Airbus A380

Will the new Airbus A380 finally crush Boeing?

I ask this question because of an article I read by Joe Vialls, he says that Boeing has entered into a deal which will cripple the company due to the falling Dollar.

No, it wont, and I would be very very very careful asking such a question on this board, because it generally opens the door to a long and protracted 'discussion' on Airbus launch aid and Boeing subsidies

The A380 is an aircraft in one particular class of airliner: the super heavy carrier, which is a position above the 747 and has never been filled. The A380 is not (yet) a general purpose aircraft - you cant fly it into every airport, and it wouldnt be efficient for short haul routes.

Boeing has already conceeded this class of aircraft to Airbus and the A380 by not announcing a competitor, but it has diversified into the longhaul efficient aircraft with the 7E7/787 where it will be profitable enough for the forseeable future.

Gone are the days that a version of aircraft will make or break a company, a failure to compete may reflect badly on Boeing but Boeing doesnt need to compete in every single arena that Airbus is in for them to remain competitive in other arenas.

Oh, and the high cost of the Dollar currently is a two edged sword. It makes US products 'cheap' to foreign markets, but makes foreign goods 'expensive' to import, making US products more competitive by default. Basically, the Dollar is being allowed to devalue so as to kick start the local economy and bring more trade back into the US.

In the Joe Vialls article he mentions a Boeing contract with China. Boeing has agreed to sell China a shed load of 787`s for $110 million each (low price). The following day Fan Gang (Chinese) spoke at the World Economic Forum in Davos, he stuck the boot into the Dollar saying it would continue to devalue. Boeing are expected to deliver the 787`s in about four years time, if the Dollar continues to fall, Boeing will take a huge hit.

Yes, if the dollar continues to fall then Boeing will take a hit (and if it continues falling like it has, that hit may be as large as 50%), but then its a gamble that Boeing has to take in order to make the aircraft a perceived success at launch.

Boeing needs large orders now so it can wave the fact that the aircraft has a lot of orders and is therefore a success, rather than taking orders when it can fulfil them. With these sort of deals, Boeing can wave figures around saying it has a lot of orders to fulfil, and that makes it look as tho the aircraft is doing well on the market, when infact in 4 years time when the clients come to pay for the aircraft, it could turn out to be a disaster for Boeing and a bargain for the clients.

Every company does it, not just Boeing.

Has the A380 flown yet? I remember a rumor on AvWeb awhile back that it might not even be able to get off the ground and is just a way for Airbus to screw with Boeing.

Originally posted by cmdrkeenkid
Has the A380 flown yet? I remember a rumor on AvWeb awhile back that it might not even be able to get off the ground and is just a way for Airbus to screw with Boeing.

No, its maiden flight is planned for anytime between second half of February and end of April - no set date because they need to finish ground checks etc first before they think about flights. Dont expect a long runup to the flight from the announcement tho, chances are it will be announced a day or two before it happens, if its announced at all.

Yeah yeah, we all have heard the rumours 'oh my god, it wont fly, its too big' etc etc. The same thing was said about the 747 when it was proposed, and that flew (though the first 747 was 80tonnes over the target weight, they shaved 50tonnes off for the second 747, and the first commercial 747 delivered was only 8 tonnes overweight. The A380-800 is 1.5% over target weight, but still a full 3% under the weight specified in delivery contracts - forget exactly where i got this from, but Im sure it was on the airbus.com site someplace).

Its guaranteed to fly. Computer simulations are 99.9% realistic these days when it comes to pure figures, and if the simulations say the configuration will fly, then you can lay bets on it.

Thanks for the clarification RichardPrice. I don't know much about Airbusses, other than I don't like them as a pilot. Any plane that the pilot doesn't actually control just isn't right in my mind. That's a whole other thread though.

Originally posted by Unspun
In the Joe Vialls article he mentions a Boeing contract with China. Boeing has agreed to sell China a shed load of 787`s for $110 million each (low price). The following day Fan Gang (Chinese) spoke at the World Economic Forum in Davos, he stuck the boot into the Dollar saying it would continue to devalue. Boeing are expected to deliver the 787`s in about four years time, if the Dollar continues to fall, Boeing will take a huge hit.

I don't understand. Why should Boeing "take a huge hit"? They are paying their workers in dollars. Most of the materials, engines etc. are also paid in dollars. So what changes for Boeing? Nothing.
Airbus would have more problems. Their workers are paid in Euros and if the dollar continues to fall down, that would increase the dollar price of it's planes, while Boeings price would remain the same.

I'm no financial genius here so someone kick me if I'm being dumb

I would have thought that it all comes down to values and exchange rates. If the Dollar falls then the price has to go up to make up the 'value'. Therefore if the agreed price ends up being half what it should be to meet the cost of building the planes by the time the payment is made then they have taken a hit as material costs and employee wages would have all risen in the meantime.

Have I got this all backwards

Basically, its this:

A devalued dollar means imports are more expensive, as you have to pay more to make up for the devaluation. The local value of the dollar rarely changes, but its foreign buying power is whats affected, so US workers wont notice a thing, but when they try and buy foreign goods in, they will notice that their money doesnt stretch as far.

Because Boeing buys a lot of its materials, parts etc in from other countries, it has to pay more for them because the buying power of the dollar has gone down. Its suppliers dont want to be left with money thats worth less than it did 3 years ago.

For example, using the UK and US currancies.

3 years ago, £1.00 would buy you $1.55, or $1.00 would buy you £0.60p (approx, dont do the math )

Today, £1.00 will buy you $1.97, or $1.00 would get you £0.48p (again, approx, dont do the math).

3 years ago, if Boeing paid me (UK company) $10,000 for some goods, then that would net me £6,000.

Today, if Boeing paid me $10,000, then I would only get £4,800. For the same goods. That cost me the same amount to produce as it did 3 years ago. Thus I have to charge Boeing more in USD for the same goods.


Today, the dollar has 20% less buying power than it did 3 years ago. When the US company wants to buy materials from a foreign country, it has to pay 20% more for those materials than it did 3 years ago. Why? Because the value of the goods doesnt change, they still cost me the same amount to manufacture them.

It all comes down to the fact that Boeings suppliers want to make the same money, and they have to work in their local currancy.

It also affects workers within the US. Because the dollars buying power has gone down in the last 3 years, imports into the US have gotten more expensive. Workers wages dont go as far. Workers cant afford that new car, whereas they might have if the dollar was worth the same as 3 years ago.

I hope thats at least clearer than it sounded


[edit on 7/2/2005 by RichardPrice]

Originally posted by Unspun
Will the new Airbus A380 finally crush Boeing?

I ask this question because of an article I read by Joe Vialls, he says that Boeing has entered into a deal which will cripple the company due to the falling Dollar.

Ahem, I think there is already a topic covering A380. I wasn't able to find it though. But I remember that there was and the title was just 'A380'.

[edit on 7-2-2005 by AtheiX]

Workers wages dont go as far. Workers cant afford that new car, whereas they might have if the dollar was worth the same as 3 years ago.

That's not true. Workers cannot afford IMPORTED cars. The price of the homemade ones is still the same.

Today, the dollar has 20% less buying power than it did 3 years ago. When the US company wants to buy materials from a foreign country, it has to pay 20% more for those materials than it did 3 years ago. Why? Because the value of the goods doesnt change, they still cost me the same amount to manufacture them.

But the question is how many materials and components are bought from foreign country. I think the wings of 787 are made Japan???? but Japan tries hard to keep the yen on the same level with dollar, so I don't think it will add to the final price.
BTW the prices in US are still mostly unaffected by the falling dollar.


[edit on 7-2-2005 by longbow]

Originally posted by longbow

That's not true. Workers cannot afford IMPORTED cars. The price of the homemade ones is still the same.

No, because the raw materials, parts and electronics will more than likely come from overseas. And they will be affected by teh devaluation of the dollar. Show me a car built in the US that is sourced 100% from teh US - you cant.

But the question is how many materials and components are bought from foreign country. I think the wings of 787 are made Japan???? but Japan tries hard to keep the yen on the same level with dollar, so I don't think it will add to the final price.

The Japanese Yen has increased in Dollar value by nearly as much as 8% in the past 4 months. (114Y to 1USD in Sep2004, to 102Yen to 1USD in Feb2005). Bear in mind that when we are talking about $100million USD worth of aircraft, an 8% rise is a LOT.

Actually, I wouldnt be surprised if a LOT of the 787 is 'made' overseas, to be assembled within the US. Thats how the 777 is made:

The skills and resources of a number of international aerospace companies contribute to the design and production of the 777. Firms in Europe, Russia, Canada, Asia/Pacific and the United States provided components and portions of the structure to Boeing.

The largest single overseas participant is the Japanese aerospace industry. Led by Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Fuji Heavy Industries, this group of companies is continuing its long-standing business relationship with Boeing. Together, these firms helped design and build about 20 percent of the airframe structure.

Source

Boeing provide no information for the 787, the above page for the 787 just says 'an international team is developing and producing the aircraft'.

BTW the prices in US are still mostly unaffected by the falling dollar.

You forget a few things. While the dollar continues to climb, you will find that inflation outstrips wage rises, and interest rates will go up for debt as well. Also, consumer goods prices have been going down for the past 20 years, you will find that either prices become stable, or fall at a slower rate which basically means your purchasing power is affected.

Any way you cut it, a devalued currancy has a negative effect on the worker.

Originally posted by cmdrkeenkid
Has the A380 flown yet? I remember a rumor on AvWeb awhile back that it might not even be able to get off the ground and is just a way for Airbus to screw with Boeing.

- You say you're a pilot and yet you would give credibility to such an obvious BS story like that?

Whatever anyone thinks of Airbus they are a serious (and very successful) Co. - just ask Boeing how seriously they take Airbus - how could they possibly be using the A380 as some kind of a dummy 'threat' to Boeing?!

The A380 is a very important plane since it provides Airbus a COMPLETE range of Airplanes from 80 seats to 800.
Boeing is still trying to compete with 2 big problems in its lineup:
a) There is no similtude in the cockpit and systems training of its various aircraft.
b) It killed two very good airplanes (the 717 and 757) in order to make the 737 family more appealing to new buyers, and the main reason for killing them was the engines, since a lot of them were RR or BMW, AND the need for having a smaller inventory and building lines.

Granted Boeing has a huge installed base of planes, but to survive in the long run they need to keep the production running at healthy numbers, in the case of the 747 and the 717 that was the case they are making them as in low number as they can (the 747) and the 717 has been killed (due to the rock bottom price of the 737).

The A380 WILL be a succsess, why?, anyone who has landed in LAX or SFO at 10 am ANY DAY will see the 3 to 6 huge Jumbos touching down from China. Korea, Singapore etc etc, all filled up to the Gills, so a plane that can make thatt trip and carry 180 to 200 more passengers, will be a huge business for the carriers, and dont forget the CARGO=$$$$, so imho Boeing will be selling 747 at very low prices to keep the assembly line working, because carriers will be lured to the MORE IS MORE marketing.

Boeing in the mean time will continue to make the Magnificent 777, but the -300 series strech is almost att the limit of the wing design, so a bigger plane to compete will mean a less than stellar performance or making a new wing altogheter...

You can arge that the 787 will make fragmentation and economics of scale easier to work with and provide a plane that will be the forefront of technology, but alas Airbus has the 330 and it will cost a lot less to "upgrade it" than to start from scratch and will be quite compatible with the avionics of the current airbuses to boot, so lets say Lufthansa is contemplating a wide body in the 240 to 330 pax and takes a hard look att the 787, and Airbus gives them a compatible airplane with its fllet, with comparable economy (not performance) and its 20 million cheaper.........sorry Boeing....

If you dont believe me just look at what happened to the MD 11, price cutting, predatory haggling by Boeing and airbus killed a GREAT plane.....

I am looking forward to the 380 maiden flight...a true milestone... (by the way I think the maiden flight of the 747 was Feb 9 1969 Am I right?)

You are right, it was 9th February 1969. The aircraft was called the 'City of Everett', and flew from Paine Field in Everett just after 11am. The aircraft was in the air for over an hour and a half, finally landing back at Paine Field at 12.50pm.

For the certification, 1400 hours of flight was logged on five 747 aircraft, in 1013 trips aloft. On December 30, 1969, the FAA certified the Boeing 747 for commercial carraige.

Originally posted by Unspun
In the Joe Vialls article he mentions a Boeing contract with China. Boeing has agreed to sell China a shed load of 787`s for $110 million each (low price).

BTW, Joe Vialls is a total wack and anything on his site is for amusment purposes only.

I have no doubt the A380 will fly. i have no issues with the engineering of Airbus planes and they make good ones. I do have a problem with thier financial backing and thier flight controll systems that have hard limits built into them.

AS you all know, I am completely unbiased when it comes to this subject.

There is, though, is an article in Aviation Week and Space Technology that you might find insightful. It's in the December 20, 2004 issue, entitled MARKET FOCUS.

You also might want to look at why EADS (Airbus' parent) has lost 15% of its stock price since its high in November -- or why several analysts have downgraded it from "outperforms" to "neutral".

THis is the 2nd half 2004 for EADS:

29/7/2004 - EADS announces larger than average profits due to Airbus sales.

04/11/2004 - EADS again announces larger than average profits due to Airbus sales.

17/11/2004 - EADS linked to BAe bid, but its denied by EADS.

18/11/2004 - EADS linked to Thules bid, but its denied by EADS.

01/12/2004 - row over EADS leadership ensues.

06/12/2004 - German EADS boss steps down.

10/12/2004 - A350 announced.

15/12/2004 - A380 project announced to be $2bn over budget.

17/12/2004 - French EADS boss steps down.

------

Basically, the share markets expected the trend of futher above average profits to continue, and the false rumours of EADS buying BAe or Thules did nothing positive for the share price (it would have artificially inflated the share price initially and the market would have had to correct sooner or later). The bickering over leadership didnt do anything positive either.

If you look at the share price for the past 12 months, EADS started at EU17.00 just before March04, and has risen to EU24.00 Jan05, with a couple of minor corrections inbetween.

There is nothing to fear from a temporary 15% drop mid Nov04, because its almost completely regained.

uk.finance.yahoo.com...



[edit on 8/2/2005 by RichardPrice]