Leeham News and Analysis
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Leeham News and Analysis
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Airbus Group, first half results 2014
Airbus Group (before EADS) reported 1H 2014 results yesterday against the backdrop of an eye-catching cancellation (Skymark A380). Overall it was a report which showed solid progress in making the former EADS a homogenous, modern industrial group managed by market realities and not involved government’s politics.
Much has been achieved since the same occasion last year when then EADS announced the name change to Airbus Group and the merging of its Defense and Space side into one tighter knit division. These changes reflected market realities; civil aerospace is growing year over year whereas Defense budgets are shrinking. The yesterday announced group numbers shows gains in revenue and profitability (+6% each when EBIT is cleaned from sale of ex. Paris HQ) underlining solid progress in the undertaken structural changes.
The all dominant civil airliner side (71% of group revenue, 72% of EBIT) is now a group locomotive with less challenges than a year ago. Today the A380 program remains a cause for concern with the forced cancellation by Airbus of its Skymark A380 contract as the airline could not arrange the financing of the airplanes. Airbus cancelled the order before two already built airframes had started cabin installations, thereby making them easier to sell to e.g. existing A380 customers.
The difficulties of the customers to make the business case work for the A380 is of course no good news (others have reduced their orders) but this is the only blip of a civil division that a year ago had more on its plate;
- A380 orders where nowhere to be seen for the year. Since then Emirates has made a surprise order for 50 more and is saying this is not the end. Amedeo has also made it’s talked about leasing program take one step further with an order for 20 A380 this spring. There are still no customers announced for these aircraft so it remains to be seen if this venture can make the A380 market more liquid.
- The challenging A350 program has made solid progress with forecast for testing finish and delivery holding steady (Sept. and Q4).
- The A320neo program is also on track with first flight and delivery forecast still at September this year and Q4 2015.
- The A330 program has gone from a future with big question marks to a lease of new life with A330neo launch orders and commitments for 121 A330-900 and -800 at Farnborough. The program fills a void in Airbus line-up below 300 seats and is now viable past 2020.
Airbus group CEO Tom Enders might still see the A380 program causing concern but he’s attention is most likely at the groups larger problems. Its defense side is seeing a flat market at best and its largest program, the Typhoon fighter, is in dire straits. It has no existing customer signaling they want to extend their orders, on the contrary, any discussion it to cut further. The prospect of new sales, despite many sales campaigns is also bleak; the capable air defense fighter is just that, not a multi-role system with good economics demanded by today’s markets. Any development of the Typhoon to more multi-role is slow in coming, its complex customer structure has still not agreed on ordering the basis for such a transformation, a series implementation of an electronically scanned radar.
Overall Airbus Group is working its problems with the rationale of a capable and well-managed giant. This is perhaps the most striking difference to the recent past, a then amalgamation of national companies loosely merged into EADS and Airbus, managed by the different governments political agendas. The market agrees with our view that Airbus Group is stronger today then EADS ever was, it traded 3% better after the report yesterday.
The Typhoon is “not a multi-role system”? What then are the RAF Typhoon FGR4?
Is the F-35 an aircraft “with good economics”? When will the F-35 receive IOC? Allowed loads at the moment -1 g and + 3 g.
The new Gripen could be an aircraft “with good economics”.
Super Hornet? Short on range.
Rafale is the one but hard to sell (France behind it)
Sorry to France! I was to quick.
India ordered 126 Rafale (for carrier use).
Still an exception, they lost all other sales campaign so far, despite having the best product.
It isn’t, yet. Still working out some air-ground capability in the jet. But the Typhoon is basically dead in the water. It is highly unlikely to garner any new sales.
The latest software update is still in development to give it full multi-role capability:
““P1E brings full simultaneous multi-role capabilities to the Air Forces currently operating the Eurofighter Typhoon with full integration of the Litening II Laser Designation Pod and Precision Guided Munitions. P1E also delivers Mode 5 IFF, improved Radios and Direct Voice Input, Air-to-Surface integration of the Helmet Mounted Sight System, improved Air-to-Air capabilities including digital integration of Short Range Air-to-Air Missiles, updated MIDs functionalities for enhanced interoperability with coalition forces, and many aspects from the popular UK Radar and Drop programmes which delivered improvements to the Tranche 1 aircraft” Eurofighter says.
Future enhancement programmes will integrate even more weapon systems and capabilities to the aircraft such as Storm Shadow, Brimstone and the Meteor missiles.”
A suggested reason for the delay in accepting an electronically scanned radar for the Typhoon is that at least one (?) of the forces is convinced that the Captor mechanical radar is less exposed to capture. Some may recollect stories floating around on how the military version of hackers have already experimented with ways of messing around (for lack of the technical term) with electronic scanners. Another is that some are convinced that the proven answer to stealth is not a newer radar but the heat detectors already proven for the Gripen and Typhoon.
The technical answer to stealth is outdated radar or a system operating at wave length of the chain home system.
More modern systems:
http://en.wikipedia.org/wiki/SMART-L
http://en.wikipedia.org/wiki/Suchoi_T-50#Avionics (L-band arrays)
A proclaimed stealth aircraft with one hot engine and a big frontal surface (heat by drag) has additional problems …
Airbus overall profit margins are still low but IIRC have improved.
Unlike Boeing Airbus cannot rely on big government giveaways on the defense “business”.
@Strato That was a good one..LOL!
What’s BA’s profit margin on the commercial aircraft business?
Close to 11%!
Much better indeed. But the difference in accounting principles (e.g. BA deferring 787 costs) will account for part of that difference.
@thysi..true, but regardless, revenue, EBITDA, etc. look good as well.
A400M, anyone? I think I’ve heard of that somewhere…..
I love it, etu brutai!
For the A380, you can add to the real if not acknowledge cancellations for Qantas (going down fast) and Virgin Atlantic (does want them and for sure does not need them) . Probably some other ones. Airbus can console itself somewhat as they get to keep the $230 million they have been paid.
I think there are still some other kaput orders on the books as well.
You can also surmise that any negotiation for the A380s are a buyers market now, “you are going to pay us how much to take these”.
Two whitetails, slots available in immediate future.
A380, bad move, driven by ego and the inability of what was supposed to be intelligent people that a cash cow only exists if there is no option. Once there is an option then its dead duck.
In this case the 777 was one option and the 747 was another (which is going to suffer the same fate unless freighter sales are enough to keep the program going).
” .. the Typhoon fighter, is in dire straits. It has no existing customer signaling they want to extend their orders …… not a multi-role system with good economics demanded by today’s markets. .. customer structure has still not agreed on ordering the basis for such a transformation…”
Correct, IMO the Typhoon has become a political construct after the cold war came to an end, requirements changed and industrial complex wasn’t willing to follow but sat on their contracts.
And the options on the table are…..
http://online.wsj.com/articles/in-aircraft-match-its-boeings-move-1405543714
There also may be a deliberate attempt at misdirection by Boeing.
As for Hazy, no one is going to buy an A330NEO for a cross continental range mission. The A330 does that cheaper.
I think in Hazy case its increasingly obvious he wants to create aircraft for his need (understandable) vs the needs of industry (if Boeing and Airbus did everything he wanted they would go broke. Of course Hazy knows that, but he wants to get as much as he can.
The real issue in all this is, mixing up the 757 and the A330NEO is mis-leading.
You can have one or the other, not both in the same airframe.
And if you can shrink a 787 an a new wing etc, you can put a new wing and or engine on a 787 and compete with the A330NEO (if the market is large enough).
The 767 is actually a more likely candidate for the 757 replacement (again market or more accurately new market as there is not enough left of its old market to make it worth while.
787 changes far more valid for a A330NEO challenge.
In ANAs case you can see what they are doing with the 787-9. This is real world operation and response by one carrier vs speculative for all.
395 domestic (A330CEO market) vs 215 International service. Where you don’t have the exact aircraft that works you make do. Flying g aircraft is about averages, there are few if any perfect routes, everyone else is in the same boat (more correctly same aircraft choices)
http://www.flightglobal.com/news/articles/ana-beats-anz-to-first-787-9-scheduled-flight-honour-402230/
Thx for the link. Amusing comments, though.
Interesting quote:
On the eve of the Farnborough Airshow, Randy dismissed the A330neo as the same airplane as they (Airbus) pulled from the market 10 years ago, while talking about the 787 flying further, flying faster and flying higher. So, now Boeing is scrambling to evaluate the performance of the A330neo, never mind Airbus’ pricing of the product. Hmm….
http://www.youtube.com/watch?list=UUeCM6CXACyc7PlpM6I0ON6A&v=QoBUSACLElY
Hmm, 😉
http://airinsight.com/page/3/#.U9qs-Uipdo4
It does make you wonder if this is all PR or Boeing really does not have the capability to take say and RR engine and put it on an A330 in a computer and come up with the numbers (as well as what and how it would need to be done and the variations).
If you can do a 787-10 and undercut Airbus market, why can’t Airbus find a segment and do the same thing (A330NEO)
Of course when you CEO makes statements like “the workers still cowering” you can be assured the rot has truly and deeply set in.
It’s the same type of denial that was so prevalent during the 2011 Paris Airshow. You know, when they were talking about the 737NG being better than the A320neo.
http://seattletimes.com/html/businesstechnology/2015352863_parisairshow19.html
“So, now Boeing is scrambling to evaluate the performance of the A330neo, never mind Airbus’ pricing of the product. Hmm….”
Translation: Randy and his PR minions are scrambling to find some juicy mud to throw
at the A330NEO. But currently they are only dry heaving 😉
Over in VV-fantasy-land the A350 is the big “loser” in the “A330neo, A350 and 787 triangular battle”. ROTFL! 🙂
http://verovenia.wordpress.com/2014/07/23/something-strange/
–
Also, comment # 41 in that link just makes my day. The statement that the the casual observer can see more technology by simply looking at Boeing’s wings vs Airbus, almost sounds like a teabagger talking about evolution…. 🙂
OV-099, wasn’t the latest Boeing wing designed and build by Mitsubishi Heavy Industries?
VV is right that the A330NEO is the A350-800 killer. That’s evolution. Not the most modern animals will survive the best fitted animals to the current environment will win the race.
I just can’t remember anybody to call the A330NEO a “787 killer” except VV. The only real 787 killer was and maybe still is the slow 787 production by Boeing.
“OV-099, wasn’t the latest Boeing wing designed and build by Mitsubishi Heavy Industries?”
AFAIK it was designed by Boeing but it’s built by Mitsubishi. A few Boeing enthusiasts, though, apparently believe that by merely looking at the 787 wing one can conclude that it has more “technology” than the wing on the A350. 😉
–
“VV is right that the A330NEO is the A350-800 killer.”
It’s puzzling how it’s possible to make so much noise about “killing” an aircraft that’s not been built , and to claim that the A330neo “deteriorates the A350’s business case severely”. Thus, he’s not only talking about the A358 but the entire programme.
The current 777 only comes in two sizes and the proposed 777-100 shrink was likewise never built. It didn’t make the 777 less successful, though. Why should there be a different standard for Airbus? The A350 was primarily designed to replace the A340-300 and A340-600 and to compete with the 777-200ER and the 777-300ER. If anything, the A350-800 has done a good job — intentional or unintentional – as a decoy marketing product in order to make the A350-900 look even better and to generate a sense of false security at their competitor. We can now see the result of that. The A330 in the first place has always seemed to be an irritant for Boeing, and now with the A330neo they seem to have been totally unprepared of the possibility of Airbus launching a competitive re-engined A330 offered at substantial lower prices than what Boeing is able to offer for the 787 if they want anything near a ROI on the 787.
@mhalblaub
“VV is right that the A330NEO is the A350-800 killer.”
– Or is he? Sure it’s more efficient than the ceo, but the biggest reason why the A330neo is better than the A350-800 right now is because it is much, much cheaper to acquire it. Once the A350 production costs stabilizes and hits rock bottom, it might be a good time to revisit the A350-800. If you close the pricing gap between the two, the A350-800 could come out as the winner.
@OV: it’s those sabre like, razor thin 787 wings ya’know. Most Airbus wings are usually thicker than their Boeing counterparts, therefore in cuckoo fanboy land, the Boeing wing must surely be better, lol. Forgetting of course that both companies approach wing design differently which dictates how each wing looks.
@nyx, I won’t expect a A350-800 like the skipped one soon according to range. I expect a real small wing for real A350-800R. Even a shorter fuselage size for slightly more 300 economy seats at max. capacity. Maybe to start with an A350-600R because a stretch is better than a shrink. For tripes of about 2 hours I expect 10 abreast. No derated engines, just real small ones. The original A350-800 will be back on the table then production costs for A350 gets closer to A330.
Well, that was quick. 😉
http://atwonline.com/manufacturers/airbus-build-a330-regionals-china
200 A330ceo as a starter?
I think this will be a outfitting facility rather than a full assembly line. An A330 FAL in China wouldn’t make much sense for Airbus when they’re looking to fill production slots until neo is in full swing.
An outfitting centre would be part of the A330ceo to neo strategy, and if it pans out as I suspect it will, is pretty damned clever of Airbus.
Yes, that was what AW&ST reported on earlier this year. However, I wouldn’t rule out an A330 FAL in the future. You know, 4 A330neos per month in Tianjin and 10 A330 neos per month in Toulouse…. 😉
http://aviationweek.com/awin/airbus-offers-build-a330-center-china
Interestingly Boeing is trying to convince the Chinese NB’s are a better solution for their domestic networks. Boeing will have to offer something superior to Chinese build A321s with GTFs and COMAC919’s in that case.. I guess soon the trade deficit issue will be played up again.
The problem for Boeing is not that the 737 can’t compete with the A330-regional on operating economics, but that the major issue of congestion at Asian airports works to the advantage of the readily available A330-regional.
http://awin.aviationweek.com/portals/awin/cmsfiles/media/pdf/ad_pdf/2013/10/18/avd_10_18_2013.txt
The story has now been corrected:
http://atwonline.com/manufacturers/airbus-supply-a330-regionals-china
13%-15% better fuel economy for a A330NEO was a given years ago. Check out the various internet forums.
That’s right, because when I need hard scientific analysis and data, I go to internet forums with anonymous posters with unknown qualifications and inherent biases.
Well, at least, some of those can be a bit more realistic than good old Randy’s analyses.
I wonder if this is the one place where a 767-300max might find a market? Equally, I wonder how an A300-600neo might fare, as this was an aircraft for short-ish ranges.
While Boeing tries to build big 777-X wings with folding wing tips Airbus could design something small.
I still expect an A350-800 but with really short wings and an OEW close to A300.
Can’t see it. There’s no interest in passenger 767s, so I don’t see what changes even if you slap some more-efficient engines on it.
Naah. Both are non FBW aircrafts, moreover A300-600 is out of production (hence impossible to resurrect, same as 757 in that respect). 767-300max would cannibalize 787 sales, so even if there would be an interest somewhere it is again Boeing long term strategy. Not every old aircraft needs one to one replacement.
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