Odds and Ends: AA, US and DOJ have mediator; new C919 order; A380 break even

Movement on AA-US merger: Terry Maxon of The Dallas Morning News reports that American Airlines, US Airways and the Department of Justice have picked a mediator to sort out the DOJ’s lawsuit to block the AA-US merger. See also this Maxon report.

Maxon has a long piece, asking several pontificators (including yours truly) what they think the outcome will be.

Bloomberg reports that American CEO Tom Horton “sees a way” to a settlement but did not elaborate.

C919 Pie ChartCOMAC orders: COMAC says it received 20 more orders for the C919, but it once again is from a Chinese lessor, not an airline. A majority of orders for the C919 are from Chinese lessors, in stark contrast to standard practice among established lessors that they want to see a solid base (or a likely solid base) for a new aircraft type from airlines before signing up.

Although COMAC says this latest order brings the total up to 400, a data base shows only 275 so far (meaning the other 125 haven’t been converted to firm orders yet).

A380 Break Even: Airbus CEO Fabrice Bregier says hitting break even on the A380 program in 2015, which is the current plan, will be difficult if deliveries fall below the target of 30 per year. Airbus should deliver 25 this year, he said.

13 comments on “Odds and Ends: AA, US and DOJ have mediator; new C919 order; A380 break even

  1. “Airbus CEO Fabrice Bregier says hitting break even on the A380 program in 2015, which is the current plan, will be difficult if deliveries fall below the target of 30 per year. Airbus should deliver 25 this year, he said.”

    So is Mr. Bregier already saying the break-even target date of 2015 is already more difficult?

  2. http://www.bloomberg.com/news/2013-10-30/boeing-said-to-near-777x-order-haul-of-up-to-87-billion.html

    “Boeing Co. (BA) is in talks with four airlines on orders for its redesigned 777X jetliner valued at as much as $87 billion ahead of next month’s Dubai Airshow, people familiar with the matter said.
    The 255 planes under discussion include as many as 100 to 150 for Dubai-based Emirates, about 50 for Qatar Airways Ltd. and as many as 30 for Etihad Airways, said the people, who asked not to be identified as the negotiations are private.”

    • Yep…that’s pretty much what he’s saying. However, the good news is that if profitability in 2015 is reduced to the fact that Airbus must produce 30+ aircraft per year instead of 25-or-so per year, then the serious cash-burn portion of the A380 Program is nearing a close.

      Hey…Airbus doesn’t want to be walking into 2015 with 2 programs – the A350 and A380 – seriously bleeding cash. One serious cash-burn program at a time is enough.

      On the A350 program, I’m going to make a prediction – and you guys can hold me to it. I predict that the A350 will break even on a cash-per-unit basis when less than 100 aircraft are delivered. Afterwards, it’s “Up, up and away we go” and the cash starts rollin’ in…again.

  3. Regarding the merger & a mediator, the judge already assigned a mediator. This isn’t new and the DOJ aren’t dumb to say “no” to the judge. From what I’ve read so far, what the DOJ want and what AA(creditors)/US want is a bit far apart.

    I do expect this to go to trial.

  4. Right now it costs Airbus more to build the A380 than it sells for. “Break even” means that Airbus will be able to bring that cost down and be able to sell the plane for more than it costs to build it.

    It does NOT mean Airbus has recouped their $25 billion development cost. That will NEVER happen.

    • I doubt the development cost of the A380 was $25 Billion….I read it was closer to $15 Billion. That other $10 Billion was probably due to the costs Airbus incurred when they hosed-up A380 Production.

      I know what I just said sounds like I’m nit-picking, and I regret it if it does. I just wanted to make the point that even if an Aircraft Program is Developed and Qualified smoothly – as was the A380 Program – it can still fail it it can not go into production smoothly and fail to make money (as did the A380 Program).

      They say the Lockheed L-1011 failed because of it’s high development costs. I disagree. According to what I’ve read (from the head of Lockheed’s Finance Unit), the L-1011 failed because of the 249 units Lockheed delivered – not one of them ever made a penny profit – they all lost money and Lockheed was forced out of the commercial jetliner business. Nevertheless, the L-1011 was a wonderful plane to own and operate, and the passengers loved it.

  5. Maybe “development cost” was not the correct wording for me to use. But the total cost of the program is ~$25 million so far.

    The A380 was not developed smoothly. The wiring fiasco caused an 18 month delay to EIS, and still plagues the program by adding months to the final outfitting time. The wing cracks will require a lengthy and expensive repair.

    • We should take care not to be repeat the $25 Billion to often. Before you now people see it three times and assume it’s the truth. Unless that’s the goal..

      Development of the A380 went pretty smoothly indeed. First flight was only a few months late and certification came relatively fast. The short wire bundles spoiled the game and resulted in 19 months delay in which the fleet made many additional hours. The first aircraft to enter service were remarkable mature and beat their efficiency goals. Nothing like the Dreamliner.

      • Keesje, it really does not matter if the non recurring costs (including design and manufacturing development) are $25 billion or not.
        The real important thing is the source of the information. In an official statement, the CEO of the Airbus told the analysts on May 2013 that A380 PROGRAM breakeven would be in 2015. That means that the A380 PROGRAM (as oposed to the production cost of each single aircarft) will provide benefits, positive profits to Airbus. That is, a positive return on the investment. Maybe a small return, that would not justify the inversion itself, but a net profit for the compnay, nevertheless.
        On the other hand, what we have (up to now) is a lousy statement: “…which invested something on the order of $25 billion to get the first A380 airborne…”. Something on the order of, without even mentioning a source for this figure, doesn not inspire confidence on the data.

    • Rick Shaw – why would you use an inflated $25B figure from a news article from a news staff writer who is clearly not an expert – read the article again – it’s cringe-worthy.
      The A380 cost from a respectable authoritative source such as Flightglobal is $12.2B. The cost of the wiring fiasco and the wing-tip cracks is said to account for R1,3B in compensation to airlines. Airbus was covered for the RR engine mishap and I understand, did not compensate Qantas for revenue loss,
      Go to http://www.flightglobal.com/news/articles/everything-about-the-airbus-a380-205274/

      Why quote an erroneous figure? What is your agenda?

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