Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
- Airbus charges and write-offs since 1999: more than €33bn April 8, 2024
EADS Investors Day–Analysts reports
EADS held an investors Day this week; here are takes from two who attended.
Airbus presentations may be found here.
Bernstein
EADS is holding its annual Global Investor Forum. We describe key themes from Day 1, which focused on EADS overall and Airbus. A key message we took away was that EADS is headed toward governance changes that should make it a more normal company.
We now expect reduced government involvement with independent directors becoming the majority on the board. The free float is planned to rise from 49% to 70%. Although the sale of shares may depress the stock in the near term, long term it is positive.
Margin upside remains the key value driver for EADS, with higher margins likely on A320 and A330 from cost reduction and pricing. A380 performance appears to be improving. We see the main risk as the A350 production ramp in H2 2013.
First flyable Airbus 350 rolls out of the factory. Airbus photo.
Wells Fargo
Summary. We attended the EADS Global Investor Forum in the UK. Given that Airbus is the primary competitor to Boeing in manufacturing large commercial aircraft, its outlook is important to the suppliers in our coverage universe. Overall, we believe the key highlights of the forum on day 1 were 1) demand for airplanes remains strong as Airbus now says 2014 is overbooked for A320 2) the A350 and A320neo developments remain on track 3) Airbus has about 300 A320 current engine option airplane slots to sell in 2016-2017 that could see some pricing pressure and 4) Airbus is intently focused on reducing its costs which could lead to some pricing pressure for suppliers. In particular, Airbus highlighted Spirit Aerosystems as a supplier that has been challenged on the A350. For the suppliers in our coverage universe, we believe the positive commentary on a stronger 2014 and the order backlog should give investors increased confidence in Boeing and Airbus production ramp ups despite recent economic weakness. In addition, while Airbus has focused on reducing costs, we believe pricing pressure has been continuous for the suppliers in our coverage universe and do not expect substantial changes in the profitability of work for Airbus. We continue to be positive on the commercial aerospace suppliers based on the OEM upturn.
A350XWB. Airbus confirmed its schedule on the aircraft with first flight in mid-2013 and entry into service in H2 2014. We do not know how many aircraft Airbus plans to deliver in 2014, but the company did say that one of its two launch customers, Singapore Airlines, has shifted its planned aircraft deliveries into 2015 leaving only Cathay Pacific to receive the aircraft in 2014.
A320neo. Airbus continues to highlight its re-engined narrow body A320neo as superior to Boeing’s 737MAX. The company believes that its larger fan size allows total cash operating costs to be 3.3% better than the 737MAX. Boeing of course calculates different economics and can show its offering is superior to the A320neo. Airbus said it has about 300 open delivery slots for the current generation A320 aircraft before production transitions to the A320neo in 2017. Not surprisingly, most of these appear to be at the end of A320ceo production in 2016-2017. The company said that its 2013 and 2014 delivery slots are now fully booked (and 2015 is nearly so), an improvement from the company’s Q3 earnings conference call when there were still 2014 delivery slots available.
Backlog Growth in 2013. Airbus has about 7.5 years worth of production at planned rates (similar to Boeing’s production in backlog). Management thinks this long backlog has reduced the cyclicality of the airplane manufacturing business since 2004. On the other hand, Boeing has said it desires to reduce its backlog such that it can deliver airplanes on a more timely basis to customers.
Focus On Cost Reduction Could Mean Pricing Pressures For Suppliers. Airbus is targeting a 10% EBIT margin by 2015 (excluding A350 losses and the impact of a weaker Euro) and is aggressively looking to take out costs. As part of its cost reduction efforts, Airbus will have reorganized its plant management process beginning in January 2013. The new structure empowers plant managers with increased authority to manage production problems. At the same time, Airbus has implemented a single procurement organization to more effectively and efficiently manage the costs of the supply chain.
A380 in similar state was rolled out May 2004. http://www.airliners.net/photo/587283/
First flight was April 25th the next yr, 11 months later..
No, that is the structural test article (MSN-5000). 😉
http://www.flickr.com/photos/aircrafts/5779845577/
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The structurally complete, first flyable specimen (MSN-001) in a similar state was moved to the next assembly station on July 7th, 2004. However, the A359 MSN-001 is significantlyy more complete systems-wise than what was the case with the A388 MSN-001.
http://www.flightglobal.com/pdfarchive/view/2004/2004-09%20-%201344.html
I for one can’t wait to see the A350XWB fly…would love to make it to TLS for first flight…
Addison Schonland over at AirInsight seems to be in possession of knowledge indicating that first flight may occur well ahead of PAS 2013.
http://airinsight.com/2012/12/04/airbus-a350xwb-msn-001-greets-daylight/
Two comments from the Wells Fargo comments caught my eye:
“Airbus is targeting a 10% EBIT margin by 2015 (excluding A350 losses and the impact of a weaker Euro) and is aggressively looking to take out costs.” Now a weak Euro is bad for Airbus!? How is that so? For the last 10 years, we have been hearing that a strong Euro has been killing Airbus and now all of a sudden a weak one is also negative.
Could someone please explain how this works?
“On the other hand, Boeing has said it desires to reduce its backlog such that it can deliver airplanes on a more timely basis to customers.”
Why are they bringing up Boeing when commenting on Airbus’ status?
Since they have brought it up, how would Boeing propose to reduce their backlog and hence, waiting time for their customers? Sell less aircraft? Sell at a higher price? Increase production to double the rate? That last one being a doozy of an invitation for a real bust cycle. Or is that just a throw away comment from Boeing to give the customers a better feeling about their future waiting times?
As I recall, Boeing was also once quite pleased with the large backlogs, which were an indication of a healthy future and greatly reduced the risk of a cyclical bust.
1) wells fargo attended because: “Airbus is the primary competitor to Boeing in manufacturing large commercial aircraft, its outlook is important to the suppliers in our coverage universe”. So it has a reason to add negativity to the airbus report to make their prediction about Boeing come true.
2) see 1) and sell at higher margins.
So you’re saying that Wells Fargo has a pro-Boeing bias?
No, I’m not saying that – Wells Fargo is.
neither do I imply that any negativity regarding airbus must be the Boeing Bandwagon playing in the background. The question I was answering was how and why WF extracted negative sentiments from an investor day, where companies usually polish everything till it shines before it’s presented to the world.
Personally, I think WF’s reservations are well placed and valid. there is no optimal exchange rate, it can only be to high or to low but never perfect. A large backlog is both a blessing and a curse.
What I see airbus doing with the A350-800 is to scrap the curent configuration of the plane and change its characteristics to compete with the 787-10. If it does not do so, it will effectively be leaving that market segment to Boeing. No matter the increase of the MOTW and neo engines that can be fitted to the A330, its still an old technology vs the 787.
Other than that, the 787 is bound to get some improvements here and there in the future that will make it even more attractive to Airlines.
Whatever futures sales that the A330 can generate, it will be simply because it is a cheaper alternative for less glamorous companies. I don’t see Qatar or United airlines ordering new A330s now that they taking deliveries of the 787.
“neo engines that can be fitted to the A330, its still an old technology vs the 787”
Between the 737-100 and first MAX there’s 50 yrs. 43 yrs for the -8i. The A330 is 20 yrs old now. Maybe a midlife upgrade could be considered. Or a more a more radical modification to fill the gab between A321 and A350-900..
http://i191.photobucket.com/albums/z160/keesje_pics/AirbusA330-700Light.jpg
It is an FBW plane. The performance improvements are based predominantly on improved load alleviation (software) and engine improvements. The initial aerodynamic design seems to age very well.
A new wing would be nice. Either that, or go cheap with the existing wing and a stretch. A new larger fan engine could be used with the longer front gear of the freighter. Cue up your A330-400NEO shot.
As I indicated in another post, even an A330-300neo might require 2 additional frames aft of the wing to maintain CG due to the larger and heavier engine.
http://i191.photobucket.com/albums/z160/keesje_pics/AirbusA330-400NEO-1.jpg
However this would compete directly with the 787-10. Ques tionable if it could be succesfull.. For medium ranges 9 abreast seems acceptable on the 787 for many carriers..
Keesje, that aircraft is seemingly as long that of an A340-600. It looks like you’ve added a 14 frame stretch (7.49 m) to the forward fuselage alone.
He said that Wells Fargo has a strong interest in the Boeing Biotope.
i.e. they have a “pro their interests” bias.
Right, because anything that speaks poorly of Airbus must be the result of some bias. Strike up the band for another round of Airbus uber Alles.
Howard, why do you have to resort to faul and offensive language rooted in National Socialism? Doesn’t that tell us more about your seeming xenophobia than anything else?
Life can be so simple.
OK, Howard and OV: dial it back.
I’m dialing It back to “10”, is that OK? 😉
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http://www.youtube.com/watch?v=UeOXsA8sp_E
OV, you are aware that Deutschland Uber Alles IS the German national anthem… even to this day?
No,you’re wrong. Because the Nazis misused and reinterpreted the first stanza, Germany’s national anthem consists now only of the third stanza of the Deutschlandlied.
Likewise, you are seemingly misinterpreting the meaning of it.
Semantics. If it makes you feel better, ok.
Semantics? Yeah right!
You seem to believe that the words über alles — and not über allen — translate into “above all” or “better than everyone else”. The words über alles in der Welt translate into “more than anything in the world”.
The words, Deutschland, Deutschland über alles, über alles in der Welt was cleverly exploited by the Allies during WW2. They tried to give the impression that the words meant that Germany would rule over the rest of the world, although this had nothing to do with intention of the anthem. Many other national anthems contain these type of word-formulations. Of course, the National Socialists had already exploited the Deutschlandlied by making the first stanza the co-national anthem of Germany, along with the Horst Wessel Song.
And I naively thought this blog was aviation related…
It is, if you look past our small battles. Some threads develop into very good and informative pieces of information. This place is often more open minded about new ideas than other aviation sites.
I have seen it, and that is just the reason why I keep coming back. Just venting some sarcasme..
I’ll try again: Howard and OV, knock it off. Reader Comment rules prohibit this nationalistic poop. Shape up or I’ll block you both.
Hamilton
This whole A330 Neo thing is as laughable as a 757 Neo.
Could someone please point me to the RFP’s to the engine OEM’s for new engines for these types?
Oh, and when you do… Add 5-7 years of engine development time, and tell me how good the NEO option looks then?
Signed: “The real world”! 😉
Yeah, re-engining the A320, A340, 737, 747, 777, KC-135, DC-8, DC-9, DC-10, E190, CRJs, do these guys have nothing better to do?! Come on, the A330 will sell no matter what!
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The difference is, that the engine OEM’s all received RFI’s from the aircraft manufacturers for new engines for those aircraft.
Not so, in the case of the A330.
Simply put: No RFI for new engine, No NEO.
There has been no RFI or RFP or even exploratory discussions so far with engine OEMs about re-engining the A330. One airline believes an A330neo will eventually be forthcoming but any launch is several years off. EIS would be 2020 or so.
“There has been no RFI or RFP or even exploratory discussions so far with engine OEMs about re-engining the A330.”
Not now, as far as we know. I can imagine Airbus doesn’t really need much additional technical information. They have been talking to the OEMS for more then a decade on the A330/A350mk1.
http://www.flightglobal.com/news/articles/airbus-has-informal-talks-over-use-of-gp7000-on-growth-a330-300-69061/
http://www.flightglobal.com/news/articles/farnborough-genx-offered-for-future-a330s-208087/
http://www.geaviation.com/press/genx/genx_20051205.html
http://www.flightglobal.com/news/articles/rolls-royce-to-develop-trent-1700-for-a350-201998/
It probably has more to do with marketdynamics, resources and overall portfolio considerations. And the business case is getting stronger it seems (787-10, A350-800, RR A350 exclusivity, cargo versions, Mobile, lack of 787/A350 slots this decade).
As often it will probably a firm “no” until it becomes a “yes”
“There has been no RFI or RFP or even exploratory discussions so far with engine OEMs about re-engining the A330.”
“Not now, as far as we know.”
As of last Friday, one week ago, this is true. Is that recent enough for you?
@ Keesje
First, thanks Scott and Keesje for you comments…
“It probably has more to do with marketdynamics, resources and overall portfolio considerations.”
Not at all. It has everything do do with “Money!”, NO engine OEM is going to invest a penny (euro) on a engine that hasn’t been requested… Sometimes the aircraft manufacturers offer money, exclusive contracts or other guarantee’s that offer the Engine OEM’s some sort of risk reduction for the monies that a company invests.
Other times, The engine OEM’s spend their own money to invest in new tech…. A great example is the GTF, P&W was forced into a position in the Commercial aviation business as a result of lost market share. For what it is worth… Airbus is pretty much getting a free ride on the GTF. If it doesn’t perform according to specs? they still have the Same CFM that will compete with the Boeing version.
Either way, NO A330 Neo…
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