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Airbus ready to axe A380 if fails to win Emirates deal

reuters.com

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Re: Airbus ready to axe A380 if fails to win Emirates deal

#231

Post by cryptonector »

jdietrich wrote: post #51
code4tee wrote: post #6

Boeing played the market correctly here. When everyone was oohing over the A380 Boeing said super jumbos were on their way out and focused on the 787. If it hadn’t been for Emirates buying so many A380s to begin with it would have been a flop from the start (Emirates alone operates almost half of the A380s ever built). The future in long haul is mid-size highly efficient twin engine jets and here Airbus is scrambling…

There was a shift in the aviation market that wasn't entirely straightforward to predict. Airbus bet that the market would continue with a hub-and-spoke model, with lots of regional jets providing connections to hub airports. Boeing bet that the market would shift towards point-to-point service, with direct flights between second-tier airports facilitated by mid-size jets with extended range. Boeing clearly made the…

I wonder if Boeing's execs arrived at their strategy by the appeal of being contrarian to Airbus' bet. Perhaps they felt they had no choice: with the jumbo market fractured they might never be able to profit from it, so why not develop the alternative and hope for the best? No doubt they had data and information from their contacts at the airlines and could sense the brightness of the point-to-point future, but having no future in splitting the jumbo market with Airbus must have been a big factor too.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#232

Post by nimish »

markonen wrote: post #182
junkscience2017 wrote: post #106

Earlier quoted context omitted.

fuel costs killed the 747, not the A380 we know this is true because no one is replacing retired 747s with A380s, they are replacing them with smaller, more fuel efficient planes

Plenty of airlines have replaced 747s with A380s. British Airways, Lufthansa, Air France and Qantas immediately come to mind.

The first three are from countries where Eads doing well is a political thing: Britain Germany and France own chunks of airbus and have a lot invested in it doing well. The former flag carriers are only nominally independent from the state.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#233

Post by alexland »

junkscience2017 wrote: post #117
dghughes wrote: post #65

Earlier quoted context omitted.

Boeing plays a lot of games like getting 40% of its revenue from the US government but crying unfair when other countries get any subsidies at all. Look at the nearly 300% duty it demanded added on to the parts made by their competitor Canadian aircraft manufacturer Bombardier.

Yet Bombardier itself is subsidized to the point where many have suggested it would be easier to just nationalize it...yet no one is critiquing that arrangement

That arrangement is heavily critiqued, particularly that Bombardier is still controlled by private shareholders (and is receiving significant public funding).

It's pretty clear that airplanes are expensive to build, and every large plane manufacturer has government subsidies, but Boeing is being particularly anti-competitive in this instance and is getting away with it.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#234

Post by mpweiher »

valuearb wrote: post #215
mpweiher wrote: post #208

Earlier quoted context omitted.

> competitor to the 747. The A340 The A340 was not competitive. The cost of a 4 engine plane with the seating of a large twin. Beautiful plane, though, very quiet near the front. > Airbus was in a tough spot with the A380 Absolutely. To me it was damned if you do, damned if you don't. A lot of industrial jiu-jitsu going on at that level.

Making a money losing investment isn't a "tough spot". You are only damned if you choose to do it. Not only did they know that 747 sales were falling, they knew point to point was becoming more popular. It was a really easy decision and they blew it. Engineering the world's greatest aircraft is an addictive endeavor, but the numbers have to work and they never did.

> 747 sales were falling

A380 was officially started in 1993.

747 orders per year, starting 1993

2, 16, 32, 56, 36, 15, 35, 26, 16, 17, 4, 10, 43, 72

I don't see "falling". At best, I see cycles.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#235

Post by jsjohnst »

samfisher83 wrote: post #175
myrandomcomment wrote: post #145

Earlier quoted context omitted.

The reason for the tinting is really simple - weight. You have to be able to shade the windows and doing this way is less weight then have pull down screens. Everything in aircraft design here comes down to weight reduction.

Lets say there are 52 windows and each shade weight 2 pounds which I don't think they do. That is 104 pounds on a 380,000lb aircraft. That is .02% of the weight of the aircraft.

> Lets say there are 52 windows

The actual number is almost double that, but that doesn’t negate your point. More than weight, I think it was seen as a “nicety”. I think with the new Gen 2 (and soon Gen 3) Windows, people won’t mind them as much as the newer generations are MUCH darker.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#236

Post by notahacker »

valuearb wrote: post #214
mpweiher wrote: post #149

Earlier quoted context omitted.

Excellent points, and I agree that the switch in the market certainly was a large component, and probably the larger component. I still think that Airbus simply could not not do the A380, just as a defensive move and hedge, and that it may have served a commercial purpose even if it didn't manage to be profitable on its own. > constrained slots [..] certainly money [..] Are slots primarily a money problem? My underst…

How can investing 20-30 billion euros into a massively unprofitable project serve a commercial purpose? How did it here?

Speculatively, by (i) having a more negative effect on the profitability of their major competitor in a duopoly and (ii) by having indirect positive effects on their sales of other aircraft. As unsuccessful airliner programs go, the A380 wasn't that bad, with over 200 actually delivered. Though it would have looked a lot worse if it wasn't for Emirates

There are also likely technologies developed for the A380 which will have long run benefits when adapted for newer generation versions of other Airbus aircraft.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#237

Post by Xixi »

mdasen wrote: post #129
mpweiher wrote: post #33

I think coverage of the A380 often misses the point that at the time, Boeing's 747 simply had no competition, whereas all of Airbus's planes did. So Airbus pretty much had to create the A380 in order to protect its other lines from cross-subsidy by this unopposed cash-cow. And, also missing from almost all the coverage is the fact that this worked: if the A380 is struggling, the 747 is moribund or dead. Official back…

Boeing made a bet on the 787. However, as you note, that's an easier bet to make when you already have the 747. Boeing already had a jumbo. It's easy to make a bet on twin-engines getting certified for longer ocean crossings when you already have the 747. There's a lot of things that Boeing bet on with the 787 and you're totally right that it's way easier to make those bets when you already have the 747. However, the…

"Boeing made a bet on the 787. However, as you note, that's an easier bet to make when you already have the 747. Boeing already had a jumbo."

It's also easier to make this bet when the passenger version of the 767 is struggling for new orders because of the A330. Boeing had the 747 against nothing, the 777 winning and killing the A340, and the 767 losing to the A330. So Boeing made a better A330. That's why I don't see the 787 as such an insightful bet in terms of capacity (size, length, weight and range): it really is pretty close to the A330. And a modern A330 can pretty much do anything the 787 can do, albeit burning more fuel on the way. The real risk was in the development process and industrialization of the 787 though, which proved risky and costly.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#238

Post by mc32 »

valuearb wrote: post #230
mc32 wrote: post #220

Earlier quoted context omitted.

Apparently the Dreamliner is doing better than anticipated, for it has begun turning a profit[1]. With the A380 being developed, Boeing couldn't just stand arms crossed. They had to develop a response --and in this case develop new materials to achieve better fuel efficiency --the discoveries thereof can be reused in future frames. [1] http://www.telegraph.co.uk/business/2017/01/25/boeing-soars-...

That article is misleading, the Dreamliner is at least a decade away from true profitability, if it ever gets there. When Boeing announces it "turned" profitable, they are saying it now costs less to make each Dreamliner than they are selling for. But that is ignoring over $30B in development costs (plus interest) that it needs to earn back before it can ever generate a true economic profit. "In the second quarter of…

Thanks for the insight and clarification. This has to be one of the most difficult businesses to be in, given a poor choice can risk bankruptcy for the developer/manufacturer. If relative success means turning a profit 20 years hence, that's one hell of an industry to be in.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#239

Post by yardie »

markonen wrote: post #182
junkscience2017 wrote: post #106

Earlier quoted context omitted.

fuel costs killed the 747, not the A380 we know this is true because no one is replacing retired 747s with A380s, they are replacing them with smaller, more fuel efficient planes

Plenty of airlines have replaced 747s with A380s. British Airways, Lufthansa, Air France and Qantas immediately come to mind.

It hasn't been a 1-for-1 replacement. At least for BA the 747 has been replaced by the A380, 777, and 787 on many routes. All 3 have different capacities to scale with demand; 787 < 777 < A380. And all 3 are more fuel efficient per passenger than the 747.

Re: Airbus ready to axe A380 if fails to win Emirates deal

#240

Post by mdasen »

mpweiher wrote: post #149
mdasen wrote: post #129

Earlier quoted context omitted.

Boeing made a bet on the 787. However, as you note, that's an easier bet to make when you already have the 747. Boeing already had a jumbo. It's easy to make a bet on twin-engines getting certified for longer ocean crossings when you already have the 747. There's a lot of things that Boeing bet on with the 787 and you're totally right that it's way easier to make those bets when you already have the 747. However, the…

Excellent points, and I agree that the switch in the market certainly was a large component, and probably the larger component. I still think that Airbus simply could not not do the A380, just as a defensive move and hedge, and that it may have served a commercial purpose even if it didn't manage to be profitable on its own. > constrained slots [..] certainly money [..] Are slots primarily a money problem? My underst…

Non-availability is what makes them expensive. It's kind of two sides of the same coin. If the slots were widely available, they wouldn't be a valuable asset. They are a valuable asset only because they aren't available.

The point of looking at the monetary value is that it's a way to quantify how unavailable they are. Land costs money. Where land is scarce, it becomes expensive. Where land is abundant, it's cheap. If landing slots can be acquired cheaply, it means there is availability.

It looks like EasyJet bought their Berlin Tegel operation for €40M including 25 leased A320s. Most likely the landing permits weren't that valuable. Lufthansa is taking on 81 aircraft for €210.

Let's say that each plane has 2 slot-pairs per day. That's €800k/slot for EasyJet and €1.3M for Lufthansa. But let's say half of the value was the staffing and leases.

Land costs money even when it's not in a popular location. If landing slots command a certain amount of money, that's not a bad thing. It gets bad (bad enough that you want a work around) when they become very expensive.

For example, let's say the A380 takes 2x the passengers of a 787. Let's say that based on passenger load, fuel, profitability of point-to-point over hub-and-spoke, etc. flying the A380 costs you $2M more per year than flying two 787s. Well, it looks like you can get a landing permit for well under $1M so it makes more sense to buy the landing permit off someone else.

Things are generally available, even if scarce, for a price. Airlines are choosing the 787 to optimize for their profit and including the scarcity and cost of landing slots as part of that. At most airports, it seems they're available for reasonable amounts of money.

--

In terms of Airbus not being able to not do the A380, do you mean that they had to create a 747 competitor to be prudent or that they had to build the A380?

You might be right that, based on the information and the market at the time, prudence might have demanded a response to the 747. But did it demand building something bigger? Maybe they could have build something marginally smaller than a 747 and been better off.

Airbus had a dream that a much larger aircraft than a 747 would be a winner. It is for certain routes, but not most. For most routes, companies wanted a smaller 747 and Boeing gave that to them in the 787.

At the time, I remember it looking like Airbus was going to get a win with the A380 and that the 787 would be the mistake. Turns out that larger didn't work out.

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