Airbus to drop prices on A350XWB

tsv · Post by **tsv** » 21 Apr 2007, 05:48

So Airbus has decided to match Boeing's price. Whoopy Do!

Given that list prices mean absolutely nothing (since no one pays that much) the only relevant price is that of your competitor. And Airbus has not undercut Boeing but merely matched them. Hardly an act of desperation. Especially when the customer ordered 100 and was owed compensation anyway for the late arrival of the A380.

The interesting information in this article is not that Airbus dropped their prices but that Boeing has only been getting $102m for the 787. No wonder they've sold 500+ and Airbus diddly squat (until the 2 big Middle Eastern orders).

I think Airbus would now be well satisfied at having sold so many frames before the aircraft design is even finalised. They're probably more concerned about the rising Euro then anything Boeing is doing. But if they've got their hedging organised properly that shouldn't be a worry either.

However the A380 is another story. Difficult to see how they can break even on it. Probably more of a matter of how much they lose.

DFW · Post by **DFW** » 21 Apr 2007, 06:51

Sorry tsv, but it is a big deal for a couple of reasons.

Firstly, the 787 is a smaller airplane, so it's suppose to be cheaper. Secondly, The 787 costs less to manufacture. No, I am not privy to any costs comparisons. But as an engineer with both composite and metal design experience, I can tell you that wound composites are cheaper. So Airbus matching the "street" price, not just the list price, is indeed a sign of desparation.

David747 · Post by **David747** » 21 Apr 2007, 07:06

DFW, good point.

boomer535 · Post by **boomer535** » 21 Apr 2007, 15:20

DFW wrote:Sorry tsv, but it is a big deal for a couple of reasons.

Firstly, the 787 is a smaller airplane, so it's suppose to be cheaper. Secondly, The 787 costs less to manufacture. No, I am not privy to any costs comparisons. But as an engineer with both composite and metal design experience, I can tell you that wound composites are cheaper. So Airbus matching the "street" price, not just the list price, is indeed a sign of desparation.

Well said. The A350-1000 is more the size of the 777. This is a super cheap price for an AC this size!! Even better if Emirates is getting a buy 2 get one free deal that has been reported they will be paying about US$68 million apiece. This is a giveaway price and Airbus will be losing money with every one they make.
The good news for Airbus is that production of the 787 is close to sold out until the A350 enters service. So if Airlines order a 787 they won't get it for years. This makes the A350 much more attractive especially at this price. I thing the A350 will get a lot of orders this year, but can Airbus deliver and make money at this price?

smokejumper · Post by **smokejumper** » 21 Apr 2007, 20:39

boomer535 wrote:
DFW wrote:Sorry tsv, but it is a big deal for a couple of reasons.

Firstly, the 787 is a smaller airplane, so it's suppose to be cheaper. Secondly, The 787 costs less to manufacture. No, I am not privy to any costs comparisons. But as an engineer with both composite and metal design experience, I can tell you that wound composites are cheaper. So Airbus matching the "street" price, not just the list price, is indeed a sign of desparation.
Well said. The A350-1000 is more the size of the 777. This is a super cheap price for an AC this size!! Even better if Emirates is getting a buy 2 get one free deal that has been reported they will be paying about US$68 million apiece. This is a giveaway price and Airbus will be losing money with every one they make.
The good news for Airbus is that production of the 787 is close to sold out until the A350 enters service. So if Airlines order a 787 they won't get it for years. This makes the A350 much more attractive especially at this price. I thing the A350 will get a lot of orders this year, but can Airbus deliver and make money at this price?

Boeing is sold out until 2012 unless they open a second assembly line (and can get the assemblies for the suppliers); then we have a whole new ball game.

tsv · Post by **tsv** » 22 Apr 2007, 02:13

boomer535 wrote:
DFW wrote:Sorry tsv, but it is a big deal for a couple of reasons.

Firstly, the 787 is a smaller airplane, so it's suppose to be cheaper. Secondly, The 787 costs less to manufacture. No, I am not privy to any costs comparisons. But as an engineer with both composite and metal design experience, I can tell you that wound composites are cheaper. So Airbus matching the "street" price, not just the list price, is indeed a sign of desparation.
Well said. The A350-1000 is more the size of the 777.

You guys have a point but it's not clear (at least 2 me) which models we are talking about. ie which model Emirates has ordered and which models Airbus and Boeing are selling for $102 million? The article said the A350-800 and 900 were offered at $102 million. So that hardly suggests that Emirates have bought the A350-1000. In any case it is inconceivable the 800 and 900 would both be offered at the same price given their size difference. That just makes no sense at all.

According to Wikipedia the 787-800 has 223 seats in 3 class configuration, 787-900 has 263, A350XWB-800 has 270, 900 has 314 and 1000 has 350.

The truth could well be that Airbus sold Emirates the 800 for $102 million and Boeing is selling the 787-900 also for $102 million. In that scenario Emirates would be getting an extra 7 seats. Not really a big deal when they are owed plenty for the A380 and have placed one of the biggest orders in Civil Aviation history.

The reality is we really don't know who has paid what for what. As for Airbus giving an additional 2 for 1 freebie deal - well believe what you will. They're probably handing out pink elephants who can fly the planes as well. Hopefully somebody will provide a more credible article (with sources) so we get a clearer picture of events.

boomer535 · Post by **boomer535** » 22 Apr 2007, 02:41

tsv wrote: The reality is we really don't know who has paid what for what. As for Airbus giving an additional 2 for 1 freebie deal - well believe what you will. They're probably handing out pink elephants who can fly the planes as well. Hopefully somebody will provide a more credible article (with sources) so we get a clearer picture of events.

Agree. There are no real credible sources for any of this. I think the $102 million figure is for the 787-8, the smallest 787. The way I understand it Emirates wanted the 787-10 but Boeing couldn't make the range they wanted. This is why I think they will buy A350-9's. The A350-9 has about 11 seats more then the 777-200LR. If they are selling the A350-9 for $102 million this would be a fantastic deal as the retail on a 777-200LR is $237M.

achace · Post by **achace** » 22 Apr 2007, 03:45

Dont know where all these prices are coming from.

As far as I can find out, the discounted price of A333 to QANTAS in their last order was $150 million each (50% dsicount)

Cannot see the XWB selling for less.

There is a lot of gossip surrounding prices and damages for late delivery etc., but worldwide standards on liquidated damages (penalties) has an upper limit of 5% of the contract value.

Hardly a formula for buy two get one free?

The massive losses being experienced by Airbus on the A380 are not penalties, they are related to having about 18 aircraft that are effectively sitting around without generating progress claim payments. That is the real pain.

Cheers
Achace

smokejumper · Post by **smokejumper** » 22 Apr 2007, 04:19

Sales prices are an artificial number; as long as a manufacturer covers the variable costs (the direct costs of producing a plane - components, assemblies, labor, etc. ), they can sell the product without loosing money. Ultimately, they need to cover the fixed costs (engineering, design, facilities, administration, etc.). Fixed costs really represent the breakeven point in which the costs to design and manufacture the plane are covered.

The excess costs being absorbed by the A380 are a combination of delayed deliveries and, penalties. By offering A330's at very low prices or as part of a new buy to cover the penalty , Airbus has made a good decision. They only need to cover the variable cost of these planes, the fixed costs have probably been reached or are close to being reached. By offering planes as part of the penalty, they increase their market share, keep the plane in production, making it available for futrue buyers and, ensure a future business line in spare parts. Wise decision for Airbus, but if I were an airline, I'd want cash for the penalty! Regardless as to the penalty style, Airbus is suffering financialy.

bits44 · Post by **bits44** » 22 Apr 2007, 15:38

This article about 787 construction includes some great pictures of Spirit's ultra clean assembly room.

http://seattletimes.nwsource.com/ABPub/ ... 76378.html

The future of aviation construction ?

smokejumper · Post by **smokejumper** » 22 Apr 2007, 16:03

Bits44 provided a link to the Seattle Times which has 5 photographs of the B787 manufacture. Picture 3 of 5 is captioned "Providing support: A 35-foot-tall Brötje robotic machine works automatically across a 787 nose section, fastening metal structural supports inside the plastic shell as the fuselage rotates." Look at this picture crefully, it appears that by changing the red-colored robotic arm to shorter (or longer) lengths, fuselages of greater or narrower diameter coud be accomodated. This could be intentional to accommodate future 737 and 777 replacements? Additional machines could be built to the same design, thus minimizing costs.

PYX · Post by **PYX** » 22 Apr 2007, 22:58

smokejumper wrote:....This could be intentional to accommodate future 737 and 777 replacements? Additional machines could be built to the same design, thus minimizing costs.

From the size of that thing it would appear it could handle something even bigger than a 777.

smokejumper · Post by **smokejumper** » 23 Apr 2007, 03:23

PYX wrote:
smokejumper wrote:....This could be intentional to accommodate future 737 and 777 replacements? Additional machines could be built to the same design, thus minimizing costs.
From the size of that thing it would appear it could handle something even bigger than a 777.

Yep!

smokejumper · Post by **smokejumper** » 23 Apr 2007, 14:15

Richard Aboulafia thoughts on the A350 vs. B787/777 reveal:

1. No one knows its (A350XWB) performance. Not much has been done by way of engineering, and you always need to discount an unknown plane.
2. Against the 777 it should be a strong performer; against the 787 it stands little chance. It needs discounting to be competitive, therefore, for 250/280-seat routes.

boomer535 · Post by **boomer535** » 24 Apr 2007, 00:57

The 787 has so many sales Boeing may have to get its suppliers to increase production to meet demand. Many of the same suppliers for the 787 will probably be making assemblies for the upcoming 737RS and Y3. Looks like Boeing and their suppliers are going to be really busy for the foreseeable future. Keeping up with demand will be a real problem. But this is a problem any companies would welcome.

smokejumper · Post by **smokejumper** » 24 Apr 2007, 03:31

boomer535 wrote:The 787 has so many sales Boeing may have to get its suppliers to increase production to meet demand. Many of the same suppliers for the 787 will probably be making assemblies for the upcoming 737RS and Y3. Looks like Boeing and their suppliers are going to be really busy for the foreseeable future. Keeping up with demand will be a real problem. But this is a problem any companies would welcome.

They will also have a tough job keeping quality up as well. Increased production stresses all aspects of production; you don't just make more of the same component faster. Tooling needs the same maintenance and care as at lower levels of production. If a tool needs 5 hours of maintenance downtime every 20 units of production, you'll loose more items during the 5 hour shutdown if you are manufacturing 35 items per week rather than 20. Boeing will have to pay even more attention to quality at higher levels of production. They certainly don't want a repeat of the issues that caused them to shut down the entire line 7 years ago when they increased plane production.

boomer535 · Post by **boomer535** » 24 Apr 2007, 04:16

Airbus is increasing production on A320 and A330's. They have the same problem with keeping up the quality. As for the A350, I wonder how more labor intensive the composite panel on frame construction will be over the one piece barrel. I think both companies will have their production problems. The first test of production will be if the 787 rolls out on time on 7/8/7.

achace · Post by **achace** » 24 Apr 2007, 05:28

The 787 will roll out on time, even if it is held together with chewing gum!
Far too much loss of face if it doesnt appear.

Regarding Airbus quality, they have ramped up production a few times, and the quality still appears OK.

I still wonder if a filament winding fault can be fixed on the production line?

Maybe one of our members can offer some information.

For sure a conventional production technique fault is readily fixed.

Looking forward to some comments.

Cheers
Achace