WTO Ruling May Harm Airbus More Than Boeing
September 1st, 2009
The WTO hands over its interim report on the US complaint of subsidies to the European Commission later this week. The European jet maker has much more to lose than its US rival.
Let’s get the hard work out of the way first - yes, both Airbus and Boeing use an array of funds that eventually find their way into commercial airplane programs.
However, that Airbus still seeks to beg for aid to assist in launching new airplane programs underscores its inability to launch a single product using its own cash. Granted, the several billion euro fund it is sat on right now is largely earmarked for colossal cost overruns on the A400M and on the befuddled A380, widely regarded biggest loss-making program in aviation history.
With costs on the A350XWB ballooning to over $17bn*, more than three times the original estimate, Airbus’ repeat performance to secure funds for the project would also risk further anger from the USA – and it is of little surprise to see the potential for the USTR to lodge yet more complaints, particularly in the wake of the handout given by the UK Government earlier this month.
The WTO too, will come into scrutiny here.
Airbus A350XWB Model
Image copyright/owned by FleetBuzz Editorial.com
Playing arbitrator is no easy task, especially when both sides are hoping the organisation goes for the jugular on behalf the plaintiff. Either way, the WTO will emerge a damaged entity for not coming down harder on either the US or EU.
That Airbus has sought funds time and again to develop new airplanes underlines a fundamental fault in trade dealings that the WTO was created to avoid in the first place.
Any reprimand contained in the document next week will, at least on the surface, be a damning indictment of the protectionist stance taken in Europe when it comes to competition – “do as I say, not as I do” mantra springs to mind.
Of course, the usual EADS-paid cereal packet promoters quip on about a level playing field where not even a penny of aid filters into any airplane program, the reality is that the WTO has no alternative but to consider and factor into its ruling the fact that EADS, Airbus and all prior entities before it, have to date, never launched a single commercial airliner without direct state aid.
The bigger issue is just how the WTO plans to ensure that such rules that do not start of a trans-Atlantic trade war and that they are obeyed.
The demand for money on the A350XWB may just be the straw that breaks the camels back at the WTO – they know they have to apply a meaningful resolution that prohibits market-distorting loans, aid (or whatever clandestine method is employed for getting money) and ensure that US is also a party to it for future airplane development programs too.
Of course, the traditionalist view in relation to the Boeing 787 and Japanese involvement on that project is flawed – namely, that as a risk sharing partner under the JADC (Japan Aircraft Development Corp), any money earmarked for the 787 came from Japanese sources, not at the behest of the US. It is also particularly telling that to date, Airbus has never once publicly defamed Japanese involvement on the 787 for fear of losing out on partnership, work or potential sales (despite the fact it has less than 10% of the Boeing-dominated Japanese market).
Without direct aid that Airbus has been breastfed on for so long, it can virtually kiss goodbye to any potential A320 replacement. It has not identified a single centime of how else it plans to raise funds for the balance of the A350XWB bill, nor has there been any guidance on how or what steps it will take to reign in the chameleon-like rates of A380 production – which incidentally have no breakeven figure to allow investors to judge the real financial throttling EADS will suffer in the near term, on top of the likely millions to be paid out for the A400M disaster.
The UK instalment of aid is likely the last we’ll see thankfully. Former CEO Noel Forgeard had stated it would be funded “in-house”, but alas, as with the insider share dealing fiasco that doesn’t seem to dissipate, to assume Forgeard meant what he said is nothing but folly.
Aside from larger contributions by France and Germany, EADS has failed to identify just how it aims to fund the remainder of the A350XWB program.
One final aspect in all this is the KC-X tanker competition. Given the new administration in the US, it is highly unlikely that it would/could endorse an EADS/Northrop Grumman solution in the face of any ruling against Europe - compounded even further in the absence of any meaningful conclusion to the Air France Airbus A330 crash on June 1, 2009.
That, however, is a another issue but not exclusively separate from the WTO’s report.
Yes, the EU will protect jobs at EADS/Airbus for as long as their market-distorting tactics will let them – the real challenge is getting them to abide the WTO’s ruling so that it finally learns to put its money where its mouth is and start swallowing risk.
*Airbus sources
Entry Filed under: Airbus, Airbus A350, Airbus A350XWB, Boeing, Boeing 787, Boeing 787 Dreamliner, Boeing Commercial Airplanes, EADS
48 Comments Add your own
1. Mic-D | September 1st, 2009 at 04:48
Airbus & The EU’s problem is that they are too damn transparent, but I guess thats a downside of being a conglomerate of multiple sovereign nations. At least with other country specific vendors there is only one paymaster to convince and one set of books to be managed. What ever way this decision goes the current protectionist nature of the worlds two biggest economies (US & EU) means that the WTO ruling will be merely philanthropic fodder.
2. Anon | September 1st, 2009 at 06:03
Not sure I agree that the EU or Airbus is transparent - isn’t part of the USTR’s complaint precisely because of the way Airbus is funded?
3. ikkeman | September 1st, 2009 at 07:20
Saj, when you include a citation in your text, try to be a little more thorough than just: “*Airbus sources” - a citation is (IMHO) meant to provide support for your statements, not just act as a smokescreen.
some proverbs spring to my mind:
“There is plenty of sound in an empty barrel’ or “When money speaks, the truth is silent”
You’ve yet to explain why Airbus stands to lose more than Boeing. You make no mention of the fact that there was a bilateral agreement on aircraft development subsidies before the US stepped out of this agreement (which they had every legal right to do, and I think a moral obligation as well).
If anythink, this move by the US on behalf of Boeing indicates they both feel Airbus has reached parity with the american behemoth.
The WTO, as it is a world organisation, will aim to install rules to all parties ascociated to aircraft manufacoring, including Japan, Italy, China, Russia - So why do you think that the Boeing way of having foreign entities pay your development costs is any better than the (transparent?) Euro way? Do you prefer the knowledge and expertise researched and created by the 787 program and payed for by the japanese to be in japanese hands?
Mic-D - I’d say there isn’t that much difference between the european UNION and the UNITED states. For the rest I agree - US and EU shouldn’t navelstare themselves into protectionism. All states that seek to isolate themselves from the world write their own doom.
Anon - and the fact that the USTR can exactly outline how Airbus is funded indicates a level of transparity.
Can you tell me how Boeing funded the 787?
4. Vero Venia | September 1st, 2009 at 08:34
I do not know much about these subsidy stuffs. But, as a French taxpayer I am happy that part of my tax is used to protect jobs here. That is why I am a little bit upset when some engineering and manufacturing works have been relocated to “dollar zone” abroad.
I admit that offshoring could help selling European products. But in my humble opinion, having the right products that are adapted to the market is a much better way to sell.
Not only better positioned products are easier to sell, they provide good profits as well.
If the WTO ruling is against the launch aid, perhaps European government can create other means which are “compliant” with the rules to help European industries.
Creating and protecting jobs is probably one important role of our government. That’s why I am happy to contribute with my tax.
On the other hand, less helping money from the government may force businesses to build products that match market demand.
5. Ed | September 1st, 2009 at 09:59
I hope it makes Boeing fans feel more comfortable about the future of their beloved company. Hey, by the way, any insight about the actual cost of the 787 program for once, and the real percentage of subsidies thereof, be it US, japanese, italian or else?
6. Aurora | September 1st, 2009 at 10:54
I fully agree that if an adverse decision is rendered against EADS, then the first casualty will be the defense business with the U.S. Department of Defense–particularly the tanker. Northrop Grumman, or any other U.S. “partner” for that matter, could ill afford the scrutiny if it is sponsoring a product found to have been inappropriately subsidized by countries intent on taking jobs from U.S. workers. That is certainly how it will be presented by supporters of the KC-777 or KC-767. Northrop Grumman will “circle the wagons” to protect its existing Pentagon business, especially its shipbuilding.
Of course, this presumes an adverse ruling, or at least language that can be interpreted this way. Frankly, I am loathe to predict the outcome since I have always felt that this is one case that has the potential to do irreparable harm to the WTO, since it is so contentious. Consequently, the WTO may offer up some watered down, insipid ruling that satisfies no one and leaves more questions than answers. However, it appears that we many finally find out which way they will rule this week.
Then there is the possibility that the RLI to EADS may be found to be perfectly acceptable. In that case, the U.S. should follow suit in a broad range of industries, not only aircraft. Where will this end? Textiles? Glass making?
7. ikkeman | September 1st, 2009 at 12:35
if any negative WTO language on euro launch aid to airbus products should be taken into account for the tanker competition, than what about the ruling on Euro vs Boeing? - Boeing’s history of scandalous business ethics - the tanker lease deal fiasco - and so on
I don’t claim Boeing is any worse than Airbus - but whatever you may find to fault one, is more than likely also true for the other.
Why would any true american applaud the selection of an inferior product for the armed forces based on political maneuvring. is it so terrible if the euro taxpayer partly financed your new tanker?. It not only puts soldiers at mortal risk, it also reduces the industry’s ability to compete (I totally agree launch aid should be abolished, but it’s not like Boeing never gets anything). Basically, you’d screw the states twice.
ofcourse, If Boeing could convince the USAF (or anyone else) their 767 or 777 would serve as better kc-135 replacements, we don’t need to expend our energie on this topic.
8. Erik Bloodaxe | September 1st, 2009 at 14:16
Ikkeman, you want to talk about scandalous business ethics? Really? With Airbus and it’s crop of over 1200 managers doing insider trading? Yea… right. In any RATIONAL countrym i.e. NOT France, these people WOULD have been prosecuted, and your best boy Johnny Leahy would be in JAIL now… don’t believe me… ask Martha Stewart, and she didn’t even profit from her insider trading, Leahy made several million euro, and still works at Airbus. Yea… squeaky clean that one.
You can whine all you like, but the fact of the matter is that Launch Aid is likely to be found in violation of WTO agreements. Even the EU and Airbus seem to think so, and have basically given the US the middle finger by saying they would go ahead with A350 Launch Aid anyway.
As to your point about the case against the US, yes that case is out there, but the basic premise that any government contract is somehow a “secret subsidy” is idiotic on the surface, and dumb through and through, especially when one considers that EADS earns several billion through this very same method. So what do they want? Cancellation of all government contracts? Good luck with that one. Some how I don’t think L’Republic Francaise is going to want to do with out it’s lovely ICBMs which EADS is the sole supplier of.
Your screed on the tanker is uninformed at best, and pure Airbus marketing spin at worst. But that’s to be expected from you. We shall see what happens. Will reality win over Airbus Bullshit? Or will phantom jobs in the USA triumph over ouvriers in French factories?
9. Buster | September 1st, 2009 at 14:23
Aurora - “In that case, the U.S. should follow suit in a broad range of industries, not only aircraft. Where will this end? Textiles? Glass making?”
The Government has already provided massive subsidies (that are never likely to be repaid) to banking, automobiles, etc.
10. Buster | September 1st, 2009 at 14:26
Re Airbus not providing a “breakeven figure” for the A380.
Has Boeing ever provided such a figure for any of its civil programs? What’s the figure for the NightmareLiner?
11. FleetBuzz Editorial.com | September 1st, 2009 at 14:35
NDA prevents me from revealing the precise source from within EADS/Airbus - the source is proprietary, hence why no definitive figure was inserted - a ballpark figure illustrates the point nicely.
12. MPTA-098 | September 1st, 2009 at 14:56
It will be interesting to see which way this one will go; considering the fact that the U.S. comes out a loser in nine of 10 trade disputes brought before the WTO.
It’s also interesting to note that Mr. Fleetbuzzeditorial is not revealing his identity when he writes/co-authors opinions (with Mr. McVitie) at GLG:
Ruling May Harm Airbus More Than Boeing
August 27, 2009
Analysis by: GLG Expert Contributor
Analysis of: WTO to rule next week on Airbus funding dispute
Published at: http://www.google.com
http://www.glgroup.com/News/Ruling-May-Harm-Airbus-More-Than-Boeing-42789.html
There’s also one self-righteous George Dorkhorn over at GLG writing “opinions”:
http://www.glgroup.com/News/No-Moral-Comparison—EU-handouts-to-Airbus-and-Boeing-business-with-Uncle-Sam-42880.html
DORK: The Europeans must learn how to do business and compete in the real world and subsidies is immoral and anti-competitive.
….translation: Do As We Say, Not As We Do!
Just one example:
America’s ethanol drive
http://www.economist.com/opinion/displaystory.cfm?story_id=E1_RJGDQTN
IT IS not often that this newspaper finds itself in agreement with Fidel Castro, Cuba’s tottering Communist dictator. But when he roused himself from his sickbed last week to write an article criticising George Bush’s unhealthy enthusiasm for ethanol, he had a point. Along with other critics of America’s ethanol drive, Mr Castro warned against the “sinister idea of converting food into fuel”. America’s use of corn (maize) to make ethanol biofuel, which can then be blended with petrol to reduce the country’s dependence on foreign oil, has already driven up the price of corn. As more land is used to grow corn rather than other food crops, such as soy, their prices also rise. And since corn is used as animal feed, the price of meat goes up, too. The food supply, in other words, is being diverted to feed America’s hungry cars.
Ethanol is not much used in Europe, but it is a fuel additive in America, and a growing number of cars can use either gasoline or ethanol. It accounted for only around 3.5% of American fuel consumption last year, but production is growing by 25% a year. That’s because the government both subsidises domestic production and penalises imports.…
—-
FleetBuzz Editorial.com Note:
MPTA-098; the identity issue is a GLG matter that I dont have control over, nor do I co-write with Mr. McVitie - so no, nothing “interesting” at all
13. Chris Wallace | September 1st, 2009 at 15:33
Even if RLI is declared illegal it’s a moot point and both the US and the EU know it. Boeing needs EU carriers much more than Airbus needs US ones right now so there won’t be any “trans-Atlantic trade war” on airplanes and the world economy will preclude one on just about any other trade item since both need the others markets.
I am also not sure that any ruling will be clearly against RLI. In 1992 the US agreed to accept it not just for existing Airbus programs (A320/A330/A340), but also for new programs (A3XX and beyond). And the US tacitly accepted the EU claim that Boeing had benefited from decades of DoD and NASA research and monies by including it in the agreement.
So in now arguing that RLI creates a “market imbalance”, they’ve given the EU the same argument to use against subsidies. So I tend to side with those who believe the WTO will likely rule against both parties to some extent, probably reducing the amount of RLI Airbus is allowed (the current is 33%) and perhaps increasing the minimum interest rate (currently no less than the Central Bank Rate) and Boeing will likely have to reduce the amount of indirect federal and state aid it receives to something less than the current 3% of industry sales and perhaps a clearer ruling on how investments like the Japanese should be treated.
At which point, the EU and US can sit down again and hammer out a new agreement.
14. keesje | September 1st, 2009 at 16:53
The Stitched-RFI Composite Wing Program was successfully completed with ground testing of a 42-ft-long wing box. The box was tested in the Langley Structures and Materials Laboratory under the leadership of Dawn Jegley in 2000, and the box failed at 97 percent of design ultimate load (145-percent design limit load). Boeing is seriously considering using this technology in the next generation of aircraft.
Boeing named its new Stitched Composite Development Center after NASA Langley researcher Marvin B. Dow in honor of his contributions to stitched composites research and, specifically, to the ASM.
http://oea.larc.nasa.gov/PAIS/Concept2Reality/graphics/fig065.jpg
http://oea.larc.nasa.gov/PAIS/Concept2Reality/composites.html
Can you imagine the RAF financing a huge research program to develop aircraft manufacturing technology ? Hell no. But in the the US: “Yes we can.”
http://www.afmc.af.mil/news/story.asp?id=123152111
And this is just composites..
& since when are huge tax cuts no subsidy? Yes Of Course They Are!
15. Paula K | September 1st, 2009 at 16:56
I don’t think it matters what the WTO report contains - in order to avert a trade war, both sides will continue to bitch about the other and let the status quo reign happily ever after.
It is pretty unimaginable that any third party could ever stop every penny being diverted from non-commercial aerospace activities into new aeroplanes.
16. Erik Bloodaxe | September 1st, 2009 at 17:45
Fanboi Keesje opens his yap yet again showing that all he really needs to do is stay with the other Airbus cheerleaders at aholes.net… hey punk ass, you ever heard of ALCAS, AWBA 1 or 2, how about NGCW… of course not, that might require you to do some research and might puncture that perfect Airbus uber alles bubble you’ve created for yourself.
17. Jacobin777 | September 1st, 2009 at 18:00
@Ikkeman…
“Boeing’s history of scandalous business ethics - the tanker lease deal fiasco - and so on”
Boeing has had to pay BIG TIME for the scandal. From fines, to jail to having to rebid to even losing.
18. Ed | September 1st, 2009 at 18:19
The “Ed” in reply #5 is not me, so please don’t confuse me as someone who is not a Boeing supporter.
“I hope it makes Boeing fans feel more comfortable about the future of their beloved company. Hey, by the way, any insight about the actual cost of the 787 program for once, and the real percentage of subsidies thereof, be it US, japanese, italian or else?”
Sure, I think we can do that. Can you do the same for the A-300, A-310, A-32X, A-330, A-340, A-350, and A-380? I won’t even ask you about the failure of the A-400M.
The Real Ed
Then of course, there is my friend Keesje, who is always willing to wave the Airbus flag.
In reply #14 he said;
“Can you imagine the RAF financing a huge research program to develop aircraft manufacturing technology ? Hell no. But in the the US: “Yes we can.”
Didn’t the RAF already do that with the A-400M?
19. keesje | September 1st, 2009 at 20:08
“cheerleaders at aholes.net… hey punk ass”
Boeing cheerleaders, don’t worry. I won’t let Eriks ridiculus dump comments shine on you. He apparently is just a frustrated individual.
20. Skeptic | September 1st, 2009 at 23:05
Saj, it appears that at least one person at Northrop-Grumman reads the Fleetbuzz Editorial! Sounds like they’re concerned enough to “whistle past the graveyard” here.
http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN0149991520090901
[quote]“This dispute has no relevance to and should have no impact
on the Defense Department’s tanker replacement program,”
Northrop spokesman Randy Belote said in a conference call with
reporters. Northrop is teamed up with Airbus parent EADS
(EAD.PA) to bid in the competition against Boeing Co (BA.N).[/quote]
Yeah, keep dreaming.
21. Falcon | September 2nd, 2009 at 02:27
A lot of the data in the editorial is correct but some of the data is directly misleading as are several of the conclusions.
I do agree that this first ruling is likely to go against EU, remember WTO is governments, not companies. The question is to what extent and I am not ready to call it to any degree. It may be that they condemn the idea of using RLI, it may be they set a different percentage than the 1992 agreement as to the amount, interest rates, repayment terms, etc. It is also possible, but I think this is the least likely, that they say it is OK without changes and US can use the same if they so want, as the 1992 agreement.
What also is clear is that there will be nothing public for some time yet. I’m sure both sides will leak information once they get their hands on the report, violating WTO procedures, and claim it went their way. Some time later we will get the final ruling and then we will have even more fanboi comments from both sides.
Partially overlapping we will see the same thing repeat with the EU vs US counterclaim and I expect the ruling in the end will not be too different.
Most probably it will end with both sides getting some trade sanctions they can levy on the other side but it is far from certain they will do so.
Then each side will go back and tweak their ways a little bit so they can state they followed the ruling but they will continue giving support and in the end it will be same but called different.
Problem is that governments need to do this to attract companies and as much as I’d like to see a world without subsidies it will never happen as any good government (running almost like a commercial company, considering the residents as owners) would be stupid not to use it.
So much for the my comments on the case and over to some of the arguments used here.
Saj claims the A350 is three times original budget. Sure, in the same way the 787 fails to reach the cruising speed of its first iteration called Sonic Cruiser. The relation between them are about the same.
The next issue is that somehow EU should file a claim against Japan about the subsidies they give and that it is OK for a US company to benefit when it is a third party receiving subsidies essentially equal to what they claim their competitors should not be allowed to receive. Addressing the later part first think of the case of child labor and the responsibilities the company placing the order have and that part of the argument should be clear to everyone. For the first part EU have no reason to race a case with Japan as EU claims it is OK to do so but if WTO finds it wrong then that should apply equally everywhere and not be excluded because it is indirect.
Based on the “not identified a single centime” comment you would think RLI’s cover 100% of airbus costs. In reality they cover maximum a third of the original budget and nothing of cost overruns so the majority is funded differently. Airbus have ways to get money and they will.
Then somehow the A380 break-even number became an issue and how investors are at a disadvantage because Airbus / EADS doesn’t publish it.
As to the tanker discussion I’m sure a lot of people will walk down a one way street wearing blinds and not look anywhere but at the things they like. Doesn’t make it right but….
Using the A330 crash where there is little evidence and mush speculation is another example of the above mentioned blinds and sadly there are worse cases to be made against Boeing. Mentioned not because I think it is valid but to highlight the lack of validity for the original statement.
Mic-D has a very valid point in that if EU and Airbus kept a lid on most of this information it probably would be less of an issue. Still I prefer it to be open and would prefer both sides to open up much more. Not just in regards to the various forms of subsidies they get but also about profitability per line, etc. I know I will not get it but….
Erik Bloodaxe as usual makes some interesting statements with little substance behind them. The most obvious a tirade about lack of dealing with EADS insider trading somehow anchored with that US deals with it and Martha Stewart is evidence of it. News flash!!! Martha Stewart wasn’t convicted for insider trading but rather obstruction of justice. Further more she did not serve 2 years in prison. She did ~5 months plus ~5 months house arrest and then 2 years probation. Would love to see your evidence for 1200 managers being guilty of insider trading when they couldn’t convict Martha Stewart.
He is however right that a government contract isn’t automatically a “secret subsidy”. What it is depends on the terms of the contract. The biggest difference between many US contracts vs EU contracts is how US companies are guaranteed a profit and the government covering overruns. On average a US DOD contract will have close to 100% overrun. Contrasting that with the terms of the A400M and the trouble EADS / Airbus are in because of them explains how important that difference is. This is one of those cases where things where “corrected” by a minor change so now the US companies are only guaranteed a profit on the original contract and not on the overrun. They still have no risk on the overrun though. Note: This does not apply on every contract but it does apply to a large amount of them and especially when there are high risks of overruns.
Another subtle but important difference is how EU generally require companies to pay to partake in research projects mainly done by others where as US often pays companies to do their own research. Anyone who have been involved in research knows the difference between receiving reports of the result versus knowing the ins and outs of what lead to the report.
Jacobin777, yes Boeing paid a lot of money (and not admitted guilt) and some people have been made scape goats and saved several others. Airbus / EADS has lost a lot of people and suffered from all the disruptions from not only what they did but also for what they didn’t do, happened at Boeing too b.t.w. Airbus / EADS are getting closer to fines and whatever other sentences there may be but let justice have its time. It doesn’t happen overnight in US either.
22. Mike M | September 2nd, 2009 at 15:33
>>>Saj claims the A350 is three times original budget. Sure, in the same way the 787 fails to reach the cruising speed of its first iteration called Sonic Cruiser. The relation between them are about the same.
Man, you really ARE losing it!
The A350 was only supposed to a $5bn project, its now over budget - who cares what Saj claims, the fact is, is that it IS over budget
The 787 is NOT a derivative of the Sonic Cruiser - so to suggest “in the same way” is completely wrong and misleading.
Your comparisons, much like you illogical logic make no sense whatsoever in that rant.
23. Falcon | September 2nd, 2009 at 16:49
@Mike M,
An early version was supposed to be 5 B. The current version never was and it was fully understood that the cost goes up when you make the kind of changes that was made.
I’m glad you think comparing the 787 with the specs of the Sonic Cruiser is misleading. It is absolutely the same mistake to compare the different versions of the A350.
As long as you can’t provide arguments against what you call my rant you really should stop screaming your head off.
24. Scorpio | September 2nd, 2009 at 16:50
>>>>The A350 was only supposed to a $5bn project, its now over budget - who cares what Saj claims, the fact is, is that it IS over budget
I think you need to look up exactly what it means to go ‘over budget’. You’ll find it means that an existing program costs more than was originally planned. The A350XWB is NOT the same plane as the original A350 which was an A330 derivative. Therefore, the plane is at this point NOT over budget as far as we know.
>>>>The 787 is NOT a derivative of the Sonic Cruiser - so to suggest “in the same way” is completely wrong and misleading.
And the A350XWB is NOT a derivative of the A330, like the original A350 was. So his comparison is a very valid one.
Is it costing Airbus more than they originally thought to counter the 787? Yes, that’s pretty clear. Just like it cost Boeing a load more to counter the A330-200 than it thought (remember the 767-400ERX?). Does that mean the 787 programme is now grotesquely over budget? No. Just like it doesn’t mean the A350XWB is.
25. Mike M | September 2nd, 2009 at 17:03
>>>I’m glad you think comparing the 787 with the specs of the Sonic Cruiser is misleading. It is absolutely the same mistake to compare the different versions of the A350.
The A330-version of the A350 is still a closer relative than the 787 is to the Sonic Cruiser.
The 787 has been marketed as efficient where the Cruiser was marketed at its speed. The A350, in all its guises remains one and the same.
Sorry, but your comparative illustrations are simply false, period.
26. anon | September 2nd, 2009 at 17:11
For anyone that is interested:
http://en.wikipedia.org/wiki/Airbus_A350
“XWB will impose a couple of years of delay into the original timetable and almost double development costs from $5.3 billion to approximately $10 billion.”
There’s also a link (number 23) on the Wiki page to this:
“Airbus A350 Cost Rises to $15.4 Billion on Composites.” Bloomberg. 4 December 2006. ”
The URL seems dead but the headline tells the detail required to the debate above I think.
Cheers!
27. Scorpio | September 2nd, 2009 at 17:32
>>>The URL seems dead but the headline tells the detail required to the debate above I think.
No it doesn’t. Everybody is well aware the A350XWB is more expensive and takes more time to develop than the originally proposed A350. That’s because they’re different planes.
>>>The 787 has been marketed as efficient where the Cruiser was marketed at its speed. The A350, in all its guises remains one and the same.
Let’s expand on that ‘logic’ for a moment: the 767-400ERX was marketed by Boeing as being more efficient than the A330. The 787 was / is marketed by Boeing as being more efficient than the A330. Using your logic, I guess we can then conclude that the 767-400ERX and the 787 are ‘one and the same’, right? And thus, that the 787 is grossly over budget, as it cost an incredible lot more to develop than the 767-400ERX would…
See how flawed your logic is?
28. Vero Venia | September 2nd, 2009 at 17:34
This is the link to Bloomberg December 4, 2006:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a0UxkzE9UbWE
29. Vero Venia | September 2nd, 2009 at 17:47
Saj may be right about the adverse impact of the WTO ruling to Airbus.
If direct government funding is not possible anymore Airbus may have some issues financing the next programs.
If the A350 is not affected by the ruling, the following aircraft programs may need other source of financing.
The trouble is that, due to A380 and A350 positioning, there are three programs to launch in the next 20 years:
1. an aircraft family between the current A350 and the A380
2. a short range aircraft family.
3. a 200-250 aircraft family (below the A350-800 but above the short range family)
There could be some funding issues there.
An unfavorable WTO ruling can have a huge impact on the programs above.
That is why I stated that I could not guess Airbus strategy in my blog:
http://verovenia.wordpress.com/2009/08/18/guessing-game/
30. Falcon | September 2nd, 2009 at 17:51
@Mike M,
doesn’t matter if you think the 787 vs Sonic Cruiser is too different example.
The point is that comparing two significantly different versions where the second has all those extra features and expecting them to have the same cost is crazy.
31. Vero Venia | September 2nd, 2009 at 17:52
By the way, this blog entry illustrates two different approaches when extracting cash from unsuspecting shareholders.
http://verovenia.wordpress.com/2009/02/06/yummy-chicken-soup/
32. Mike M | September 2nd, 2009 at 18:22
>>>Using your logic, I guess we can then conclude that the 767-400ERX and the 787 are ‘one and the same’, right?
No, thats YOUR logic Scorpio. The 787, as you know, was not a 767 off shoot.
Thanks for the Bloomberg story/link anon and Vero Venia.
33. Scorpio | September 2nd, 2009 at 19:04
>>>No, thats YOUR logic Scorpio.
Actually, I simple applied the exact same logic you used on the A350 to Boeing and the 787. Thought that was pretty obvious.
>>>The 787, as you know, was not a 767 off shoot.
…and the A350XWB, as you don’t seem to realise, is not an A330 offshoot.
34. Erik Bloodaxe | September 2nd, 2009 at 19:46
Hey Falcon… the 1200 were the number of middle and upper managers identified by the AMF. Geeze you are dense, or intentionally obtuse. As I said a long time ago… Google is your friend.
http://www.guardian.co.uk/business/2008/apr/01/theairlineindustry
http://www.aviationweek.com/aw/generic/story_generic.jsp?channel=comm&id=news/YAWN10047.xml&headline=Market%20Yawns%20at%20EADS%20Insider%20Trading%20Allegations
http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article2580699.ece
http://www.france24.com/france24Public/en/archives/news/business/20071003-EADS-insider-trading-Le-Figaro-Paris-court.php
35. Falcon | September 2nd, 2009 at 20:34
@Erik Bloodaxe,
Unlike you I know how to use google. It can only be used as a starting point and nothing more. Same goes for Wikipedia b.t.w.
If you had done your research you would have known a) Martha Stewart was not convicted for insider trading. b) 1200 is the number of people who they looked in to and from that group they expect 17 to remain.
What was it you said “Geeze you are dense, or intentionally obtuse.”
36. Falcon | September 2nd, 2009 at 21:12
@Vero Venia,
Correct me if I’m wrong but I can’t remember any shareholder being asked to provide funds.
Just to be clear: I’m not saying there hasn’t been (or are expected to be) funds from entities who also are shareholders but I am saying they are provided for other reasons than the shareholding function.
37. Vero Venia | September 2nd, 2009 at 21:46
36. Falcon | September 2nd, 2009 at 21:12
Shareholders don’t provide funds. They own the company and its assets.
Spending corporate money = spending shareholders’ money.
38. ikkeman | September 2nd, 2009 at 22:12
22. Mike M | September 2nd, 2009 at 15:33
” illogical logic ” good one
29. Vero Venia | September 2nd, 2009 at 17:47
not to worry - if direct gov’t support is frowned upon by the WTO report, the EU could simply adopt the US way. The EU could decide it needs to investigate what it would take to produce a short to medium haul, 100pax airplane and happen to give airbus the development contract including a guaranteed profit margin clause.
32. Mike M | September 2nd, 2009 at 18:22
The point about logic is their’s no your or mine about it. it’s supposed to be impartial and not subjective. After phrases like “illogical logic” and ” your logic” - you might want to consider hitting a different note. You might want to try Argument or Opinion.
as to the similarity between the 330 and the current 350, where do you see similarities that don’t exist between the 767 and 787?
34. Erik Bloodaxe | September 2nd, 2009 at 19:46
thanks for your substantiating links. We can finally discuss facts.
What I read is that a total of about 1200 transactions (or transactions by 1200 individuals) were identified as possible insider trading cases. of these 1200 cases, only 21 appear to warrant further investigation. The investigation is ongoing.
39. Falcon | September 3rd, 2009 at 14:25
@Verio Venia,
When you said “extracting cash from unsuspecting shareholders” I understood it as getting new funds from existing shareholders. I don’t think using funds in the company can be described like that but if it is what you meant to say, OK. I would call it approving the project though.
I also think you’re walking down a very dangerous road if you equate corporate money with shareholders money. While the shareholders certainly can make the decision to close the company and distribute the assets between them they are last in line to receive funds with all debts having to be paid first. It is the very same thing that protects them if the company becomes insolvent.
40. Vero Venia | September 3rd, 2009 at 15:36
39. Falcon | September 3rd, 2009 at 14:25
Falcon,
An enterprise is an economic mean to generate profit. A shareholder must be paid because they provide the capital to run the company. You have to understand that a shareholders own part of the company. The usage of corporate money other than for its normal operations should be agreed by the shareholders.
Spending for an investment is often called “Capital Expenditure”. When you invest, you burn some money (part of the capital, which is given by the shareholders). For example when you launch a new product you need a huge sum of money. Either you use your own cash for this investment or you ask a loan from a bank.
A debt contracted by a company is not directly a shareholder’s debt. But any debt will create financial burden (interest payment or the cost of capital). So any normal commercial loan induces a financial burden.
Like a bank which ask to be paid (interest) for its loan, a shareholder also asks to be paid for the capital he gives to the company.
Normally, a company should use its excess of cash either to pay dividend to its shareholders or for investment purposes (if the shareholders agree). In the case of an investment, it is clear that shareholders expect to recover the capital spent plus some profit (return of investment).
I understand why the launch aid irritates the Americans.
It’s like buying a house. I wanted to buy a house. The first thing I did is to take a loan for this investment. I have to pay the loan and the interest whatever happens in my life.
Now, let’s take Joe’s case whose father is quite rich. Joe wants to buy a beautiful villa and the latest Porsche 911 Carrera. He ask his father to provide him with a loan, “Dad, can you lend me some money? I’ll pay you back later when I’ll become Boeing’s CEO. I promise to pay the capital plus ten percent of my annual bonus.”
He then continues, “If I continue to work as unionized machinist I won’t be able pay you back but I’ll keep the house”
That’s too easy for Joe. He does not take any risk. I did.
41. Charles A. Derrow, MD | September 6th, 2009 at 00:39
If anyone is listening, Have you noticed that all of the accidents have been nearly all Airbus planes. That included the flight that went down on that day (9/11)
The Hudson plane was also an airbus plane.
The A33 is the plane that has faulty air speed sensors that have still not been replaced. Only one plane from Boeng has gone down in this period.
Stick with Boeing, People. Do not fly on airbus planes.
42. Paulo M | September 6th, 2009 at 19:09
41. Charles A. Derrow, MD | September 6th, 2009 at 00:39
If anyone is listening, Have you noticed that all of the accidents have been nearly all Airbus planes. That included the flight that went down on that day (9/11)
The Hudson plane was also an airbus plane.
The A33 is the plane that has faulty air speed sensors that have still not been replaced. Only one plane from Boeng has gone down in this period.
Stick with Boeing, People. Do not fly on airbus planes.
Sir, with all due respect - that is a rubbish comment. Or as said by:
22. Mike M | September 2nd, 2009 at 15:33
illogical logic
I’d like to think that all Airbus planes are crap & plastic - and frankly, I could until the recent past. (Way back before the 787, Boeing was happily applying plastic bits to their planes, but they didn’t have to make much noise about it because the 777 was already better than the A340.) Now, I’ve read a fair amount, and I know they’re both heavily involved in plastics. And I still believe Boeing rocks.
To make dumb comments about these two manufacturers’ safety record is incredibly stupid. Planes now are so sophisticated, their operation is similarly a sophisticated set of tasks carried out by apt, sophisticated, competent folk. Accidents now are much more by the incredibly rare freak ‘chance’ of a sequence of events uniting for tragic chain reaction - like that of the A330 on June 1st. (But it is true that those involved underestimated the gravity of air speed sensor problem.)
In any case, you don’t make comments questioning the air safety of a rival - ever - this has a habit of turning around and biting you hard. It’s also cheap publicity, of the wrong kind.
You don’t take safety for granted, you have to keep working at it like this: http://www.boeing.com/news/techissues/pdf/statsum.pdf
By the way, which is that flight that went down on (9/11) and is Airbus? Do you perhaps mean that flight that went down - I think - two months later - an A300 just off JFK, NYC?
Now, this was a WTO post wasn’t it?
43. Paulo M | September 6th, 2009 at 19:14
42. Paulo M | September 6th, 2009 at 19:09
Wrong link posted, here’s the correction:
You don’t take safety for granted, you have to keep working at it like this: http://www.boeing.com/news/frontiers/archive/2009/july/i_ca01.pdf
44. Vero Venia | September 6th, 2009 at 20:24
42. Paulo M | September 6th, 2009 at 19:09 says “To make dumb comments about these two manufacturers’ safety record is incredibly stupid.”
Yes. I fully support your reaction.
Dumb comments on accidents are detestable.
45. Buster | September 7th, 2009 at 12:27
@Charles A. Derrow
I just hope you know more about medicine than you do about aviation.
46. Scorpio | September 7th, 2009 at 20:53
Mr. Carles E. Derrow,
>>>That included the flight that went down on that day (9/11)
What do you mean by that? The planes that crashed on THE 9/11? Because those were Boeings, all four of them (not that that was Boeing’s fault in any way)
The hudson crash: I’m sure you’ll enlighten us how that crash is in any way due to the airplane design: any twin engine plane would probably have experienced the same problem.
You’re an MD, you claim. Then I take it you know a few things about statistical relevance, having gone through college and all. Yet you come here and claim we should ’stay away from Airbuses’ because of a few accidents (completely unrelated accidents, btw) in the last few months, and that ‘only one Boeing has gone down in that time period’. A time period that short is completely and utterly meaningless. Look at the numbers of, say, the last 10 years to get a better picture. You’ll see the safety numbers for both manufacturers are very similar, i.e. both are very good. You’ll see more Boeing crashes, but that’s mainly because there simply are still more of them around.
47. Sun Yao Lin | September 30th, 2009 at 17:49
I recently had the opportunity to fly on a brand new A330 (still had some plastic wrap on the window frames) from Hamburg to London for business, after flying on a much older Boeing 737.
My observations- the Airbus was significantly louder in both takeoff and full throttle situations. The Airbus, had many rattles, especially from the overhead bins which were swaying back and forth as the structure twisted. (I would like to know the data on the body and its torsenal ratings). The much older 737 felt amazingly planted and secure and was significantly quieter. I read recently that Continental has no intentions of switching to Airbus (for fleet) as Boeing’s durability record is second to none. They said they are easy to maintain and require little if any part replacements. (Bloomberg)
Now, I’m not here to argue which manufacture makes a better plane as I know they both make excellent planes. However, that being said, after flying both for years and comparing the 2 in various situations, I can attest to the durability and reliability of Boeing, especially more recently, as Airbus has been plagued with faulty electronics and multiple structural failures. The fact that there are hundreds 20+ year old of Boeings flying without incident also leads me to conclude, Boeing knows how to do it better. Further, this article confirms in my mind that Boeing is the true leader and Airbus will always be following with Government subsidies the only thing keeping them alive. Airbus continues to rush products to the market and this leads to problems. When booking flights, I avoid Airbus at all costs for the fear of another accident. Just two cents from a very frequent business flyer.
48. MPTA-098 | October 2nd, 2009 at 18:06
Sun Yao Lin, I´m not aware of any A330s flying business travelers between Hamburg and London.
An opinionated frequent business “flyer” not knowing what kind of airliner one´s flying on, and at the same time who manages to utter a few wildly hyperbolic claims regarding one of the OEMs, can´t be taken seriously.
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