Airbus New A350 Closes Gap With Boeing, Emirates Says

boomer535 · Post by **boomer535** » 16 Apr 2007, 17:44

I would think it would be hard for Airbus to compete on price. Right now the dollar is pretty low and the Euro is riding high. I would also think the one piece carbon barrel construction (787) would be less labor intensive and thus cheaper then the panel on frame fuselage (A350). I wouldn't be suprised if Airbus went the one piece barrel route in the end, but this could cost them another year that they don't have. While Airbus is playing catchup with the A350 now would be the time for Boeing to announce Y1 (737 replacement) and go for the kill. I think Boeing will wait and see how the A350 turns out before going with Y3 and replace the 777. I like the Dreamliner name a LOT better then the XWB name. I mean "Xtra Wide Body" to me means overweight.

chunk · Post by **chunk** » 16 Apr 2007, 17:48

smokejumper wrote:Airbus CAN however, compete on price. Since they are not absolutely certain of the A350's final performance (only engineering estimates and paper studies exist today), Airbus can only compete on price. If Airbus offers an attractive enough price to offset higher (IMO) fuel and maintenance costs, they will sell planes to airlines wanting either (1) a 777 size plane, or (2) a less efficient plane (larger planes cost more to operate) than the 787 whose acquisition price is low enough to offset increased operational costs. This is probably how they have interested Emirates and possibly US Air.

Unless you know something I don;t the 787 is pretty much a plane who's performance is based on estimates and paper studies as well. No-one knows what the actual results will be until it is in the air so in that respect surely it is no different. The only difference is that it will be in the air quite soon.......

I still think the 380 is going to be a big winner when it comes into service. The hub and spoke system is not going to disappear anytime soon because quite simply, point to point is not efficient on a large scale. There are so many regional airports feeding traffic in good numbers to the hubs that the airlines would be nuts to get rid of it. THat said - the traffic is never enough in most cases to sustain a point to point service. That and uncertain fuel prices, uncertainty in what the various governments are going to do regarding emmissions etc mean the 380 could clean up.

boomer535 · Post by **boomer535** » 16 Apr 2007, 18:16

One big difference is Boeing has already built all of the major subassemblies of the 787 this is important because Boeing knows how much the completed AC will weigh. The engines for the 787 are already running so Boeing knows how they will perform. the engines for the two larger A350 AC are still in development. Airbus has not made any parts or have a really good idea how much the panel on frame fuselage will weigh (my opinion). Because of this Boeing has a MUCH better idea of how the 787 will perform. The A350 isn't even a paper Airplane until Airbus freezes the design. That said I think the A350 will be a fine AC, good enough in fact to make Boeing come up with Y3 (777 replacment). I think the A380 will do well too, but the 748 will keep it from totally running away with the VLA market. The 748F will do well too.

smokejumper · Post by **smokejumper** » 16 Apr 2007, 20:15

Several points that I want to respond to:

Chuck from Scotland has written "...point-to-point is not efficient on a large scale." I feel that overall there are more people that want frequent service between non-mega cites (say, Edinburgh, Scotland to Denver, Colorado, USA) than want to travel between mega markets (like Tokyo to Hong Kong). There will be few daily direct flights between smaller city pairs. Rather you will fly from Edinburgh to London, London to Chicago and, Chicago to Denver. This is not (IMO) efficient either in the sense of time, nor fuel, nor airplane operating costs, etc. Rather, a point-to-point service is much more efficient.

Boomer 535 from Spring Hill, Florida, USA has written "I would think it would be hard for Airbus to compete on price. Right now the dollar is pretty low and the Euro is riding high." I agree, but am not sure how much government financial assistance Airbus might receive to design and build the A350. Say the development costs are $12 billion and governments put up the money with the stipulation that re-payment will start after 500 units are sold. In this hypothetical case, the unit-development costs for the first 500 planes will be $24,000,000 per plane. Underwriting prices at this level (and I repeat, this is a hypothetical example) would give Airbus a significant advantage over Boeing. Yes, I know that Boeing has received some local government infrastructure and tax subsidies and that there are technology transfers between military and civilian programs, but it has not received direct US Government subsidy for development of a specific commercial plane. If Airbus can cut their price by $24,000,000 per plane for the initial 500 sales, they will get a big leg up on Boeing.

I’d like to recognize this forum for its availability so we can discuss ideas and opinions. Few of us have direct insight into the bowels of Airbus and Boeing management decisions, so we discuss and speculate on our ideas and opinions. Its lots of fun and stimulating – thanks Luchtzak!

boomer535 · Post by **boomer535** » 16 Apr 2007, 20:33

I was hopeing the WTO would stop the launchaid that Airbus gets but I think this is a dream. This Launchaid does come at a price though. Look at all the trouble Airbus is having with their power 8 plan to cut costs. I wonder if Airbus will get their Launchaid for the A350 if they cut a bunch of jobs. I think Boeing will run a tight ship and keep the costs down. As long as the Dreamliner delivers on its promises Boeing will be in great shape. The next big fight is going to be the single aisle AC. I think Boeing can really hit a homerun here too.

smokejumper · Post by **smokejumper** » 16 Apr 2007, 21:03

boomer535 wrote:I was hopeing the WTO would stop the launchaid that Airbus gets but I think this is a dream. This Launchaid does come at a price though. Look at all the trouble Airbus is having with their power 8 plan to cut costs. I wonder if Airbus will get their Launchaid for the A350 if they cut a bunch of jobs. I think Boeing will run a tight ship and keep the costs down. As long as the Dreamliner delivers on its promises Boeing will be in great shape. The next big fight is going to be the single aisle AC. I think Boeing can really hit a homerun here too.

Agree. I do wonder about the launch-aid issue though. To control costs, Airbus must institute the Power 8 Program which calls for streamlining the company and reducing unnecessary costs (labor, etc.). This will be most unpopular and labor can be expected to protest and governments can be expected to complain. However, in the end, I think the governments and others will come t the realization that if they want to have an efficient and comptitive Airbus they'll have to accept it.

David747 · Post by **David747** » 16 Apr 2007, 22:01

The challenge to Boeing as some have already said here is that the plane is not only delivered on time, but performs as Boeing has said the plane would perform(fast, more efficient fuel burn etc.) As for the A350, I believe Airbus will settle on a final design by the Paris Air Show, and if they do, this Emirates order might become a reality.

boomer535 · Post by **boomer535** » 17 Apr 2007, 00:28

smokejumper wrote: I do wonder about the launch-aid issue though. To control costs, Airbus must institute the Power 8 Program which calls for streamlining the company and reducing unnecessary costs (labor, etc.). This will be most unpopular and labor can be expected to protest and governments can be expected to complain. However, in the end, I think the governments and others will come t the realization that if they want to have an efficient and comptitive Airbus they'll have to accept it.

Agree here. But it may take years for Airbus to complete power 8. And they will be bleeding money all the way. IMO the A350 is for Airbus what the 747 was for Boeing, make or break.

achace · Post by **achace** » 17 Apr 2007, 02:35

I think the FAA have thrown a potential spanner into the Boeing 787 production timeframe with this new requirement to test the composite wing and fuel tank fire resistance.

The problem may be the composite being too good, and will not allow heat dissipation the way aluminium does.

Seem to recall the little Eclipse 500VLJ has had to scrap composite fuel tanks in favour of aluminium, but not sure if it was the same issue.

Just maybe XWB being a bit behind could have some benefits for Airbus, while Boeing tackles the material issues.

Cheers
Achace

chunk · Post by **chunk** » 17 Apr 2007, 11:52

smokejumper wrote:Chuck from Scotland has written "...point-to-point is not efficient on a large scale." I feel that overall there are more people that want frequent service between non-mega cites (say, Edinburgh, Scotland to Denver, Colorado, USA) than want to travel between mega markets (like Tokyo to Hong Kong). There will be few daily direct flights between smaller city pairs. Rather you will fly from Edinburgh to London, London to Chicago and, Chicago to Denver. This is not (IMO) efficient either in the sense of time, nor fuel, nor airplane operating costs, etc. Rather, a point-to-point service is much more efficient.

I’d like to recognize this forum for its availability so we can discuss ideas and opinions. Few of us have direct insight into the bowels of Airbus and Boeing management decisions, so we discuss and speculate on our ideas and opinions. Its lots of fun and stimulating – thanks Luchtzak!

I see you're first point....but I don;t agree in the first case. To be honest I am thinking of very few city pairs from Scotland for example that could work. The only way they will work is if they feed into a hub as is the case now with US into Philly, Delta in to Atlanta etc. The example of Edinburgh to Denver is a good one in my view as it proves my point exactly! There is no way in hell a route like that would survive unless Denver was a hub to go onto other places....maybe its different from other countries but Scotland as an example hasn't enough traffic in my view. Where it may work is something like Manchester to Denver....but even then - they could do that now if the demand was really there. That is why I am sceptical about point to point. As fuel prices at best are going to be unstable I am not sure too many risks are going to be taken and the 787 purchases will simply replace old 767's on current routes....other than the natural growth in flying public of course that we see.

Also, if we look at the behaviour of the biggest and best airlines out there and we see consolidation into the hubs rather than the opposite - even where they have the resources. BA could diversify from LHR, AF could from CDG but they don't - why is that? Continental are an example but even they only send 757's over the pond to the regions to New York. So even it is to a hub in reality.

As for point 2 - well said!

boomer535 · Post by **boomer535** » 19 Apr 2007, 13:49

I think that a small number of Airports will always be big hubs. There will be a demand for VLA in the future. The problem with the A380 is that it has competition. There are a lot of 744's that are being replaced now and in the future, but not all will be replaced with another VLA. Some are being replaced with 777's, some with 748I's, and some with A380's. I think the A380 will get it's share of orders but in 8 to 10 years Boeing will come up with the 777 replacement that will make it obsolete. In the end I think the A380 will do fine in service but won't make a dime for Airbus. Now the A350 is another story. This AC has the potential to bring in a lot of cash. The Paris Airshow is going to be big for Airbus this year IMO.

boomer535 · Post by **boomer535** » 20 Apr 2007, 00:52

smokejumper wrote:Boomer 535 from Spring Hill, Florida, USA has written "I would think it would be hard for Airbus to compete on price. Right now the dollar is pretty low and the Euro is riding high." I agree, but am not sure how much government financial assistance Airbus might receive to design and build the A350. Say the development costs are $12 billion and governments put up the money with the stipulation that re-payment will start after 500 units are sold. In this hypothetical case, the unit-development costs for the first 500 planes will be $24,000,000 per plane. Underwriting prices at this level (and I repeat, this is a hypothetical example) would give Airbus a significant advantage over Boeing. Yes, I know that Boeing has received some local government infrastructure and tax subsidies and that there are technology transfers between military and civilian programs, but it has not received direct US Government subsidy for development of a specific commercial plane. If Airbus can cut their price by $24,000,000 per plane for the initial 500 sales, they will get a big leg up on Boeing.

According to this story in the times Airbus is offering A350's to Emirates and others for over 50% off!!!!
http://business.timesonline.co.uk/tol/b ... 680645.ece
You hit the nail right on the head, I smell Launch-aid BIG TIME!!

smokejumper · Post by **smokejumper** » 20 Apr 2007, 02:05

50% discounts may get sales, but who will pick up the loss? Published list prices of $189 to $215 million sound like a profitable program, but if the actual sales price is $102 million, the breakeven point will be quite high. Even with my limited mental capacity, I suspect that goverment aid will be needed and this will present the WTO with more business.

If Airbus can not sell the product on its' own merits as an economical and viable business machine, then I fear that version 5 of the A350 is not a good design. I've said it before but if you make the capital acquisition costs of a product low enough, an operator can make money and pay for more fuel and maintenance.

This reminds me of the old antage "Sell a product at a loss and make it up with volume"! Airbus needs a successful product, not a cut-rate one; they need to design a plane that carriers want, not willing to buy cheap.

CX · Post by CX » 20 Apr 2007, 04:10

Are these sources reliable..?
And Emirates is a special case, they do have like 43 A380s on order and sucking them also to the A350, will make them one of the largest Airbus operators. US is a sole-Airbus operator and Airbus would likely to want to continue that way, and Finnair, like other airlines who has ordered previous versions of A350s, it is kinda fair for them to get the plane at the original price since they didn't request the change. I'm sure no one can live too long with discounts of 50%.

TexasGuy · Post by **TexasGuy** » 20 Apr 2007, 04:19

50% seems a bit too high. I dont believe that. There are too many hands(governments) involved in Airbus to allow something like that to occur. I could be wrong, but i dont think that i am. I guess time will tell on this one

DFW · Post by **DFW** » 20 Apr 2007, 06:04

I can believe the 50% figure. 40% discounts have been given away in the past, although in extremely rare situations. If Airbus feels that it needs the A350 in order to remain a major player, and it gets government launch aid, then 50% is not out of the question.

However, I think it is very shortsighted. Selling at those prices means the breakeven point would be somewhere near 1000 orders. Launch aid may be conditional on no layoffs in the lending nation. That would unravel the painful but necessary restructuring of Power8. Worst of all, Airbus would never develop into a lean enterprise capable of products that sell on their own merits. When (not if) other major players enter the market (think China) with cheaper products, would Airbus be competitive enough to survive? My bet is that Boeing would survive because it would be streamlined enough to counter cutthroat discounts through superior products. Would Airbus?

TexasGuy · Post by **TexasGuy** » 20 Apr 2007, 06:08

In the scenario mentioned above, i see the answer in a transatlantic alliance between Boeing and Airbus. Stranger things have happened. No way will the western world fall victim to anything by way of aircraft coming from China.

David747 · Post by **David747** » 20 Apr 2007, 06:13

I don't see Airbus giving Emirates a 50% discount. I do believe there will be a discount on any order by Emirates. Either way, if or when Airbus lands this 100 plane order for the A350, this would be the shot in the arm that Airbus needs to get a final configuration of the plane, and more importantly, to slow down the juggernaut the 787 is.

boomer535 · Post by **boomer535** » 20 Apr 2007, 10:12

According to the article Emirates is getting free AC on top of the discount. The extra free AC are compensation for the A380 being late. I can't believe everything I read but I know that Airbus needs the Emirates order a lot more then Boeing does.
The Paris Airshow will be really wild this year!!! I can see hundreds of orders announced.

smokejumper · Post by **smokejumper** » 20 Apr 2007, 14:45

The big question (for me) is the quality of the A350 vs. the B787.

Is the A350 as competitive as Mr. Hotwind Leahy says it is. Will it have similar fuel burn, will it have the same maintennace requirements (and agreed, we don't know how the B787 will perform in commercial service), how well can it be repaired at remote airports, etc.

If the life-cycle operating costs of the A350 are higher than Boeing's 787, then acquisition cost is the best way Airbus can compete in a life-cycle cost analysis.

Boeing has indicated that the 787 will have lower manufacturing costs (due to lower assembly costs and labor hours, pre-wired and plumbed sections, etc.) than conventional construction. Airbus' announced design will use carbon panels over alunimmum frames which require a lot of labor time, similar to today's methods. Several observers have guessed that Boeing's plane willl cost less to manufacture which will give them a more competitive price structure.

Perhaps Airbus is offsetting Boeing's perceived cost advantage by just cutting the price, cost recovery be damned!

Who knows? Anyway, the Paris Airshow will be fun to watch; it'll be like watching 2 women mud wrestlers go at it - fun to watch, but messy!