Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Airbus YE08 Conferences Tuesday, Thursday
EADS and its subsidiary Airbus will have their year-end 08 press conferences January 13 and 15 to discuss 2008 orders, events and the outlook for 2009.
This comes on the heals of a January 9 analyst report by Goldman Sachs (London) on EADS with a Sell recommendation entitled, “It’s worse than we thought.”
The gloomy report follows one in December, also a Sell rating, that Goldman today says wasn’t gloomy enough.
The Goldman analysts look at plunging worldwide airline traffic, the dismal state of affairs in China’s aviation sector and what is now at least a three year delay in the troubled A400M program, also worse than thought in the December report. (More after the jump.)
Goldman believes that the A400M will have a negative impact on the A350, pushing introduction of the A350 from 2013 to 2015. The reason: engineering resources necessary for the A400M will be diverted from the A350, delaying this program.
We remind readers that we’ve previously identified the diversion of engineering resources from a variety of programs at Boeing, most specifically the 747-8, to the delayed 787 as a major issue at Boeing. This Goldman prediction sounds like deja vu all over again.
Goldman makes the mistake, as is so often the case among observers, of citing the A350 vs the 787 instead of recognizing that two of the three A350 models compete with the Boeing 777, not the 787. Goldman reported that a 2015 A350 EIS gives Boeing a five year head-start over the A350 with the 787. (This assumes, of course, that Boeing actually makes its first delivery in 2010, as the fourth revised schedule now calls for.) In fact, the first A350 model to enter service will be the -900 model, which is aimed at the 777-200 series, not across from the 787-8, which competes with the A330 series and Boeing’s own 767-300ER.
Be all that as it may, Goldman’s London analysts are as negative on the aerospace sector as Goldman’s New York analyst, given the sharp declines in commercial aviation worldwide.
Speaking of the A400, the UK Defense Secretary was quoted today by Reuters as saying that “Britain can not accept a three or four year delay” in the delivery of their A400s. What are the RAF’s real alternatives? C-17s? C-130s?
I suspect what the Goldman Sachs ‘analyst’ has done in his great analysis is open a newspaper, saw a quote by Aboulafia, saying, ‘I just did a finger in the air analysis and concluded a 2 year delay for the A350’ and put it into his piece, adding the usual ‘diversion of resource’ and all the rest of it. However in reality things are a little different.
– A400M could be compared to the 787, except that the aircraft is completed, had its power on, undergone GVT and will be declared ‘flight ready’ by the end of January….. minus the engines! The engines + engine software are the biggest problems here. I wonder how much attention the ‘analyst’ has given to this problem in his piece. The additional work required on that front will not divert the resource on the scale Goldman predicts.
– A350. What annoys me is that this stand up double act of ‘Dickie and Dougie’ come on the stage, yet again, with a limited repertoire of ‘Let’s bash Airbus’ and people actually listen and take it as gospel. Without any support to his argument Aboulafia declares that A350 will be 2 years late. The reality, yet again, is somewhat different.
M5 milestone had occurred in mid December, on time as promised. That’s 4.5 years before EIS, the detailed design is frozen. A flight test program of at least 18 months is planned, that’s 9 months more than the 787. Suppliers had been selected early and integrated into the design teams. The production model is virtually the same and what Airbus has specialised in from the beginning. BTW, the production model for the 787 was a first for Boeing. The ground breaking for the A350XWB FAL will be tomorrow. Yes, there are issues in the development of the A350, what new program hasn’t got them? But there is enough time for Airbus to sort them out and get a great aircraft out of the door in mid 2013. As of now, the program is on target.
– Deliveries 2008. Record deliveries have been made of 483 a/c and more than 500 planned for 2009.
I am not saying everything is perfect at Airbus and it is struggling on several fronts. The A380 is proving to be a mountain to climb and this will be reflected in the ’09 deliveries. Plus the A400M headache. But let’s get things into perspective and not cry ‘wolf’ too early.
To clarify one or two things:
The flight test period for the A350 is 15mo, not 18mo (as of December 2008)–we’ve seen the timeline on this. The larger point of more time for the A350 than for the 787 is correct.
We agree that at this stage, those predicting an EIS delay for the A350 seem to be engaging in premature gratification. This far out, how can one tell about delays? Things did not become apparent about delays in the 787 program until early in 2007 (at least to those outside Boeing). Delays to the 747-8 became apparent about a year ago as it became apparent engineering resources were sucked up by the 787.
The Goldman point about engineering resources diverted to A400M may have some validity, in our view, given what we saw at Boeing vis-a-vis the 787 and other programs. However, the two situations are not entirely comparable given the vastly different stages the programs are and have been at, the reasons for the delays and so on. We also think Airbus, knowing full well the harm done to its credibility and reputation over the A380 (and now the A400M) is going to do everything possible to avoid a repeat with the A350.
Scott,
I meant to say that 18 months is from start of the flight tests to EIS. That is of yesterday. Flight certification will of course occur early.
As far as the resource diversion is concerned it cannot be compared to the 787, IMHO. Boeing can’t put a plane together, having multiple problems like centre box redesign and fasteners mk1 and mk2. Boeing employees have been collecting airmiles going around different subcontrators helping them out. That is what’s taking the resource away from other programs. 748I has it’s own set of problems with the wing.
Goldman put 2 and 2 together and got 5 when it came to the Airbus analysis of the A350. The A400M is virtually completed awaiting engines.
Scott, have any news on what company EADS was planning to buy out?
Nope, but I’m working on other things today.