Airbus selling for Fire Sale Prices

[bits44]

http://sg.biz.yahoo.com/041217/1/3pbmm.html

[concordino]

Not sure which department of Boeing you work in, bits but you appear to wear blinkers whenever Airbus gets a new deal.

Aicraft manufacrueres are just one industry which discounts heavily. A few years ago we were selling roller bearings at discounts between 75 and 90% - crazy but that was the practice then.

The real cost of aircraft operations comes after initial purchase with spares sales etc. Profits on those areas can be incredible (Aut industry does exactly this too)

You are being very naive if you believe that it is only Airbus who uses these practices - it is only after a sale is lost that everyone hears the bleating. The US prides itself on the "market forces" principles but when it goes against them there are complaints all round.

I have no preference between B & A and don't believe that either company is blameless but the best thing to do in these situations is to make sure that you don't lose the next contract - remember the old adage "don't cry over spilt milk"

Concordino

[Advisor]

Bingo Concordino. Both indulge in discounting. It's like some things are reported and most are not. Company X involves those in power to lobby worldwide and Company B uses technology and yes capital funding to sell.

It's all a part of the game. All we have to do is watch.

[Rago]

I agree Concordino.

Bits 44: When I see your rather extreme pro-boeing preferences, I have to understand you are having quite a giant share in the Boeing holding or maybe president? But it's all about business, so you have to survive, and in business every "trick" to sell counts! Not only in aviation world

[Ruscoe]

Where are Airbus going to get the money from 2007, for new programs such as the 350 when their hedgeing of the US dollar starts to run out.

Airbus have traditionally used profit as well as loans to do this.

Ruscoe

[bits44]

I agree Concordino.

Bits 44: When I see your rather extreme pro-boeing preferences, I have to understand you are having quite a giant share in the Boeing holding or maybe president? But it's all about business, so you have to survive, and in business every "trick" to sell counts! Not only in aviation world

If I sound pro Boeing, you are correct, I am a shareholder in that company, but I also am a shareholder in Airbus as well, in fact I own shares in numerous aircraft related industries. I have been in the airline business for 30 years and I have some knowledge of the Aviation industry

What I have a problem with is the methods used by Airbus to gain orders, and that is sell at next to, or at cost. If you invest thousands of your own dollars in a company, you expect that company to make a profit and pay you a dividend. What Airbus is doing is costing me money and it's doing it in two ways, 1. its forcing Boeing to reduce its prices to match Airbus, thereby making less per aircraft. 2. Airbus is selling at next to cost of production, thereby reducing its profit. But the problem is Airbus is riding on the money provided by Government, not its own operating capital.
Boeing gets no money from government to develop aircraft, and please don't tell me the defence orders pay for that, they don't ! the margin of profit on defence contracts is so skinny its ridiculous. In this discussion group you will note that Airbus sold a contract for aircraft that are worth 60 million dollars for 30 million dollars, seems very stupid to me, and unfortunately in the not to distant future this predatory pricing policy is going to cost Airbus an unimaginable amount of money. And just as an aside I'm sure everyone has read that the A380 project is 1.5 Billion dollars over budget, this is no surprise, that money is being spent on reducing the weight, because the plane is horrendously bloated. Where do you think that money is going to come from? Airbus is in horrible trouble, they are over extended, the management is a joke, they only have orders for 139 A380's an no orders on the horizon, in fact some airlines have deferred orders to 2010, and may cancel entirely.

The one most important thing to remember in business, you are not here to sell cars, or boats, or airplanes, you are in business to MAKE MONEY.

I know there will be a lot of disagreements with my point of view, but if you look at the facts at face value, and contributions by other posters, and the financial and airline industry, you may form a different opinion.
Feliz Navidad

[Advisor]

With not sounding rude, Feliz are you trying to tell us that Boeing does not short sell???

And yes you are in business to make money, but your basic discussion revolves around making money at what cost!

Your point of view is totally acceptable, as it is human nature to differ, but we are here to discuss solutions and yes grow thereby taking the industry with us.

Remember John Henry, he often said :Growth is the only evidence of life.

[SN30952]

....The Americans beat the Russians and the Europeans by buying out and recruiting their best and most creative elements to produce in their investments. Now the pendulum swings in the other way, they are protesting... and will soon start fighting, because in their philosophy they will have to protect their interests...
Expect economic retaliations first.

December 21, 2004 NYT writes:
Foreign students contribute(d) $13 billion to the American economy annually. But this year brought clear signs that the United States' overwhelming dominance of international higher education may be ending. Foreign applications to American graduate schools declined 28 percent this year......it remains unclear whether the sudden decline in foreign enrollments is a one-time drop or the beginning of a long slide.
Would that be a precursor for other declines?

[Advisor]

I can only sum up the wise words on Fons in the epithet by YOSHIDA KENKO who had aptly said, that "AMBITION never comes to an end".

I guess for some people making money has become an ambition and hence the downfall of morality, values and yes integrity. Now we all know that with this what happens to business ethics.

[Advisor]

http://news.airwise.com/stories/2004/12/1103537664.html

http://autofeed.msn.co.in/pandorav3/out ... eb665.aspx

Air Deccan to buy 30 Airbuses and Lufthansa 7 A340-600.

[Advisor]

http://news.airwise.com/stories/2004/12/1103446410.html

Kingfisher Airways planning to buy 30 Airbus A320s.

[Advisor]

http://www.findarticles.com/p/articles/ ... i_73541006

http://www.businessworldindia.com/Nov2403/news01.asp

Indian Airlines to add 43 planes to its fleet is expected to cost Rs 10,089 crore with a foreign exchange component of over Rs 8,500 crore. The recommendation to purchase 43 Airbus (a mix of A 319s, A 320s and A 321s) over the next five years.

[bits44]

Where are Airbus going to get the money from 2007, for new programs such as the 350 when their hedgeing of the US dollar starts to run out.

Airbus have traditionally used profit as well as loans to do this.

Ruscoe

This article will shed some light on the impending problems that will soon face Airbus.
http://www.fxcmmini.com/euro-high.html? ... SPL+text+2

and one other source

http://quote.bloomberg.com/apps/news?pi ... wewas02hzM

[Ozzie1969]

....The Americans beat the Russians and the Europeans by buying out and recruiting their best and most creative elements to produce in their investments. Now the pendulum swings in the other way, they are protesting... and will soon start fighting, because in their philosophy they will have to protect their interests...
Expect economic retaliations first.

December 21, 2004 NYT writes:
Foreign students contribute(d) $13 billion to the American economy annually. But this year brought clear signs that the United States' overwhelming dominance of international higher education may be ending. Foreign applications to American graduate schools declined 28 percent this year......it remains unclear whether the sudden decline in foreign enrollments is a one-time drop or the beginning of a long slide.
Would that be a precursor for other declines?

Only last week I saw a feature on CNN about American students in Europe (American University in Paris, in fact) who had enormous trouble coping financially, because the value of their dollar had plummeted. In fact, several have had to call it quits and head back home to America. So a decline in foreign students might coincide with a return of American students from abroad. How long it will all last is of course impossible to predict.

[Ruscoe]

I would not worry too much about the American economy, it is open and will naturally find its own growth equalibrium.

More closed economies are the ones that can get into real strife if the correct levers are not pulled.

Ruscoe

[Advisor]

Valid Point for discussion Ruscoe, but Ozzie1969 makes a lot of sense.

[Ozzie1969]

Ozzie1969 makes a lot of sense.

Sorry, it won't happen again!

[bits44]

I would not worry too much about the American economy, it is open and will naturally find its own growth equalibrium.

More closed economies are the ones that can get into real strife if the correct levers are not pulled.

Ruscoe

We kind of got off the point of monetary losses a bit, the point I was trying to make was the problem currently facing Airbus, and its nothing to do with the U.S. versus the EU, Airlines purchase aircraft in American dollars, when the U.S. dollar goes down or the Euro goes up, Airbus loses money, on the other hand when the same conditions apply Boeing makes more money, and has an edge in pricing when quoting on new orders.




This combined with the fact that Airbus stock is dropping, the A380 is 1.5 billion over budget, with orders dried up, and they are going to launch the A350 at what cost? this all leads financiers to lower their ratings, costing Airbus more to borrow money.

This article dated the Dec. 27 for future release explains it all, and the concerns the financial and aviation community have in regards to the future of Airbus,

http://yahoo.businessweek.com/magazine/ ... _mz054.htm

KT

[Advisor]

Thanks for sharing the advance information bits44.

[bits44]

Where are Airbus going to get the money from 2007, for new programs such as the 350 when their hedgeing of the US dollar starts to run out.

Airbus have traditionally used profit as well as loans to do this.

Ruscoe

Just an additional Financial Institution's viewpoint.

http://www.businessweek.com/2001/01_10/b3722107.htm