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 production cost weigh down EADS earnings; Airbus hopes rising dollar will save program

Just a warning on where I stand: I think Airbus pursuing the development and production of the A380 is one of the worst decisions the European company could have made. I know there are many readers who will take issue with that and I certainly welcome your frank and polite response.

EADS just announced that its earnings are being negatively impacted by continued production problems on the A380. Airbus salespeople wanted to have as much customization as possible so that airlines can out do each other in terms of flying amenities. Fine but that obviously presented a huge (ongoing) headache for Airbus' A380 engineers and operations people who have to design and coordinate the massive customization of each and every A380 and has dramatically increased the A380 costs and pushed out the breakeven to beyond 500 airplanes.

Airbus is at such a point in the program that the success or failure of the program no longer hinges on the merits of the aircraft but on the direction the US dollar trades in the foreign exchange markets.

Airbus has come to a point where the destiny of the A380 program is not in their hands anymore they are at the mercy of forces that are beyond their control. World events and financial speculation create volatility in the financial markets thus having the A380 profitability be determined by these forces is very scary. And this is $25bn that we're talking about here. That's not chump change!

Mismanagement is partly to blame but so is Airbus' hubris that they thought they could sell 1000 A380s. Truly the only reason Airbus bought the A380 to market is that they wanted to lay claim to the building the largest passenger aircraft flying. Well they have that distinction but they're also going to have the distinction of making one of the worst industrial production decision ever.

Hans Peter Ring, EADS finance chief is hoping that the dollar appreciation over the next 5 years can help the A380 program breakeven. Take note here, it not customer orders that's going to save the A380 program, it the strong dollar that Airbus is laying its hopes on. The aircraft will garner a couple hundred more orders but with the rumored breakeven at 500 or 600 units, this program will not breakeven on orders alone.

Saj Ahmad of Fleetbuzzeditorial.com also has the same take on the A380 program:

Saj Ahmad: Shoot the Dog (Part 5)

Paris 2009: Boeing to offer KC-777 (& KC-767), possible 777 revamp w/ 787-10 being looked at

Some musing coming out of Paris today.

First of all, and not entirely unexpected, Boeing will be offering up both the 767 and the 777 (presumably the 777F) for the USAF tanker competition against the EADS KC-330 tanker. Thus the tanker saga which has been years in the making continues to get interesting. It'll get it's own Lifetime TV movie by the time it's all done.

Next, Boeing's Commercial Airplanes Chief, Scott Carson, commented on the 777 future and said that Boeing might look at re-winging the popular twin in order to get more range in order to remain competitive with the A350 (specifically the A350-900 and A350-1000). Now it all comes to costs of redesigning the wing vs an all new design to supplant the 777 and remain competitive with the A350. Carson also did not rule out a larger 787 (the 787-10) which would seat about 310 people in a three class configuration. This aircraft would compete with the A350-900 while a re-winged 777-300ER would compete against the A350-1000. Before any of this can happen though, Boeing has to get the 787-8 into the air and into flight testing which will be the subject of another post.

FT: Airbus Hampered By Cultural Differences

The Financial Times put out an interesting and disturbing article on tensions at Airbus’ A380 final assembly line. Read it here.

While it has always been normal to have labor tensions at any global manufacturing firm, it is particularly disturbing to have strife amongst groups of workers who need to work together. Even if you have strife as it seems to be the case in Toulouse, the underlying tensions are nationalistic in nature bought on by the stress of the getting the A380 out the door quickly. In other words the disputes have become the French vs. the Germans.

Airbus was created with the hopes of pooling the aerospace talent across the European continent in order to be more competitive with the US manufacturers and they have succeeded in that. Times were good and the concept of the different European nationalities working together seemed to have been validated as workers of different nationalities got along . But that was when times were good but now with the pressures of delivering the A380s weighing on them as well as a host of other negative developments (A400M, the insider trading investigation, and Power8) Airbus workers have now set up each other and the battle lines have been drawn along nationalists lines.

While it’s certainly not going to bring down Airbus it can seriously hurt the A380 program at a critical point of the recovery plan and could lead to further delays.

Breaking: GAO sustains Boeing's protest of the KC-X Tanker award

This is out on Bloomberg but the GAO sustains Boeing's protest on the award of the KC-X (KC-45) tanker contract to EADS/Northrup Grumman. This is not over by a long shot folks!

Here is more information: GAO says review of record led to conclude Air Force made errorsThese errors could have effected the outcome. GAO recommends that the USAF re-open the talks with the competitors. They also recommend that the Air Force reimburse Boeing forthe cost of the protest! GAO says the Air Force improperly boosted the Boeign cost estimate and they didn't asess the relative merits of the proposals and the the Air Force held misleading and unequal talks with Boeing. The Air Force violated the evaluation provisions.