared with a weak broader market.
It is very likely that some of Boeing’s penalty payments related to 787 delays are going directly to A330 leases, indirectly benefiting Airbus.
10. Vero Venia | June 22nd, 2009 at 13:24
Re: 8. MPTA-098 | June 22nd, 2009 at 12:57
What is he going to do with the remaining A340-600 orders?
11. Leelaw | June 22nd, 2009 at 13:31
Isn’t it disingenuous and intellectually dishonest for our resident flak to cherry pick from the analysis/commentary of an analyst that he (as well as his fellow travelers) has frequently condemned as being a mere stooge of Boeing?
12. MPTA-098 | June 22nd, 2009 at 14:50
“What is he going to do with the remaining A340-600 orders?”
We’ll just have to wait and see until next month for Airbus latest updated table for orders and deliveries, and then see if the deferred order for 6 A346s have been converted to 6 A333s.
http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSLM71154620090622
Virgin Atlantic [VA.UL] will take delivery of 10 new Airbus A330-300 aircraft between now and 2012, allowing it to expand while awaiting delivery of Boeing Co’s (BA.N) troubled 787 Dreamliner.
If the 787-9 had been delivered in the time period as contractually agreed to, the order for these 10 A333s (6 firm, 4 on lease) would most likely never have materialised, which is a loss for Boeing and a gain for Airbus.
13. Mike M | June 22nd, 2009 at 14:51
>>>Then Boeing will be left with a load of parked planes.
Yeah right, Boeing would happily place jets elsewhere than have defacto “white” tails lounging around as they do at Too-lose.
As for the Chinese carriers and 787’s, the reality is that they are up shit-street and have used the 787 delays as an excuse to back out of taking delivery while they have way too much capacity.
Kinda like CZ eternally deferring the POS A380.
14. Vero Venia | June 22nd, 2009 at 15:06
Re: 13. Mike M | June 22nd, 2009 at 14:51
>>>Then Boeing will be left with a load of parked planes.
I am not sure to understand Mr Al Baker’s logic. Those aircraft are not yet built. If Qatar cancels the orders, the aircraft won’t be built or the production slots will be allocated to someone else.
If Qatar takes delivery of the planes, it is very likely the planes will effectively be parked, not in Seattle but at Doha airport.
Qatar buys too many aircraft in a region where there is an obvious overcapacity.
15. Vero Venia | June 22nd, 2009 at 15:14
12. MPTA-098 | June 22nd, 2009 at 14:50 “If the 787-9 had been delivered in the time period as contractually agreed to, the order for these 10 A333s (6 firm, 4 on lease) would most likely never have materialised, which is a loss for Boeing and a gain for Airbus.”
Yes it is a gain for Airbus. If the 787 had been delivered on time, Virgin would have canceled the A340-600 orders outrightly.
However, VS has not canceled the 787 orders despite the A330 order.
16. boeing investor | June 22nd, 2009 at 15:19
“We’ll just have to wait and see until next month for Airbus latest updated table for orders and deliveries, and then see if the deferred order for 6 A346s have been converted to 6 A333s.”
While this may be true, I worry that Airbus will be in little or no rush to amend it.
After all, just how long did it take them to remove the Iraq Air A310’s?
Back on topic, Air Asia-X will have a hard time financing these A350’s with its poor balance sheet.
17. Mike M | June 22nd, 2009 at 15:21
>>>>If the 787-9 had been delivered in the time period as contractually agreed to, the order for these 10 A333s (6 firm, 4 on lease) would most likely never have materialised, which is a loss for Boeing and a gain for Airbus.
There is only ONE year between Virgin’s firmly ordered A330’s and delivery of its 787-9.
In contrast, some 787-8 customers will STILL be waiting. Quite WTF Brannie is bitching about is nothing but media headline attention which he cannot live without.
18. Vero Venia | June 22nd, 2009 at 15:29
OFF TOPIC
Boeing reduced the VLA forecast to 740 units in its latest CMO.
http://www.boeing.com/commercial/cmo/images/styng_crnt_new_airplnes_lrg.gif
http://www.boeing.com/commercial/cmo/
What’s Airbus’ current position relative to the VLA market?
The only answer I’ve got is from here: http://www.airbus.com/en/corporate/gmf/
Is there a more recent one?
19. keesje | June 22nd, 2009 at 15:33
“Of course, announcing yet-to-be-firmed MOU’s has become an inherent trademark for Airbus while showcasing at Le Bourget every two years”
I fail to see how this statement relates to todays Virgin A330 order.
Somebody sees it all wrong I guess.
20. MPTA-098 | June 22nd, 2009 at 15:35
“After all, just how long did it take them to remove the Iraq Air A310’s?”
Wel, the story of Iraq Air is not relevant to Virgin, but I agree that it was peculiar, to say the least, for Airbus to keep Iraq Air’s A310 order in the order book for that long.
“Back on topic, Air Asia-X will have a hard time financing these A350’s with its poor balance sheet.”
Come on, first deliveries of the aircraft are due to take place in the first quarter of 2016…..
21. FleetBuzz Editorial.com | June 22nd, 2009 at 15:39
Let me make it easy for you Keesje:
Wizz Air, Paramount Airways et al. If you can’t understand that, I’m sorry I cannot help explain it to you.
22. boeing investor | June 22nd, 2009 at 15:42
“Come on, first deliveries of the aircraft are due to take place in the first quarter of 2016…..”
And?
They have progress payments to fund for their A320 adventure, which they are struggling to finance.
I cant think of a single LCC in SE Asia that isnt junk rated.
Air Asia X will defer a lot of what they have on order if they cant fund this expansion.
23. MPTA-098 | June 22nd, 2009 at 15:48
“There is only ONE year between Virgin’s firmly ordered A330’s and delivery of its 787-9.”
Wrong, unless you meant one year between the last A330 delivery and the first 787-9 delivery.
The 787-9 was originally going to be delivered to Virgin Atlantic in 2011. The first deliveries (not to VS) of this stretch variant have slipped to the first quarter of 2013, at the earliest, which is more than two years later than had been originally scheduled.
http://www.virgin-atlantic.com/en/gb/b7879.jsp
In an order worth up to US$8 billion Virgin Atlantic have ordered 15 new Boeing 787-9 Dreamliners with an option on a further 8 aircraft, delivery is scheduled between 2011 and 2014.
24. Mike M | June 22nd, 2009 at 16:01
>>>The first deliveries (not to VS) of this stretch variant have slipped to the first quarter of 2013,
Um, recheck what I wrote please.
VS gets first 7879 in 2013. It gets its first A330 (from Airbus, not AerCap) in 2012.
That’s a year (give or take etc…)
Airbus doesn’t have A330 slots for 2011 and AerCap hasn’t placed its allocation. Nice three-way deal and the A340-600 hits the gutter one more time!
25. MPTA-098 | June 22nd, 2009 at 16:26
2″And? They have progress payments to fund for their A320 adventure, which they are struggling to finance.”
In many countries government agencies exist to assist domestic companies in financing the export of domestic goods and services to international markets. These agencies include the Italian SACE, the French COFACE, the US Ex-Im Bank, the Japanese NEXI and the German EULER HERMES. They provide, for instance, working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). Wouldn’t you agree, therefore, that there’s a real likelihood that Air Asia’s advanced (and final) A350 payments might have benefitted (will benefit) from governmental export financing?
26. MPTA-098 | June 22nd, 2009 at 16:41
“Um, recheck what I wrote please”
Yeah, you’re right! (Last) firmly ordered.
27. MPTA-098 | June 22nd, 2009 at 17:23
“Yes it is a gain for Airbus. If the 787 had been delivered on time, Virgin would have canceled the A340-600 orders outrightly. However, VS has not canceled the 787 orders despite the A330 order.”
VS has not cancelled the 787-9 yet, and because of the two year delay, VS will not have to pay any penalties if they would choose to cancel the 15 787-9s they have on order. Also, I would guess “Darth Leahy” is working overtime to get“Darth Dick” to jump on the A350 bandwagon. Boeing’s loss is that they’ve managed to let Airbus into VS’ ring once again with VS now going to use A333s instead of 789s to replace early A343s. A fleet of A333s and A350-900s/1000s would be an excellent choice for VS and with the A350-1000 replacing the A346s from 2016/2017.
28. boeing investor | June 22nd, 2009 at 17:30
“Wouldn’t you agree, therefore, that there’s a real likelihood that Air Asia’s advanced (and final) A350 payments might have benefitted (will benefit) from governmental export financing?”
Oh yes I do, no argument sir, however I do feel Airbus must have made some contribution to win this deal.
Although over 400 seats in a A350-900 is not the way I’d want to travel
29. MPTA-098 | June 22nd, 2009 at 17:54
“Oh yes I do, no argument sir, however I do feel Airbus must have made some contribution to win this deal.”
Not Airbus per se, but rather with various European export banks.
Please do note that similar financial packages for BCA sales are arranged for by the US Ex-Im Bank.
An example of financing of Boeing aircraft by the US Ex-Im Bank :
http://goliath.ecnext.com/coms2/gi_0199-4318816/The-phony-free-trade-lobby.html
The November 2002 Boeing-Pakistan airline deal presents an extreme example of how the game is played. Boeing inked a deal to sell its Boeing model 777 passenger jets to the Pakistani state airline for $1.5 billion from the years 2004 through 2008, backed by loan guarantees from the Export-Import Bank. (The Eximbank’s stated mission is “to assist in financing the export of U.S. goods and services to international markets.”) Several months after the Eximbank extended the new loan guarantees, the federal government concluded a long debt rescheduling negotiation (begun before the Boeing deal) and wrote off $1 billion in bad Pakistani government debt. As the jets began rolling off the assembly lines for Pakistan in 2004, the federal government signed a deal to cancel another $495 million in Pakistani debt to the United States.
“Although over 400 seats in a A350-900 is not the way I’d want to travel.”
Agreed, Air Asia is not my cup of tea.
30. MPTA-098 | June 22nd, 2009 at 18:08
A better link than the one above:
http://www.thefreelibrary.com/The+phony+%22free+trade%22+lobby:+why+the+so-called+%22free+trade%22+lobby+is…-a0132801308
31. Chris Wallace | June 22nd, 2009 at 19:15
Considering how crucial Pakistan was to the previous Administration’s “War on Terror” and the extremes that Administration went to curry favor with the Pakistani government, I’d be very inclined to view PIA as the exception and not the rule.
In other words, I do not believe the purpose of the Ex-Im bank is to allow Boeing to “gift” airframes to foreign operators using the US government’s funds.
As for China, considering how much of our paper they own, I doubt a default on making their aircraft payments was a real fear. Especially since Boeing and Airbus aircraft purchases are one of the few ways China can make even token gestures at addressing the large trade imbalances they have with the US and the EU.
32. MPTA-098 | June 22nd, 2009 at 19:39
Chris, it was explicitly stated that the November 2002 Boeing-Pakistan airline deal presented an extreme example of how the game is played, so yes, it was “not the rule”. However, there’s a reason Ex-Im is known as “Boeing’s Bank”:
http://www.google.com/search?hl=no&q=ex-im+boeing%27s-bank&meta=&aq=f&oq=
33. Chris Wallace | June 23rd, 2009 at 00:12
Yeah, but Airbus had two, not counting the French throwing €5 billion into the pot so Boeing’s still at a disadvantage.
Seriously, it’s why I tend to not even bother with these types of discussions. Neither company is playing scrupulously fair and neither company is operating at some extreme disadvantage to the other.
Even the WTO case is probably going to end up being used for PR purposes more than as a place for actual remediation.
If Airbus loses, it’s not like the US is going to slap import duties on Airbus planes and even if they do, the rest of the world is not required to. It may raise their costs, but the quality of the product will still move it.
And if Boeing loses, it just means Boeing needs to put on their “A game” and get back to being a company of engineers who understand the value of money, and not money-men who do not understand the value of engineering.
34. Dougloid | June 23rd, 2009 at 02:48
A better link than the one above:
http://www.thefreelibrary.com/The+phony+%22free+trade%22+lobby:+why+the+so-called+%22free+trade%22+lobby+is…-a0132801308
But, sadly enough, a poisoned chalice to take a swig from. Didn’t anyone tell you who the John Birch Society is?
Sheeyit, feller. You could get more mileage quoting wikipedia as source material.
35. Ahmed Sultan | June 23rd, 2009 at 09:50
Their statements are inversely pari passu with the current economic condition. The statements are meant just to serve public relations only. Seemingly, the crash of AF447 earlier this month forced Airbus’s CEO to adopt a bold stance toward mass media.
36. ikkeman | June 23rd, 2009 at 10:27
33. Chris Wallace | June 23rd, 2009 at 00:12
“being a company of engineers who understand the value of money, and not money-men who do not understand the value of engineering”
Best quote I read in weeks - IMHO not necessarily aimed at Boeing, Airbus or even just aerospace…
37. Leelaw | June 23rd, 2009 at 10:53
“Didn’t anyone tell you who the John Birch Society is?”
Doubtful, unless it’s mentioned in some increasingly stale Leahy talking point or contained in a digitized Airbus clip file. Ask yourself why would any rational self-respecting person go into such anorak detail to “refute/positively spin” every last comment which comes over the transom of this (and other) blogs which could possibly be construed as casting any kind of negative light upon a multi-national corporation, unless they’re somehow being compensated for their efforts and/or suffer from OCD?
38. Leelaw | June 23rd, 2009 at 11:20
“Best quote I read in weeks - IMHO not necessarily aimed at Boeing, Airbus or even just aerospace”
Ah, the “engineer’s lament,” however, are the “demands” of the “greedy money men” (e.g. a 250 unit financial break-even, 20% IRR for the WhaleBus[t] program) really all that unreasonable considering the billions they are asked to put at risk to fund the large capital projects of the “commercial” OEMs? IMO, the “greedy money men” are convenient “bogeymen” to rationalize away rather appalling management failures at the OEMs.
39. ikkeman | June 23rd, 2009 at 11:54
for more (balanced?) reporting on the same subject:
http://www.aviationweek.com/aw/generic/story.jsp?id=news/aw062209p1.xml&headline=Airbus,%20Boeing%20Hope%20to%20Convince%20Suppliers%20of%20Their%20Build%20Forecasts&channel=awst
40. MPTA-098 | June 23rd, 2009 at 12:24
Chris Wallace: “Neither company is playing scrupulously fair and neither company is operating at some extreme disadvantage to the other.”
Correct, but I guess you noticed that I wrote that BOTH Boeing and Airbus benefit from export financing from government agencies.
Latest example:
Airbus and the Chinese bank ICBC sign MoU on aircraft financing solutions.
http://www.airbus.com/en/presscentre/pressreleases/pressreleases_items/09_06_22_ICBC_EN.html
Dougloid: “A better link than the one above:”
……was in reference to the first link, which btw, is an article excerpt; while “the better link” contains the whole article; and had nothing to do with the “quality” of the article. However, I’ll agree that I could’ve parseed my words better.
“But, sadly enough, a poisoned chalice to take a swig from. Didn’t anyone tell you who the John Birch Society is?”
Funny enough it could easily have been written by i.e. Pat Buchanan who seems to like to admixture the economic ideas of the american left with US-style national and cultural conservatism.
As for the John Birch Society, I first heard about it in secondary school when I was writing a paper on the Kennedy Assasination. On 10th April, 1963, Major General Edwin Walker (ret.), a leading member of the John Birch Society, was the victim of an assassination attempt while he sat at a desk in his Dallas home. Walker’s wingnut views were cited as an excuse for Lee Harvey Oswald’s alleged attempt on the general’s life shortly before he allegedly shot JFK.
Also, when Sony in 1991 released the Bootlegs Series - volumes 1-3 (rare & unreleased) 1961-1991, I heard for the first time a live recording of Bob Dylan’s John Birch Paranoid Blues.
Bob Dylan Live 1964 - 103 Talkin’ John Birch Paranoid Blues
http://www.youtube.com/watch?v=4I6Sa4zmoKE
Lyrics:
http://www.bobdylan.com/#/songs/talkin-john-birch-paranoid-blues
Well, I wus lookin’ everywhere for them gol-darned Reds.
I got up in the mornin’ ‘n’ looked under my bed,
Looked in the sink, behind the door,
Looked in the glove compartment of my car.
Couldn’t find ‘em . . .
I wus lookin’ high an’ low for them Reds everywhere,
I wus lookin’ in the sink an’ underneath the chair.
I looked way up my chimney hole,
I even looked deep inside my toilet bowl.
They got away . . .
41. Ed | June 23rd, 2009 at 14:30
Hello dear Airbus bashers: gess you all have read about 787’s first flight postponement on Boeing’s website…Toulouse should be made accountable for that!
At least, “Dreamliner” #1 should be ready soon for “slow taxiing” tests (ha ha…)
42. Chris Wallace | June 23rd, 2009 at 14:54
The managers make those “appalling failures”, Leelaw, because their decisions are driven by what the spreadsheets generated by those money men tell them.
As noted, the 787 has now been hit with yet another “indeterminate delay” because of a structural issue found in fatigue testing. This is at least the third time that the 787’s structure has been found wanting and I am inclined to not think it was the engineers who decided to make it “borderline” but management working under the direction (even if subtle and indirect) of the “money men”.
The real irony is management slavishly follows these spreadsheets in the interests of “shareholder value”, but now as the 787 moves into a minimum two year EIS delay, it’s the shareholders who are taking it in the shorts as the stock price is savaged due to all these problems and the delays they generate.
43. Ed | June 23rd, 2009 at 16:01
As a matter of conclusion to this interesting debate: losing the backlog? yes, maybe, but on which side of the pond?
44. Dougloid | June 23rd, 2009 at 16:27
….As for the John Birch Society….-
The point was, on the internet anyone can say anything about anything and anyone else can offer it as proof of anything.= they want.
Example. Many people, (not including me) always point to Garrett Hardin’s notion of “the tragedy of the commons” as proof positive that free resources are inevitably overused. It certainly changes one’s view of the idea to note that Hardin was also a believer in Nazi style eugenics and forced sterilization who ultimately committed suicide. It’s nearly as bad as quoting Dr. Mengele.
You’ve simply got to do more drilling down. Didja know the average person never looks past the first three google screens? And they call it research.
45. MPTA-098 | June 23rd, 2009 at 17:28
Dougloid, I interpreted your comment as having little, or no honourable intent, as it was framed as sort of a “gotcha moment”.
“The point was, on the internet anyone can say anything about anything and anyone else can offer it as proof of anything.= they want.”
True, but you’re making a lot of fuss over nothing., and you know it!
46. Leelaw | June 23rd, 2009 at 20:35
“The managers make those “appalling failures”, Leelaw, because their decisions are driven by what the spreadsheets generated by those money men tell them.”
I don’t think inadequate funding of development is the problem, something is obviously rotten at Boeing and I don’t think the stench leads you ultimately to the money men.
47. Steve | June 26th, 2009 at 12:16
Well for all the Boeing fanboyz endless crowing about the “lack of quality” of Airbus’s backlog, a quick look at the FACTS show a different picture.
At the end of June, Airbus’s widebody orders will number around 50 while Boeing shows 80 widebody cancellations.
48. Leelaw | June 26th, 2009 at 13:22
“At the end of June, Airbus’s widebody orders will number around 50″
To what end? The financial markets seem to think it’s more low margin/no margin deals which do nothing to remedy the dismal financial picture at Airbus in terms of being a source of earnings growth for EADS in the foreseeable future.
49. keesje | June 26th, 2009 at 17:01
“To what end? The financial markets seem to think it’s more low margin/no margin deals which do nothing to remedy the dismal financial picture at Airbus in terms of being a source of earnings growth for EADS in the foreseeable future.”
100% non-sense.
Demand is high, foreseen 787 has to be replaced. Leasing companies and Airbus ask as much as they can. A sellers market. The market speaks for itself.
Oh and maybe the current 787 maybe go a bit further then management and outsourcing. What everybody knows and doesn’t want to know.. Technology, hype, pride, blind loyalty, wishfull thinking..
In a few days analysts will find that open nerve..
(this pict was deleted from a.net last yr as flamebaith..)
50. B380 | June 26th, 2009 at 17:35
Leelaw:
“low margin/no margin deals which do nothing to remedy the dismal financial picture at Airbus in terms of being a source of earnings growth for EADS in the foreseeable future.”
So to what do you attribute the 8bln EUROs, which EADS is sitting on? Airbus is by far the biggest contributor to the EADS earnings and has done well both in terms of earning and margins, forgetting about 2007 and the huge penalties it paid out then. Look at the period of 2000 to 2008.
51. Leelaw | June 26th, 2009 at 17:54
“Demand is high, foreseen 787 has to be replaced. Leasing companies and Airbus ask as much as they can. A sellers market. The market speaks for itself.”
Demand is high and there’s a “seller’s market” at what contract price and sales margin? At this stage in the various aircraft development cycles at the OEMs, and in these market conditions where there isn’t going to be much traffic growth, the only way the A330 line returns to producing compelling margins is if the “Nightmareliner” program actually melts-down and Boeing cancels it. Otherwise the A330 program will soon be winding down as a new-build pax transport.
52. Leelaw | June 26th, 2009 at 18:15
B380:
The financial markets are looking at earnings prospects prospectively, not retrospectively. Margins drive earnings which determines share price. If the financial markets thought EU8B in cash were all that relevant to future earnings and earnings growth, EADS shares wouldn’t be trading for less than 12 euros.
53. B380 | June 26th, 2009 at 18:28
What happened to the share price when repeated A380 delays were announced plus the A400M uncertainty?
Whichever deal Airbus announce it’s the ‘Leahy low margin/no margin policy’ from you. If that was the case, the share price would be zero.
54. Leelaw | June 26th, 2009 at 19:06
“Whichever deal Airbus announce it’s the ‘Leahy low margin/no margin policy’ from you. If that was the case, the share price would be zero.”
You seem to be confusing “low margin/no margin” with “loss making” deals, which would indeed result in a far lower share price. I’m not sure why you’re so annoyed with me because the financial markets seem far less impressed by the financial results of Mr. Leahy’s ongoing “deal-making” than the small cadre of breathlessly fawning and doctrinaire Leahy acolytes roaming the blogosphere.
55. B380 | June 26th, 2009 at 20:03
I am not annoyed, just trying to point out that your constant jibes that every deal Leahy makes is either low or zero margin with the markets unimpressed, isn’t correct in my opinion. Would you invest in a company at 12 EUROs/share if the returns were near zero? I can perfectly see the difference between no/low margins and loss making but for an investor they might as well be loss making if the return is near zero.
Both Dick and Doug have been at it since the last downturn, claiming Airbus is giving planes away for the sake of the market share, since then Airbus has out margined Boeing in every year (2007 excluding). I look at figures to have an opinion, I think, the hate for Leahy makes yours. Yes, he is a loud mouth who talks too much but he is the reason why Airbus has been the biggest contributor to the EADS earnings and hence the 8bln Euro cash position.
56. Leelaw | June 26th, 2009 at 20:56
B380:
EADS own executives have been publicly lamenting declining margins going forward, particularly in the twin aisle business, since IIRC early 2007. Since then, Mr. Leahy, has continued to make deals and “set sales records” which in the view of the financial markets, aside from other structural financial concerns plaguing Airbus, aren’t leading to healthier margins and/or prospective earnings growth. If you want to keep digging in the ever growing financial manure pile spawned by Mr. Leahy’s policies in search of the proverbial “pony,” be my guest, at this juncture the “smart money” probably isn’t.
57. B380 | June 26th, 2009 at 21:52
We have exchanged our views…. time will tell.
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