Airbus and Mobile: Implications and analysis

Before getting to the meat of things, a couple of key stories:

Mobile Press-Register, June 30. Details of the plan.

Wall Street Journal: Boeing complains.

It’s now one of the worst-kept industrial secrets: Airbus will announce at 10am CDT July 2 that it will construct a $600m A320 Family Final Assembly Line (FAL) in Mobile (AL).

This is a major strategic and tactical move in the intense, often bitter competition between Airbus and Boeing.

Even before the plans became official, Boeing issued a pissy slam, harking back to the World Trade Organization dispute, rather than stating that it is in a position to compete against Airbus and its A320 with what Boeing otherwise routinely characterizes a better airplane with the best workers in the world.

Perhaps the pissy statement was chosen because in many respects, Airbus has mouse-trapped Boeing—and there is very little the company can do about it.

Before explaining, here are some facts to keep in mind. Click on the graphic to enlarge.

Implications and Analysis

This move is a major offensive against Boeing, driven by the huge backlogs facing both companies for the current generation of airplanes and for the re-engined successors. Neither company can any longer offer timely deliveries to customers without massively over-booking. For Airbus, the runaway success of the NEO inhibited subsequent campaigns in which Boeing had the ability to offer the 737-900ER ahead of the A321ceo by a year or 18 months. See below.

Airbus now has no available A320ceo positions until 2017 and neither does Boeing for the 737NG. Airbus, with more than 1,400 NEO orders, currently can’t offer more than a smattering of NEO positions until after 2020 and Boeing—with 451 firm MAX order plus more than 550 commitments—is two years behind Airbus for the advertised EIS and likewise is pressed to find meaningful slots before 2020.

With a two year lead by Airbus with the NEO EIS over the Boeing MAX, Airbus’ decision to open a Mobile FAL gives the company the ability to initially open four slots a month from 2016 and the potential to boost this to eight a month. This gives Airbus a major opening to offer the NEO to 737 and 757 operators who need fuel-savings airplanes long before Boeing can hope to offer them. Boeing already trails in market-share, 47%-53%. Airbus could, over time, add two or three percentage points, according to one Wall Street analyst. This shift could last decades—until either Airbus or Boeing design and introduce a New Small Airplane that has major technological advances. Many, including the now-former CEO of Boeing Commercial Airplanes, Jim Albaugh, thought Boeing should proceed with the NSA instead of a re-engined 737. But Airbus forced Boeing’s hand with the coup of winning a huge order for the A320ceo and NEO at American Airlines.

Boeing has been struggling ever since to design the 737 MAX in a competitive fashion, given the constraints of working with a basic airplane design that dates to the 1960s.

Campaigns

Airbus had a major goal when launching the NEO: win major Boeing customers. It won Norwegian Air Shuttle and Garuda but the biggie was American Airlines. Boeing spent months denigrating the very idea of a re-engined airplane, but when officials learned American was breaking its Boeing monopoly and selecting the A320ceo and NEO, the hand was forced. In a decision said to be made by Boeing Co. CEO Jim McNerney, Boeing shelved the NSA plans and went with what became the re-engined MAX. Albaugh looked positively pained at the American press conference, sitting next to a beaming Airbus CEO Tom Enders.

But buried under its own success, Airbus no longer could offer timely delivery slots for either the NEO or the CEO. In the hard-fought campaign that followed American, Delta Air Lines ultimately selected the 737-900ER over the A321ceo (the re-engined models weren’t part of the competition). Although in the end Boeing won on price, Boeing was also able to offer Delta airplanes 12-18 months before Airbus could.

Both OEMs are now finding customers reluctant to commit to new orders because they face five, eight or more years of price escalation clauses—a situation unacceptable to most.

Boeing has the ability to take production beyond the 42/mo announced, which takes effect in 2014, and officials are studying doing so. The Renton FAL has room for 63 a month, though associated facilities and the all-important supply chain need to expand. Likewise, Airbus currently can go to at least 44 A320s a month—but officials elected to hold off doing so.

With the plans for Mobile’s FAL to have a capacity of eight per month (but starting with four), Airbus and its parent, EADS can achieve several goals.

Objectives

These goals are:

  • Hedge the dollar-Euro exchange rate. Airbus costs are in Euros; airplanes are purchased in dollars. Every 10 cents the dollar weakens to the Euro costs Airbus $1bn in profits. Although FAL is only 5% of the airplane’s value, it represents 15% of its costs, according to a Wall Street analyst. Airbus has been working for years to increase its dollar-based costs and this helps.
  • Airbus parent EADS also wanted a solid US-based FAL in its fight for the USAF KC-X tanker. It told the Defense Department that it would assemble the tanker in the US at Mobile, a move it hoped would make it more palatable to award a contract for the KC-X based on the Airbus A330-200 instead of one based on Boeing’s 767-200. EADS, partnered with Northrop Grumman, won, but the award was overturned on a Boeing appeal. Boeing won the next competition. EADS did not protest. Now, with Airbus proceeding, EADS can point to this FAL in future competitions. The Pentagon still has several long-term replacement programs based on transport category aircraft, as well as other DOD efforts in the future. Boeing immediately trashed the leaked A320 FAL (see below).
  • Made in the USA might help win US orders from airlines, but John Leahy, COO-Customers of Airbus, once told us he never had an airline ask for an A320 made in the USA. (China is the Tianjin plant is a different matter.) But Airbus Americas isn’t just the USA, it also includes Canada, Mexico, Central America and South America. We suspect suppliers from these regions will also feed into Mobile, so while we don’t believe Mobile will be decisive in any campaign, maybe it won’t hurt.
  • The biggest goal, in our analysis, is to break through the backlog that stretched to 2020 and offer delivery slots, especially for the NEO, that Boeing can’t match because its MAX is two years later in coming. Whatever airplanes roll off the Mobile line can either fill the need or free up slots in Toulouse and Hamburg (Tianjin is largely, but not exclusively, for China) to provide airplanes elsewhere. Boeing, is mouse-trapped—unless it wants to increase production beyond 42/mo on the NG and drop the price to compete with a more fuel efficient NEO.

Tankers

Boeing pulled out all stops to defeat EADS the second time for the KC-X and one reason was to deny Airbus a commercial FAL in the USA. Boeing gambled that once the tanker was dead, so was the prospect of an FAL.

It was a multi-billion dollar gamble that Boeing lost. Boeing bet the farm, as they say, undercutting the EADS price by 10%. Boeing and the USAF have already said Boeing will lose upwards of $500m on the first four airplanes and associated R&D. It remains to be seen how the balance of the 175 airplane contract works out.

From the moment Boeing won Round Two, Alabama officials began floating the idea of an A320 FAL in Mobile. We knew that Airbus and EADS never stopped analyzing, and in November we understood a decision was pending the French elections this year. When we were at Airbus Innovation Days in May, it was clear management wanted to proceed. The final business case analysis was then underway.

Boeing’s Reaction to Mobile

In a press statement that had journalists rolling their eyes, Boeing trashed the Mobile plans, relating it back to jobs identified by the US and Boeing in the WTO trade dispute as allegedly lost. (Never mind the WTO largely dismissed this claim.) Boeing, of course, became the master of outsourcing jobs overseas with the 787 program—but never mind this little detail. Also a bit of irony: In the tanker competition, Boeing promised to maintain and add jobs in Wichita (KS) but the company is closing its operations there, much to the consternation of Kansas politicians who carried Boeing’s water in Congress for the KC-X. Further irony: Airbus will likely hire many of the Boeing engineers losing their jobs as Boeing closes up shop.

But Boeing chose to trash Airbus and connect the WTO complaint while missing the opportunity to praise its 737NG and 737 MAX, the workers who build them and the ability to match any production capacity. The problem, of course, is that Boeing doesn’t have a MAX for delivery until two years after the first NEO rolls out of Toulouse and even today Boeing doesn’t have final specifications for the MAX to show customers. So perhaps falling back on the tired, old WTO complaint was the best Chicago could do.

75 Comments on “Airbus and Mobile: Implications and analysis

  1. Yes, Boeing was silly and pissy in its reaction. Lame and so unnecessary especially when that company’s prime objective in recent days is give the outgoing CEO Albaugh a big, fat, obscene farewell package that’s well north of $50 mil. That being said, the author’s attitude is no less than smug as well — call me silly if I find it difficult to discern what is arrogance vs. bias. At any rate, Airbus along with Boeing will be more than sorry when the ridiculously overblown bubble for new narrow-body jets implodes and the massive order backlogs melt away. But yes, for now at least, Airbus is to be congratulated for what appears to be an excellent chess move. However, should demand “unexpectedly” decline, it had better have a real viable exit strategy from a US-based FAL. You don’t think this could ever happen? The global economic crisis is only just starting to get interesting…

    • Right? Has anyone stopped to think that maybe pounding out commercial airliners that last 30 years like it’s World War II or something is a bad idea? In case you hadn’t noticed we’re not in an era of unprecedented global economic growth. Something has to give here.

    • The NB bubble will hurt Airbus much more than Boeing, Airbus are spending like its 2006 all over again. An impoloding backlog will hurt a lot, add the very costly A400 program and the 380 program. They better hope for a flawlss NEO and 350 program. The A400 was 11B euro over budget and is still below capability. Its backlog melted away with the financial crisis hitting EU bad. Germany looks to shrink even more of its share..

  2. ROTFLMAO ! perhaps there is a subtle link between recent BA mis-management changes and the Airbus announcement.
    As a previous ( year 2000-2001) low level participant of the WTO/CVD wars (CVD is CounterVailing Duties ), the effects of the MacDummy crowd in their stifiling [edited] actions then are still coming home to roost. A special thanks to Rudy DeLeon for his ‘help”

    Although one wonders why Aibus does not make a bid for use of an excess Boeing facility in Wichita, since Spirit is now making some sub assemblies for Airbus there as well.

    • A bit of history follows – for the purpose of asking the rhetorical question- what has really changed ? I have not checked recent data, but I’ll bet labor costs in the U.S Commercial Aerospace industry are still lower than in Europe, what with vacations, pensions, work rules, etc. And probably productivity as measured by ‘ sales per employee ‘ are lower in the U.S.

      So what did WTO settle and what are the effects.

      ++++
      The following was done by myself and others in 2001- I handled most all of the numbers analyis, etc. While SPEEA planned to submit said petition in early september 2001, 911 happened, and Boeing later in the year stepped in to stifle. ( worried about impact on Tanker ) and the rest is history. maybe a repeat coming ?

      Airbus Countervailing Duty Position Paper August 2001

      For the past year, the SPEEA Legislative and Public Affairs Committee (L&PA) has been conducting an intensive investigation into the practices of Airbus Industries; namely, the subsidies being provided by EU governments, and the below fair market prices at which they sell their commercial airplanes. SPEEA is concerned because these practices have had a severe impact on the jobs of commercial aerospace workers and the people we represent.
      The L&PA Committee has concluded filling out a very detailed petition requesting relief under U.S. countervailing duty law. The SPEEA Council authorized this investigation, with the goal being to determine whether such a filing could be reasonably supported by examination of publicly-available information from both Boeing and Airbus. Once this petition is filed, the International Trade Administration (ITA) within the Department of Commerce and United States International Trade Commission (USITC) will be able to consider the initiation of a countervailing duty proceeding. Such a proceeding is administrative in nature, and may result in the imposition of special countervailing duties on specific imports.
      
In order to fill out the petition, the Committee gathered data from various sources, including: Boeing Annual Reports; the first European Aeronautic Defence and Space Company (EADS) (formerly France’s Aerospatiale Mantra, Germany’s DASA, Spain’s CASA, and Britain’s BAE Systems) Annual Report for 1999/2000; statistical surveys conducted by the European Aerospace Industry (EAI) for 1997 – 1999; information from both Boeing’s and Airbus’ websites; numerous press accounts; and informal discussions with industry representatives.

      The Boeing Company has neither helped nor hindered us, nor have we had access to any Boeing proprietary data. As SPEEA represents workers within the industry, and not the industry itself, actual sales prices, contract information, profit margins, discounts, and lease information are closely held by the respective companies and were not available to us; however, these can be requested by the ITA and ITC.
      
The L&PA Committee has made the following observations which lead to our belief that Airbus, through a variety of methods, is effectively selling their products below cost. Raw material, engines, avionics, landing gear, and similar parts cost the same for Boeing and Airbus. Assembly techniques, automation, certification, process controls, and computer-aided design techniques are essentially the same, and have no inherent cost differences. Additionally, labor costs are higher for EU countries, with differences from 15% higher in 1995 to about 5% in 1998. Finally, the EADS annual report shows that for the year 2000, Airbus’ share of EADS net consolidated profit was zero.
      
We then compared the published selling prices of Boeing and Airbus commercial airplanes from 1998 – 2000, omitting figures for the Boeing 747. For 1999, the average cost of all airplanes sold by Boeing was $59 million per plane, whereas the average cost for Airbus was $46.4 million per plane. We then compared two comparable models of aircraft, the A320 and the 737-800. Figures reflected an average 737-800 costing (conservatively) about 10% more than the A320.
      
Therefore, how can Airbus, with equal material and subassembly costs, higher labor costs and arguably lower productivity, and admittedly zero profits, still undercut Boeing prices by at least 10 percent? Our determination is that Airbus is selling most, if not all aircraft models into the U.S. at 10 ­ 25% below cost. Note: this does not include special lease, financial, or maintenance agreements, which even further harm our workers.

      
In conclusion, the overall affect of the governmental subsidization of Airbus has caused distortions in international trade that support United States governmental action. Therefore, the SPEEA L&PA Committee is recommending the SPEEA Council and Executive Board take action to file the petition for countervailing duty relief with the United States Department of Commerce and International Trade Commission.
       
      END

  3. This is a fantastic editorial Scott. Knowing how close to your hart Boeing is, it must have been painful for you to write this illuminating summary of the situation.

    Until recently I enjoyed making fun of Boeing. But I consider the Airbus decision to open an FAL in Alabama a very serious matter and nothing to laugh about. It could not have happened at a worst possible time for Boeing. And you give us here all the important reasons why it is so.

    Two things strike me in your editorial. First, you make it clear that Jim Albaugh favoured the NSA over the MAX. Second, you make it equally clear that he has been overruled by Jim McNerney. But you leave for our own appreciation to determine if McNerney is up to the job or not. What I can say is that so far I have not been impressed by his leadership.

    The way he managed the 787 fiasco, the way he dealt with the unions, the way he lead the WTO fight, the way he handled the American Airlines order, and even the way he speaks in public generally, are all indicative of a man who lacks the necessary vision to lead The Boeing Company into the 21st Century.

    I am convinced that one of the main reasons why Albaugh was dismissed is because he could not agree with JM on the NSA business case. But what surprised me is the little interest this issue garnered in these pages, even after keesje had brilliantly exposed the contradictions in Albaugh’s speech twelve months earlier. Many here know my position on this subject and will readily dismiss my concerns. But I sincerely believe that what was at stake all along was not only Albaugh’s future, but we must understand that it is also Boeing’s own future which is in the balance.

    It seems to this observer that as Airbus was steadily reinforcing its position over the years, in parallel Boeing’s situation was steadily deteriorating. But we can say that it is mainly due to self-inflicted wounds.

    We can clearly see that Boeing’s reputation is compromised by bad decisions taken at the highest level.

  4. Thanks Scott to make it clear !

    I think personal influences in the staff of A and B have been very important !

    Clearly John Leahy, win it , first for the NEO launch ! Secondly with the Mobile FAL project !
    Tomas Enders help a lot, since Louis Gallois, now retired, was not so enthusiastic, to this move !
    On the Boeing side, Jim Albaugh was the looser, he was not followed by his boss, Jim McNerney !

    Airbus may be the winner for the Narrow Body market for the next 6-8 years !
    And Boeing is on a good way to make the move to re-engine the B777 , to get advantages in the wide body market, depending on the timing not very clear of the A350-1000 …

    Interesting times ahead !

  5. I’m not really sure what transport aircraft acquisitions programs you’re referring to…The C-130J is selected as our tactical airlifter,the C-27J our intratheater transport, the C-17 our strategic trasport, and the C-5s just received a mid-life upgrade. The A400 doesn’t really fit into that scheme. Do you think Airbus has the expertise to build a heavy bomber? That’s the only future military program I know of that isn’t already spoken for.

    • Great editorial Scott, looks like you are the first to provide an extensive piece on this topic. WCOG, the A400 is a high performance large tactical transport, the C-130 has become small, its bay was large enough 50 yrs ago. The C17 and C5 are huge expensive strategic transports. The USAF send out a RFI in 2010 for an A400 size transport. Lockheed responded with super Herc, Boeing with a shrink C-17.. There’s no RFP now, but it seems a question of time. Maybe LM & EADS join up.

      • There’s also the Russian An-70 and the Japanese C-2, both in the A400M class in terms of payload, plus the Embraer KC-390 which fits in between the C-130 and the A400M. But I wouldn’t count out the C-130 yet.

        • KDX, the KC-390 is much closer in terms of performance and capacity to the C-130 than it is to the A400M, which is almost twice as big. Therefore to position the KC-390 between those two aircraft does not appear to be appropriate in my view.

      • The US military has been buying equipment to be C-130 or C-17 mobile for the last Three decades. There is no money in the US budget for a huge buy of medium-sized airlifters. This is a pipe dream.

  6. This leak of the US FAL is a fantastic PR for Airbus given the Farnborough is going to be a Boeing orders bonanza. No one is talking about that now. And I’m sure Airbus will want this to be the only story at Farnborough.

    No delays to the EIS and better than promised efficiency gains will more than guarantee the Alabama gamble pays off.

    With regards to Boeing’s reaction, I think the unions will be concerned, now management can use the Airbus plant as a threat to push through unpalatable productivity terms. So Boeing wins. If the the NEO is late, Boeing wins.

    • Everybody is anxious to see this predicted “Avalanche” of Boeing B737MAX orders during the Farnborough show …
      Unfortunately Jim Albaugh may not be present … for the harvest ??

      I do not think Airbus will be late with the A320NEO, at least for the EIS, and they may be ahead of a few month if they don’t need to use the 6 month buffer they should have … the (Light) structural work is largely done, apart the pylons !
      But, I have some doubts for the ramp-up of production, with only one engine available, the PW, for the first year !

      • Nobody will look out for MAX commitments of any kind when Boeing themselves is presenting the “Bad Looser” to the public with much fanfare. IMHO the worst thing they could have done.
        They should have kept their silence on this topic ( at least past the FAS ).
        The Press and public will be myopically focused on this standoff. The Political Troupe will be rallied.
        Now even if Boeing manages to again capsize an Airbus adventure it will be a heavily poisoned and imaginary win
        providing leverage for further WTO litigation.

  7. Unless I missed something, I do not believe Albaugh was fired.
    With a company the size of Boeing firing of such a senior executive is the DCM(Don’t come Monday) which means with immediate effect.
    I suspect a negotiated retirement has been worked out as 3 months notice seems about right for such a course of action.
    Eventually the truth will out over what caused this upheaval, but the best of luck to him and the best of luck to Airbus in Alabama

      • My take is thatHe stepped down as CEO with immediate effect. His retirement date is October 1st. He’ll serve as an EVP until then, not for the next three years.

    • What you may have missed Andrew is the demonstration carried out by keesje in a previous thread and which explained how Albaugh was forced to change his line in regards to the NSA and start to promote the MAX against his own will, apparently.

      If that is not enough to convince you that he was dismissed, you can add to this twelve months old saga the fact that his departure remains officially unexplained, for no concrete reason has been given so far for his sudden resignation.

      But we have to also take into consideration the fact that it was announced immediately prior to the Farnborough Airshow and in conjunction with the revelation that Airbus is about to open an FAL in Alabama.

      So there are only two possibilities it seems. He either quit out of frustration and desperation, or was asked to leave gracefully and honourably.

      • “Demonstration carried out”… He put two quotes together in a post (and then proceeded to copy it to every website with a comments section) in order to imply a connection where none exists. If Albaugh had somehow been disgraced by an evolving business situation then they wouldn’t have waited a year to “fire” him.
        The fact is, none of us know why Albaugh left the company, but that’s not going to stop some of you from creating a series of pseudo-explanations that you choose to believe.

  8. It looks like Albaugh had a more long-term perspective in favor of the NSA and accelerated development of the 787-10 and 777-8X/9X aiming to restore engineering excellence and regain lost ground against Airbus. McNerney seems to be more focused on getting the balance sheet right, which means accelerating production of existing types to stuff the financial sinkhole the 787 is and avoid the expenses associated with new developments (NSA) of significant upgrades (777-8X/9X).
    Bad timing: Poor Ray Conner will have to start his tenure with admitting that the objective of 10 Dreamliners a month by the end of 2013 is not going to be achieved.

    • “McNerney seems to be more focused on getting the balance sheet right”.

      Exactly! That is the kind of manager JM is I believe. He obviously cannot see ahead for more than one or two quarters at the time. He has no long term vision it seems. And my impression is that everyone else in the corporate boardroom don’t seem to pay much attention to what the Boeing engineers have to say either. They probably all prefer to read reports coming from Wall Street business analysts.

      • In case you have missed it, there is a global financial crisis growing now, EU is at its knees among others. It should be wise to have ones financials in order to weather the oncoming storm. Airbus is walking on thin ice gamling their future to expand, they chose a time that could see a lot of their business wiped out.

        • Prettifying the next quarterly report isn’t what I would deem “having ones financials in order”.
          Boeing sits on a Bomb.
          Europe at their knees (what foxy hyperbole) is a problem for the US because they are klinging to those knees to stay afloat.

      • Uwe, Spain and Italy’s borrowing costs are at 6 and 7 percent. Greece is a walking dead man and the rest of the PIIGS are half a step from insolvency and you say the EU at its knees is hyperbole? Really? Do you have any knowledge of economics?
        Does the US depend on the EU for our economic survival? No!
        As for the aircraft ordering bubble, it will burst and for both airframers. It will not be pretty for either. I am surprised to see EADS open a new FAL at this time. The fact that they
        are opening in the US is not surprising.

  9. Thank you for a great analysis!..I am especially proud, as Mobile is my home town!…Need a local perspective?..let me know!..LOL!

    • As a resident of the Mobile area I can say we are excited by the move. The disappointment of loosing the tanker project after having initially won it (with the questionable politics that accompanied that move) hurts less now knowing that we will soon have an FAL anyway with the jobs that go along. Boeing’s sour grapes press release was icing on the cake!

  10. Rensim :
    Airbus may be the winner for the Narrow Body market for the next 6-8 years !

    But I am not worried for Boeing in the next 6 to 8 years. It’s only after this initial time period that the situation could potentially become more difficult for them. Their backlog could start to diminish by that time because the performance gap between the neo and MAX will have more than likely widened a bit more.

    Yet, that may not be quite enough to dramatically upset the balance. But in a not so distant future Bombardier could start to offer a larger capacity variant of their state-of-the-art CSeries aircraft, the widely expected CS500. And possibly even a CS700. Boeing would then suddenly find itself in an uncomfortable situation.

    It is to be expected that the conjunction of these two new forces, the neo and CSeries, would permanently alter the commercial aviation landscape.

    • I think the CS500 is already build into the CSeries, looking at its wing dimensions and HGW versions already on the BBD website. BBD denied everything sofar, but believed a week ago Airbus would be producing A320 in the US in a few yrs..

      That said I think the A320 also still has further development potential towards the end of this decade. E.g. the 200 seater Ryanair, Easyjet and Jetblue are asking for and the emerging medium capacity & range requirement (Transcon, TATL, intra Asia and Leisure) currently filled in by 762, 757, A300/10 and Tu154. Maybe Airbus will sit on their hands, maybe not.

      http://i191.photobucket.com/albums/z160/keesje_pics/AirbusA320NEOfamilyconcepts.jpg

      • For the CS500 to be already built into the CSeries would require the basic design to be optimized around the CS300; with the CS100 being a shortened version of the original design and the CS500 a stretched version.

        But I remember that during the detailed design phase Bombardier said that the CSeries was being optimized around the CS100. Frankly I never believed that. It would not be logical to do so. Unless there is a technical justification for it. But I can’t see what it could be.

        The only valuable explanation I found at the time was that they were pretending to optimize around the CS100 in order to lead the competition into a blind alley. Apparently it worked. For at the time no one took them very seriously. Except perhaps a team of well informed researchers at Air Insight. 🙂

  11. More new commercial aircraft manufacturing facilities should be a net gain for the U.S. economy and the industry skill and knowledge base. How about an Embraer plant in Kansas or Kentucky.

      • Which commercial aircraft model do they manufacture there?

        • Embraer in Florida:
          US Headquarters, then a design center and recently fabrication : Phenom 100 and 300. they got FAA certification for the fab in june.

  12. If it were purely production numbers EADS had several European sites to consider that allowed much quicker financial reward & superior times for airframes out of sheds, no doubt, by all accounts this is a very strategic decision.

    I’m pondering how any most countries faced with the opportunity of Boeing setting up a production facility would react, I’m confident that if a Boeing plant was planned here in Europe it would be embraced as a vindication of the chosen countries capabilities.

    EADS’s reaction to a similar Boeing plan within Europe, would not have them dancing on the board room table, it would however be seen as healthy competition.

    • Phil, a key factor in the decision of Airbus to establish an FAL in United States, instead of say Eastern Europe, is the Dollar value versus the Euro.

      • That’s patently clear short term, (Currency Exchange Rates) but as the dollar influence globally declines it should be understood former eastern block countries that now fall within the EEC offer quality stable, cost effective manufacturing opportunities, more often eclipsing the more established southern EEC members suppliers of Airbus understand this more than most.

        Quality global out sourcing & manufacturing within EADS is now exemplory, heaven knows it’s been a path riddled with grave errors & costly mistakes, but judging by recent events & continued ongoing problems it’s an object lesson one major competitor could learn from.

  13. Guru Josh :
    My take is thatHe stepped down as CEO with immediate effect. His retirement date is October 1st. He’ll serve as an EVP until then, not for the next three years.

    You’re totally right. No idea how I managed to read it any other way.

  14. en590swe :
    The NB bubble will hurt Airbus much more than Boeing

    I agree with you that there might be a NB bubble out there. But I don’t see why it would affect one manufacturer more than the other. Both OEMs are trying to increase production in order to generate more cash quickly and be able to better satisfy customer demands by offering more interesting delivery slots.

    If the world economy was to deteriorate further, which is a distinct possibility, Airbus could use the Mobile site as a shock absorber to lower the neo production rate as required. It is much easier for them to lay off people in the US than in the EU. And the neo backlog is still larger than the one for the MAX. So if anything, it is the MAX production that would suffer the most.

    In regards to the A400M program and its purported lost of 11B euros, we have to keep in mind that much of it will be absorbed by the respective governments after the initial conditions will have been re-negociated. But we cannot say the same thing of the 787 for which Boeing continues to pay large sums of money to its customers because of the long string of delays.

    And like if that was not enough, it is costing Boeing a lot more to manufacture the 787 than was initially predicted. Therefore they still loose huge sums of money on each aircraft they make. If you add to that what was spent on the longer development program, the total amount of money that will have been lost on the 787 is considerably bigger than for the A400M and A380 combined together.

    Based on quarterly results though, Boeing still appears to be in a better financial position than Airbus, for various reasons. But that could be an illusion because it only shows a snapshot of the situation to the detriment of the long term perspective.

  15. Normand Hamel :
    KDX, the KC-390 is much closer in terms of performance and capacity to the C-130 than it is to the A400M, which is almost twice as big. Therefore to position the KC-390 between those two aircraft does not appear to be appropriate in my view.

    Well, payloads are 20t for the C-130, 29t for the KC-390, 37t for the A400M. Right in between… 😉

      • You have a point keesje. The volume allowed for the payload can some times be just as important as the weight itself (payload).

        In terms of internal capacity (volume) the A400M has been optimized from the start around current military requirements. This was relatively easy to achieve because it is a clean-sheet design that is not based on an existing airframe.

    • The figures I have are 20T for the C-130, 23.6T for the C-390 and 37T for the A400M. The latter can carry 116 fully equipped airborne troops. The C-390, which is based on the E-Jet, can carry only 64 airborne troops.

    • “In regards to the A400M program and its purported lost of 11B euros, we have to keep in mind that much of it will be absorbed by the respective governments after the initial conditions will have been re-negociated.”

      Wait a second. Does it means that Airbus will get all this money back for what is basically something they created on themselves by taking more than they though? Plus, would it bit the same thing Airbus (and so many posters) claims that Boeing gets all this government assisted defense aircraft development money that they later get to used on commercial aircraft?

      Scott, I have a question for you. Since Boeing accuses Airbus of receiving illegal government aid from European countries and Airbus accuses Boeing of receiving tax exemptions from some states as illegal subsidies, will they not take any tax exemptions from the state of Alabama? That would be hypocritical of them to do so. Plus, it will pretty much be like “double dipping,” wouldn’t you say so?

      Thanks.

      • It depends on how the tax breaks are structured whether they comply or not with WTO rules. The WA State tax breaks were clearly just for Boeing and aerospace. As we understood it, any tax breaks could not be that specific.

        Memory tells us AL was prepared to give EADS $250m in tax breaks in connection with the tanker facility. Since the WTO rulings came out, we would have to believe any tax breaks now would have to be structured to avoid violating WTO rules. But we don’t know the direct answer to your question.

      • The cost overrun were relatively moderate and EADS had to pay a large part itself. 4 governments were involved, during a financial crisis and a dozen of opposition parties in all countries taking the opportunity to stab into peceived militairy waste at a time care and educations where cut everywhere.

        It not like US programs like C-17, F22 where incredible cost overruns are smoothly absorbed by the goernment under agreements that guarantee a 10% profit for the industry.

        A400M sized cost overruns would not even be noticed in the USA.

        http://www.govexec.com/defense/2009/03/gao-staggering-cost-overruns-dwarf-modest-improvements-in-defense-acquisition/28872/

        “Any aeronautical engineer with only half a brain figured from the first drawings that a CS500 is part of the story.”

        Agree.

  16. Normand Hamel :
    The only valuable explanation I found at the time was that they were pretending to optimize around the CS100 in order to lead the competition into a blind alley. Apparently it worked. For at the time no one took them very seriously. Except perhaps a team of well informed researchers at Air Insight.

    Any aeronautical engineer with only half a brain figured from the first drawings that a CS500 is part of the story. More so as Bombardier registered a CS500 trademark.

    • I believe that CS700 and CS900 are also registered as Bombardier trademarks.

      • Exactly. The CS300 is offered with up to 160 seats in a high density arrangement today. It is conceivable that a CS500 would seat up to 190.

  17. Thank you Scott
    Thank all
    Very interesting discussion as usual here

    Btw, don’t forget that the A400M will get full EASA civil certification and that a 37 t payload with all the military stuff inside (paratrooper seats for example) may well give you 40t+ payload in a civilian derivative

  18. “We knew that Airbus and EADS never stopped analyzing, and in November we understood a decision was pending the French elections this year.”

    Could we understand this to mean EADS top brass expect to have problems with Mr. Hollande and his government?

    • EADS did not want this decision to become a campaign issue. EADS is also less than thrilled with the outcome of the presidential election.

  19. Louis Gallois do not wanted this argument to emerge during the electoral French war of May-June 2012 !
    Now it’s over !
    The French Govt has no more serious leveraging on EADS, nor the German Govt !
    The only possible way to influence, is through (dwindling) military credits … or research credits !
    But who else can receive them ???

  20. According to wiki the A400 fails to carry even the puma, seriosly overweight and under capacity. 29t, to make the target range. Germany seeks to offload 13 more after delivery, it seems like its not so hot even with the original customers.

  21. Wonder how many of the expected 737Max orders for Farnborough are firms, would be interesting to see how many of those, and indeed the existing MAX commitments (especially where Airbus are aware of delivery date issues) that Airbus goes after. Any of these that defect would be incredibly damaging for Boeing.

    • Boeing wants to come out of the air show with an aggregate 1,000 MAX orders. With 451 on the books now, the math is pretty easy.

      • Think there is some confusion, my comment was more on the commitments that Airbus might try and take, rather than the firming of orders

  22. en590swe :
    According to wiki the A400 fails to carry even the puma, seriosly overweight and under capacity. 29t, to make the target range. Germany seeks to offload 13 more after delivery, it seems like its not so hot even with the original customers.

    This was in 2009 !
    They have made some improvements with the A400M at Airbus Military since 2009 !
    I hope trials with the Puma at 31,5 tons, will forgo this year !
    Weight rip out is in (Slow) progress !

  23. En590SWe taken from an Airbus military presentation (Neil Smith, september 21 2010)
    So
    1) after the first flight off test planes:
    2) almost one year into flight test programm

    OEW 173 300 lbs / 78.7 T
    Taken from 2012 Airbus military docs :
    MZFW 115.7 t

    Delta = 37 T

    PUMA
    http://en.wikipedia.org/wiki/Puma_(IFV)
    Is 31.5 T with class A armor, but 40.5 t with class C armor…

    So what ?

    BTW : 2001 OEW was 66.5t and MZFW 103.5 t

    Sorry for the offtopic

    • Watching aerospace for more then a decade, I notice that every new Airbus has its industry watchers predicting disaster, it won’t meet its performance, delivery, efficiency and sales targets.

      Always anonymous, always from the US and steadily increasing since Boeing dropped the ball on the Dreamliner.

      If I remember well the A would build 100 A380 max, it was 16t overweight, passengers wouldn’t notice, the future is twin. The NEO would be leapfrogged ASAP, lessors hated it. Nowadays the A350-1000 is the enemy, destined to fail..

      Funny thing is I cannot point out an Airbus aircraft (A300, A310, A320, A330, A340, A380) that failed to meet its efficiency / performance targets. Some had low sales (A340, “just” 400), some were late (A380, 19 months).

      So maybe the A400M grossly missing its targets is from the same family & will never be heard of once the A400M enters service, but right now, (difficult situation with another OEM), is too welcome to pass by?

      • I think that in addition to the A340-500/600, the A318 did not meet its specs either.

      • I am Swedish if you failed to notice.. I try to balance the Leeham lovefest for Airbus, its a bit pathetic of this site IMO.

  24. leehamnet :
    A340-500/600 were well short of fuel specs.

    Scott I tried to find confirmation on this. Googled performance, fuel consumption, range, lufthansa, singapore airlines, virgin, shortfall, etc I can find nothing. As far as I know the A340-500 /600 burns more fuel then 777s, but not more then promised.

    Closest reference I could find:

    “Virgin’s head of flight technical services, Jeff Clark, says the Trent 500’s fuel burn “is very close to book; not materially worse than book”. He adds that a new engine specification, dubbed the “A2″, installed from the airline’s 10th aircraft, provides a 0.5-1% improvement in specific fuel consumption. ”
    http://www.flightglobal.com/news/articles/the-long-hello-197483/

    The A340-600 had some early dispatch reliability problems but I assume the A340-500/600 falling short of fuel spec is not the case.

    • I think the A340-500/600 and the A318 were approved by a CEO who did not listen to engineering. Enough said.

  25. Pingback: US Airbus plant could be trouble for Boeing - Military News | Military News

  26. Normand Hamel :
    I think that in addition to the A340-500/600, the A318 did not meet its specs either.

    The initial PW6000 engine was unacceptable ( fixed by MTU later ) the fallback to a CFM adaption was then obviously also late. If one accepts the family limitations it is not a bad plane and sells better than the 737-600. Biggest plane that is certified for LCA steep approaches. If you plot length versus OEW you see that the optimum of the series is more to the A321 ( the A320 to A321 weight gain is flatter than the 737-800 to -900 transition.)

  27. A380 didnt meet ispecs either and I have a hunch the A350 will not either, without PIPs and weightloss..and higher MTOW.

  28. en590swe :I am Swedish if you failed to notice.. I try to balance the Leeham lovefest for Airbus, its a bit pathetic of this site IMO.

    I like this site, as it is a good site to get balanced, mostly objective stories about Airbus and Boeing. I used to read the Leeham site where Scott used to gather stories about both companies together and he published the occasional analysis.

    Although some do get carried away with the pro-Airbus, con-Boeing attitudes (which is by no means exclusively in this direction here), I find it still to be rather balanced. It is much better than that rabidly Boeing propaganda “rag” known as fleetbuzz, the wild west shooutout atmosphere of airliners.net and much more importantly, Scott does try to keep things civil, relatively objective and somewhat to the point. I also notice that he has, of late, been more willing to correct some of the more blatantly false or incorrect statements made by some of the commenters.

  29. It is a deal that may be successful , the next years could tell us if it is the case, trying to reduce costs and encouraging employment.

Leave a Reply

Your email address will not be published.