Airbus gain at the ILA but A350 issues loom

This past week Airbus got a much needed shot in the arm for the failing A380 program when Emirates Airlines ordered 32 more of the super jumbos. This will bring the airlines A380 fleet to 90 airplanes when the last aircraft is delivered in 2017. This deal meets Airbus' goal of selling 20 or more A380 this year but of the 234 total orders for this airplane, over 40% of this number is from one airline. A huge exposure for Airbus if the airline's fortune's go south. Another issue that sticks out is that the airplane has not attracted any new customers at the present time.

Airbus is still struggling to execute its production plan and it remains to be seen if they could achieve their goal of 20+ A380 deliveries this year.. The program continues to be a cash drain on EADS/Airbus' earnings overall and even with the 32 air frame order, the company is far from breakeven on this program.

More ominously, dark clouds are looming for Airbus' other major widebody program, the A350. Saj Ahmad has been poking around and this morning said that the A350 program could find its schedule pushed back by as much as one year from the current mid-2013 delivery of the first A350 to Qatar Airways. Airbus is still struggling with weight issues on the aircraft with some estimates that the airplane could be overweight by as much as 6+ tons overweight and fuel burn impacted by as much as 1% or more according to Saj. Airbus has produced a few composite fuselage panels but because they have to attach the panels to a skeletal structure the fittings used to attach the panels are turning out to be heavier than anticipated. Airbus has acknowledged that they have used up almost all their schedule margin in the program and delays on this airplane along with resources needed to tackle the problems in the A380 and A400M program will undoubtedly present a huge schedule an monetary risk to Airbus as it attempts to pay suppliers, finalize the designs and ramp up production of the A350. Even though Saj is saying up to a one year delay is in the offing...my personal feeling is that it would be 18 to 24 months.

Saj Ahmad: Airbus A350XWB “Delays Inevitable”

Flightblogger: The curious case of 90 A380s

A380 continues to be Airbus' problem child

Ok forget the A400M problems (it's a military program anyway and I can cover that one in a separate post) but the A380 is going to be Airbus' problem child for years to come and, in my opinion, will never make a cent for EADS/Airbus.

The fact that Airbus could only deliver 10 vs the 12 (and that 12 was down from the 45 that Airbus had promised only a couple of years ago) that was promised in 2009 shows that this is a program in deep, deep trouble. Cost have increased and that only means that the breakeven amount for Airbus has only increased.

What is very interesting is that two analyst in the field, Saj Ahmad and Scott Hamilton, whose views sometimes run 180 degrees apart from each other are in agreement about the what Airbus should do with the A380. Both agree that the A380 program should be shut down because of the limited chance that Airbus would profit from the program. Saj Ahmad has advocated the A380 shut down for a few years now before the situation had worsen.

The major issue with the A380 is not the engineering or even the design but the huge flexibility that Airbus gave their customers in customizing the interiors of the A380. You have all these airlines with the A380 trying to out do each other in terms of on board passenger amenities and Airbus' salespeople basically said, in a nutshell, "no problem, we'll do that for you." This, in my opinion, went on without regards to the engineering and production issues that would be involved in producing each and every A380 and is now pacing the A380 production. When you have to hand wire and in some cases put in specialized equipment like plumbing for the showers on Emirates' A380s, the production is going to slow. Airbus is promising to deliver at least 20 A380s (they have to be deliberately ambiguous as the truly don't know how many they'll be able to produce) this, I think, is going to be a big reach for them.

Fleetbuzzeditorial.com : A380 Continued Woes

Fleetbuzzeditorial.com : Is the A380 Making Any Money For Its Customers?

Scott Hamilton : Boeing/Airbus Outlook for 2010

Flightglobal : A380 to remain a financial burden

Financial problems aren't the only gremlins in the A380 program. In the two years since the aircraft's entry into service, the aircraft is still experience technical issues that have grounded flights or forced them to turn around in mid flight. It was widely expected that given the two year delay in delivering the aircraft, that the A380 would be service ready with few technical glitches forcing the cancellation of flights.

But this doesn't seem to be the case as the A380 has been experiencing a large number of technical issues. This presents problems for the airlines as you can imagine, first off off loading over 500 passengers and finding hotels and meals for them. Finally getting other aircraft to get them to their destination.

Airbus Works to Stamp Out Superjumbo Bugs Haunting A380 Flights

At the end of the day even Thomas Enders, EADS CEO, has called the A380 program "a big disappointment."

What remains is can Airbus fix this program if at all? It is clear that EADS and possibly the EU will lose money on this program but if they can lessen the technical issues and get a few more orders, the financial pain may not hurt as much. What can be a really big problem is that if the A380 (and the A400M) continues to take resources away from the A350 XWB then that very important program will be delayed and will suffer the same issues that the 747-8 had suffered due to the reallocation of resources from the 747-8 to the 787. However, with two large programs in serious trouble, the effect on the A350 can be more severe than the 787's delays were on the 747-8.

Other news from the aviation world

We all know the aviation world doesn't revolve around the 787...yet, so here some other interesting tid bits to tide you over until the next 787 update.
Heathrow is demolishing T2 to make way for a brand spanking new T2 that will replace the old T2 and T1. Looks real nice to me especially since T2 has been around since 1955, it's time for a change.
The first phase of the project should be done by 2013 and the second phase should be completed by 2019.

Introducing Heathrow's New Terminal 2

Moving on to other topics. Looks like the A400M may beat the 787 into the skies. There's word going around that first flight for the European military transport is penciled in for November 30 (2009). The aircraft has already completed one set of low speed taxi tests so the Nov. 30th date is not out of the realm of the possible.

A400M Taxi Trials

Lastly, there was an interesting report out on the heels of EADS admission that the A380 is a matter of concern. With only 202 orders over the past 9 years since the aircraft was launched and a lot of customer deferrals for the aircraft, Airbus is going to have great difficulty getting the production rate up to any meaningful number let alone 40/year that they had hoped they would achieve in 2010. The fact that Lufthansa's first A380 has been delayed from the spring 2010 into the summer doesn't make any one feel more confident about the direction ofthis program. This can effect EADS' other programs especially the A350. Here's a very interesting research piece from Gerson Lehrman Group.

Airbus Battles with Continued A380 Woes

787 vs A400M, Irish bookmakers taking bets on first flight

Ok, so who's up for placing a bet? Irish bookmaker, Paddy Power, is giving the 787 1-2 odds for making it into the air before the A400M which is at 6-4. Both planemakers are saying that they expect first flight for these two airplanes before the end of the year.

Boeing's Dreamliner Odds-on For First Take Off