Richard explains thus:
1. The 787 delay is purely logistical. The production challenges are daunting, but the design is said to be right on target in terms of weight and likely performance. By contrast, the A380 weight numbers were always high relative to aircraft capacity, and according to some customers–notably Emirates–it’s overweight. The A380 production numbers stay anemic for the next year probably because they have made (and are making) design modifications intended to remedy this problem. The first batch will likely be overweight, and the implementation of changes will suppress the ramp up.
2. The 787 has enormous broad commercial appeal in terms of both orders AND pricing. This incentivizes everyone in the supply chain, ensuring adequate investment by everyone as they look forward to reaping the benefits. A380 suppliers are merely incentivized by 25-30 planes per year and a likely total of around 300 aircraft.
3. There are no other important programs that require pressing attention and siphon off financial and engineering resources. Airbus needs to worry about the A350 XWB and A400M. This is particularly true because the A350 DOES have enormous broad commercial appeal–already it has more orders than the A380 has received over a much longer time period Boeing can stay focused on its single most important project.
4. One guy is in charge. Boeing might have needed to supervise some of its first tier suppliers a bit more closely, but they have the power to impose changes to the supply chain as they see fit. Airbus has two major power centers at the top who argue over work apportionment.
There’s a lot at stake with the -1000. The -800 looks useless against the 787-8/9. The -900 could be good against the 787-10, but we don’t have enough information yet, and in all likelihood they might be well matched (although if Boeing can get a 7500 nmi 313-seat design out of the -10, that will be tough to beat. The A350-1000 is the only potential headache for Boeing, and could force them to commit serious resources to a 777 replacement or major update.
That said, the A350-1000 might be tough to execute. Airbus should give it priority over the ineffectual -800. The biggest variable is engine performance, and that’s why they should try hard to get two competing engine providers. Funny thing–Rolls makes good engines, but the only widebodies built with Rolls as a sole source have been disappointments on the market–L-1011 and A340-500/600.
http://fleetbuzz.wordpress.com/2007/10/ ... ia-speaks/
Richard Aboulafia Speaks
Moderator: Latest news team
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peacemaker
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Eventually publications will start to ignor ethe prattlings of this utter buffoon. Is this not the guy that was quoted in an 'impartial report' only for it later to be uncovered that the report was paid for by Boeing? Sure I read that somewhere....still as long as some people take his word as some sort of gospel then his crap will appear in the media.
Yep, he was part of a report on the VLA market that turned out to be a Boeing backed study.chunk wrote:Eventually publications will start to ignor ethe prattlings of this utter buffoon. Is this not the guy that was quoted in an 'impartial report' only for it later to be uncovered that the report was paid for by Boeing? Sure I read that somewhere....still as long as some people take his word as some sort of gospel then his crap will appear in the media.
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smokejumper
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Whether you agree or disagree with his viewpoint! this man has more knowledge of aviation matters than all of us put together, and deserves a lot of respect, his opinion is highly valued by the airline industry and impartially is paramount in his profession with the Teal Group.
His qualifications speak for themselves.
His qualifications speak for themselves.
Richard L. Aboulafia
Vice President, Analysis
www.RichardAboulafia.com
Richard is Vice President of Analysis at Teal Group. He manages consulting projects in the commercial and military aircraft field and analyzes broader defense and aerospace trends. He has advised numerous companies, including most prime and many second- and third-tier contractors in the US, Europe and Asia. He also writes and edits Teal Group's World Military and Civil Aircraft Briefing, a forecasting tool covering over 135 aircraft programs and markets.
Richard writes publicly about aviation and defense, with numerous articles in Aviation Week and Space Technology, the Wall Street Journal, Financial Times, Military Technology, Avmark Aviation Economist, and Jane's Intelligence Review. He has a regular column in AIAA's Aerospace America. Frequently cited as an aviation industry authority by trade and news publications, Richard has also appeared on numerous television news and radio programs including ABC, BBC, Bloomberg, Reuters, CBS, CNN, NBC, NPR and PBS. He has spoken at numerous conferences, including ATRIF, NAFA, NARA, Network for Aerospace Management in Europe (NAME), and Speednews. He presents a yearly lecture to the National Defense University/Industrial College of the Armed Forces and has served as an expert witness in aerospace markets.
Before he joined Teal Group in 1990, Richard analyzed the jet engine market at Jane's Information Group, served as an aerospace industry consultant for an international trade advisory company and supported research projects at the Brookings Institution. He has a Masters degree in War Studies from King’s College, University of London and a Bachelors degree from George Washington University. He lives in downtown Washington, DC with his wife, Casey.
There are no strangers in the world, just friends we have yet to meet.
I would have to say he has laid out the case pretty well, and you keep hearing the rumblings of those issues.
Fact: The A400M has just announced a 6 month delay. You can say what you want, but the reality is that the A400M is an Airbus project, not an EADS. Its problems, penalty payment and starring come out of Airbus, not EADS.
That puts Airbus and EADS in a dilemma. Do you make good on your fixed price commitment for that limited project, or do you move those resources to the A380 and A350 (and remember, UPS canceled their A380F order not because it was going to be late, but because Airbus quit working on it).
This is another bad situation Airbus got itself into because of ego, and at the time, Airbus tail wagging the whole EADS dog.
They had no concept that a military project is not a civilian project. Worse a European military project, where every country wants its own major variations of the concept (note that when other countries buy the C17, they accept it exactly as is in US production, knowing that you screw up the budget when you ask for your own deserves).
Upshot is, its going to bite them one way or the other. And they are going to loose any future sales they hoped to make to the far more effective C17 (cost wise you get 4 times the aircraft for your buck).
A380: I was reading some figures on this. The one key fact was that the break even point for it was stated, that break even was based on list prices. It stated that discounts as much as 40% were being given (and I have seen some that looked like at cost).
It probably is still overweight. It looks like that still meets what some airlines need, but it also means that there is a huge hammer for the airlines in negotiation price breaks.
Airbus thinks they will sell 800 of them in 20 years. If they do that all they do is break even cost wise, and resource wise, they have starved the company of what those same people could do on a revenue making aircraft.
The odd situation is, they have a production ramp up to 40 a year, when they only have to do that to meet delivery dates. Once that’s passed, at the current sales rate, that will be far too high.
Airbus made huge mistake thinking they could produce this aircraft, and then ask whatever they wanted for it like Boeing did for the 747. That business model is going down like the titanic (and there is a huge amount of selective editing in that that business model was based on Freighter sales as well, all of which have evaporated, and an extremely attractive 747-8F to keep it from ever coming back).
A350: The assessment seems very much in line with what I think. The A350-800 cannot touch the 787, period.
The A350-900 is maybe a bit more uncertain, it may win 30% of the market. Not because its that good, but because the airlines are trying to keep competition in the selection process.
The A350-1000 is the real competitor. It does what they should have, and that’s target one segment or the other, not try to blur across segments. On paper its looks good. It still has to be executed, and if they were using familiar technology, that would be right up Airbus ally. They are not. They are trying to introduced a totally new manufacture technology for a one time use, amid impossible demands on their resources. Like Boeing on the 787, they will stumble on some part of this. They will be lucky to deliver by 2015. And will it sell enough to get any return on the project?
Boeing will be well through the rough part of their current projects, and will have an answer to that. What they do is going to be interesting. The time lines (even on Airbus schedule) means that they can let Airbus lock itself into a design, and then respond, and have a product out at the same time as Airbus.
Fact: The A400M has just announced a 6 month delay. You can say what you want, but the reality is that the A400M is an Airbus project, not an EADS. Its problems, penalty payment and starring come out of Airbus, not EADS.
That puts Airbus and EADS in a dilemma. Do you make good on your fixed price commitment for that limited project, or do you move those resources to the A380 and A350 (and remember, UPS canceled their A380F order not because it was going to be late, but because Airbus quit working on it).
This is another bad situation Airbus got itself into because of ego, and at the time, Airbus tail wagging the whole EADS dog.
They had no concept that a military project is not a civilian project. Worse a European military project, where every country wants its own major variations of the concept (note that when other countries buy the C17, they accept it exactly as is in US production, knowing that you screw up the budget when you ask for your own deserves).
Upshot is, its going to bite them one way or the other. And they are going to loose any future sales they hoped to make to the far more effective C17 (cost wise you get 4 times the aircraft for your buck).
A380: I was reading some figures on this. The one key fact was that the break even point for it was stated, that break even was based on list prices. It stated that discounts as much as 40% were being given (and I have seen some that looked like at cost).
It probably is still overweight. It looks like that still meets what some airlines need, but it also means that there is a huge hammer for the airlines in negotiation price breaks.
Airbus thinks they will sell 800 of them in 20 years. If they do that all they do is break even cost wise, and resource wise, they have starved the company of what those same people could do on a revenue making aircraft.
The odd situation is, they have a production ramp up to 40 a year, when they only have to do that to meet delivery dates. Once that’s passed, at the current sales rate, that will be far too high.
Airbus made huge mistake thinking they could produce this aircraft, and then ask whatever they wanted for it like Boeing did for the 747. That business model is going down like the titanic (and there is a huge amount of selective editing in that that business model was based on Freighter sales as well, all of which have evaporated, and an extremely attractive 747-8F to keep it from ever coming back).
A350: The assessment seems very much in line with what I think. The A350-800 cannot touch the 787, period.
The A350-900 is maybe a bit more uncertain, it may win 30% of the market. Not because its that good, but because the airlines are trying to keep competition in the selection process.
The A350-1000 is the real competitor. It does what they should have, and that’s target one segment or the other, not try to blur across segments. On paper its looks good. It still has to be executed, and if they were using familiar technology, that would be right up Airbus ally. They are not. They are trying to introduced a totally new manufacture technology for a one time use, amid impossible demands on their resources. Like Boeing on the 787, they will stumble on some part of this. They will be lucky to deliver by 2015. And will it sell enough to get any return on the project?
Boeing will be well through the rough part of their current projects, and will have an answer to that. What they do is going to be interesting. The time lines (even on Airbus schedule) means that they can let Airbus lock itself into a design, and then respond, and have a product out at the same time as Airbus.
Amazingly the bulk of the Aviation Industry and most of it's analyst's agree with you. Even Doug McVitie the Ex Airbus sales honcho says the same thing in his interview found elsewhere in this forum. Of course that won't matter. and you know why. 
There are no strangers in the world, just friends we have yet to meet.
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smokejumper
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Airbus will continue to put pressure on Boeing, but I do not think they will do so profitably on very large aircraft (the A320 IS a cash cow). They can not make money with the A380 (beautiful as it is) due to the large sales discounts needed and the time value of money. Their delay of 2 years has cost Airbus the probibility (not possibility) of profitability (sales are low, no substantial money has come in, costs are higher than expected, etc.).
Airbus is in the same position as the US in Iraq; they can not leave the fray, but it is very expensive to stay. When you've got a tiger by the tail, you can't let go.
The A350 is another story. It is not compeitive (except possibly in price) with the 787-8; it can compete with the 787-9 and, can whip the pants off the present 777. Boeing now needs to develop a new strategy (they probably have already) to compete in this market. If they replace the 777-200 passenger with the 787-10 series, it will undercut the manufacturing base and economies-of-scale for the 777-200 freighter.
We'll have to wait until Airbus finishes with specifications for the A350 and see how Boeing responds.
Airbus is in the same position as the US in Iraq; they can not leave the fray, but it is very expensive to stay. When you've got a tiger by the tail, you can't let go.
The A350 is another story. It is not compeitive (except possibly in price) with the 787-8; it can compete with the 787-9 and, can whip the pants off the present 777. Boeing now needs to develop a new strategy (they probably have already) to compete in this market. If they replace the 777-200 passenger with the 787-10 series, it will undercut the manufacturing base and economies-of-scale for the 777-200 freighter.
We'll have to wait until Airbus finishes with specifications for the A350 and see how Boeing responds.
Pretty well says it.smokejumper wrote:Airbus will continue to put pressure on Boeing, but I do not think they will do so profitably on very large aircraft (the A320 IS a cash cow). They can not make money with the A380 (beautiful as it is) due to the large sales discounts needed and the time value of money. Their delay of 2 years has cost Airbus the probability (not possibility) of profitability (sales are low, no substantial money has come in, costs are higher than expected, etc.).
Well, we finally took our face saving move and got out of Vietnam. You do have to face the music, and that might mean loosing your job for the sake of the company. A lot of politico might have to take the hit.Airbus is in the same position as the US in Iraq; they can not leave the fray, but it is very expensive to stay. When you've got a tiger by the tail, you can't let go.
So, rather than say it can’t be done, what would a clean up plant that would be livable (not happy, just livable for all parties).
The basis for the discussion for Europe is that Airbus would have to survive in a viable form.
I would propose a settlement along the lines that it also would have to satisfy the US in the terms of the bailout, otherwise it would be a WTA case.
So, the A380 gets cancelled. The US would not tolerate a bailout that lets that one go, and has Airbus in a position to dominate Boeing. The airlines can live with that, what they want and what they have available have always been different anyway (they want a plane that makes money no matter what, flies to where they want when they want at a cost they want). Qantas stops in Dubai going to London, so what?
Boeing gets the VLA segment back (if you don’t have an A380 option, the 747-8 looks good.
The A400M gets transferred to EADS and off Airbuses back (it does not belong there anyway, and its going to be a loss for a long time, maybe forever, just not enough sales to justify it).
Airbus gets re-capitalized, so they have the necessary finances to compete in the single aisle mid and large wide body. No future launch aid and no bailout ever again or the US will not buy it. They can even go for the VLA again if they can convince anyone to finance it. For Airbus to be viable, that would have to include enough to get to the next technology level that Boeing is at.
To me it looks something like that or Airbus limps along like wounded duck until it hits the mud.
And, what I keep in mind is what would the US do if Boeing was in the same position as Airbus? There is now way we would let out last large aircraft company go out of business. We would find a way to get it viable again, so I do not discount that Europe should be able to do that with Airbus. It just has to be the last time, and Airbus has to be setup (EADS) as a real money making company, with as minimal politico interference as is possible in this world (which means EADS cannot exist as a job creating entity for Europe anymore, it has to justify itself on the basis of performance.
We disagree on the –9, and on paper I agree on the lower end of the 777 lineup. But they have to prove a whole lot of stuff, that’s iffy. We also need to see how much better the 787 is than Boeing contracted for (1-4% range is my guess).The A350 is another story. It is not competitive (except possibly in price) with the 787-8; it can compete with the 787-9 and, can whip the pants off the present 777.
Keep in mind that’s at least 7 and maybe 10 years down he line. In the meantime, like the 747F, the 777F has the field all to itself, and Airbus may never be able to financially justify a competitor (and they are going to fail if that is not their first priority, i.e. financial success). If the A350 sells poorly enough, a freighter option might be very interesting.Boeing now needs to develop a new strategy (they probably have already) to compete in this market. If they replace the 777-200 passenger with the 787-10 series, it will undercut the manufacturing base and economies-of-scale for the 777-200 freighter.
Agreed, and then the fun begins!We'll have to wait until Airbus finishes with specifications for the A350 and see how Boeing responds.
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sn-remember
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The A350 positioning as a possible T7 replacement seems sound to me if (a big if) they manage to derive from the same design an effective competitor to the smaller B787.
In fact I would probably have emphasised the latter development from the start because I believe it has a bigger market potential, however their current choice is understandable given the B787 lead.
The big question is can they derive at low cost an effective 210-280 seat marvel from the 310-380 seat frame still under design ?
True Boeing is expecting an uplift with the B787 (and they will not stop there) same as Airbus when they produced the A320 family.
However I am confident Airbus can prove their maturity and know how by making better money on better choices
In fact I would probably have emphasised the latter development from the start because I believe it has a bigger market potential, however their current choice is understandable given the B787 lead.
The big question is can they derive at low cost an effective 210-280 seat marvel from the 310-380 seat frame still under design ?
True Boeing is expecting an uplift with the B787 (and they will not stop there) same as Airbus when they produced the A320 family.
However I am confident Airbus can prove their maturity and know how by making better money on better choices
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smokejumper
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Airbus may sell more than the 420 units they say will equal breakeven, but I do not believe that the program will be profitable.David747 wrote:I wonder, when Airbus breaks even with the A380, and keeps on selling the A380 what will be the new talking points?
The costs have been higher than estimated; they are selling them at substantial discounts, the financing costs (that pesky time-value-of-money thing that many seem to ignore), the issue that late deliveries have resulted in no payments (except SIA's recent 1st delivery), longer than anticipated development resulting in higher labor and material costs than originally predicted, and other factors, all seem to add up to a VERY high breakeven point.
Then again, if the sponsoring governments do forgive the startup costs (a subsidy) then the financing costs can be ignored, but the other factors wil remain. I am not confident that we'll ever learn the actual breakeven point that includes total fixed and variable costs.
If, as some anticipate, the sales now accelerate, then the break-even point reduces, if they can get them through the door quickly enough.
The 420 figure was established based on rate of sales at the time, so if they for instance sell another 250 over five years, the programme will be profitable, BUT, not a very commercial margin.
I believe it will end up reasonably healthy, but a few years to go.
Cheers
Achace
The 420 figure was established based on rate of sales at the time, so if they for instance sell another 250 over five years, the programme will be profitable, BUT, not a very commercial margin.
I believe it will end up reasonably healthy, but a few years to go.
Cheers
Achace
As you can read here 
International Team Facts, a large chunk of the boeing dreamliner is build outside the USA. They too will face a changing break-even point due to the lower value of the dollar: today we had a new altime low against the Euro.
In the same time oil prices rose to an altime high and predictions are the worst is yet to come.
This means all oil-dependent operations (production and exploitation) will have a higher costs but more for those paying in dollars(because of the ongoing devaluation).
A provocative prediction : both the 787 and the 380 will see cancelling of orders within three months.
International Team Facts, a large chunk of the boeing dreamliner is build outside the USA. They too will face a changing break-even point due to the lower value of the dollar: today we had a new altime low against the Euro.In the same time oil prices rose to an altime high and predictions are the worst is yet to come.
This means all oil-dependent operations (production and exploitation) will have a higher costs but more for those paying in dollars(because of the ongoing devaluation).
A provocative prediction : both the 787 and the 380 will see cancelling of orders within three months.