EADS -Airbus

[rffrydr]

It's everything we love to hate about european business and europe in general. It's competing controlling state interests whos interests are rarely on business, a pension-rich labor who thinks itelf a government employee and giant white elephant of a superliner that may never get off the ground. On top of it all EADS cannot bid in the biggest gravypot in the world--US Armed Forces. --And it's got a backlog of orders as far as the eye can see.

http://economist.com/daily/news/displaystory.cfm?story_id=8769105

Thinking of buying this after the global shakeout (if it happens ((already had its own)). What many owners of BA and EADS don't know is that many of those orders are for planes that don't even have airports yet. And maybe never will. The revitalized US Carriers though will need to upgrade. A strenghening dollar will help. They're holding out of tech breakthrough on fuel consupmtion--but we'll stay tuned.
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Today is the Tomorrow you worried about Yesterday!

[texfly101]

China signs up for $14.8 Billion of new aircraft...and a production line. That is the bigger story, China as an aircraft producer. Boeing is watching closely for sure.
http://online.wsj.com/article/SB119605392116403744.html?mod=hps_us_whats_news
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dj

[texfly101]

Main page article from the Economist on Airbus and its problems with the dollar, "In for the Long Haul"
http://www.economist.com/daily/news/displaystory.cfm?story_id=10198517&top_story=1
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dj

[texfly101]

This is a quote from an article in Aviation Week:

"In Europe, the pressure is on aerospace manufacturers and suppliers, which sell their products in U.S. dollars but pay their employees in local currencies. In the midst of soaring sales and deliveries, Airbus’s parent company, EADS, recently lowered its profit forecast for 2007 by $580 million—to zero. The dollar’s decline has subtracted nearly $19 billion from the value of EADS’s backlog during the past year."

The fall of the dollar is having a significant impact on their bottom line. Just as $100 oil is killing airlines, and consequently the manufacturers that make the airliners. They are already warning about delayed deliveries. Time to go short?
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dj

[texfly101]

A link to Scott Leeham's website that has several interesting and informative articles on both Boeing and Airbus. It has been slow loading at times to see the pdf files. In the Reports/Studies, there is a presentation on the 9 month future projections of EADS.
http://leeham.net
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dj

[HenryTo]

I believe a significant part of their USD exposure is hedged through 2008, but have no idea how exposed they are during 2009 and beyond. I will probably do some research on these during the Holidays...

[texfly101]

You have hit on one of their major problems. The fact that they price in dollars and pay in euros has been impacting their bottom line significantly. This is a major problem with them because their current organizational problems stands in the way of resolving this situation. They have to figure out what facilities to sell, how to reorganize, what products to offer... all before resolving this issue. Lots of choppy water ahead.
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dj

[HenryTo]

Thanks dj, this is really helpful. I will keep an eye out on this over the next few days.

Will also be interesting to see what the record high Euro is doing to Airbus' bottom line.

[texfly101]

The Dubai Airshow, a major commercial aerospace sector event, is taking place starting this weekend. It will be where both major commercial manufacturers, Airbus and Boeing, will announce major orders. The airshow site is:
http://www.dubaiairshow.org/airshow07/site/home/index.php
Airbus tends to hold and stockpile the announcement of their orders and announce them at events like this for maximum publicity and media buzz. Boeing doesn't, announcing as they happen unless the airline desires otherwise. Consequently, Airbus tends to get a uplift and stock bounce at these events. The rumors and pre-announcements can be followed at Airliners.net. The Airbus thread is as follows:
http://www.airliners.net/discussions/general_aviation/read.main/3693745/
Right now there is a very big rumor of Emirates making a huge multi billion dollar order of the Airbus A350, the proposed composite answer to the Boeing 787 and 777 models. Rumors current for Airbus models are (from the Airliners.net thread):
Emirates - A350s, A333s (already announced I think) but I think they may also go for A332F.
Sri Lankan to get some of the EK A350s.
Air Asia - more A320s.
Gulf Air - A350s.
Air Arabia - more A320s
Aegean - more A320s (unless they did earlier this year I cant remember)
Turkish - A350s.
PIA Pakistan - A320s and A321s.
Oman Air - A350s.
Jazeera - more A320s.
Jet Airways - A380s.
Etihad - Newbuild A320s and A321s. Maybe A350s.
RAK - A332s.
Tarom - A320s.
Air Madagascar - A332s.
Thai - A350s and A321s.

So just trying to add industry buzz to this thread. As a declaration of my positions, I hold no Airbus stock nor Boeing stock, I work for Boeing.
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dj

[texfly101]

More bad news for EADS/Airbus. As I commenting on before, EADS and Airbus have a formidable uphill task before them. Between major losses in both the commercial (A380) and military side (A400M) of the house, there is a marked drop in their customer's confidence. Lately they have not been able to deliver on their programs and they still face being late with the development of products that their future depends on. Their management structure, a convoluted mix based on political affiliations is unwieldy and the countries are not willing to address it. Not a good omen for the future. Check out the articles in Flight Global and Aviation Week.
Aviation Week Nov 3, "EADS Struggles with Program Execution"
http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=comm&id=news/aw110507p2.xml&headline=EADS%20Struggles%20with%20Program%20Execution
Flight Global Oct 6 "EADS pays the price"
http://www.flightglobal.com/articles/2006/10/10/209792/eads-pays-the-price.html
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dj

[texfly101]

Forgeard's actions sure looked suspicious even before the A380 delays were announced. And that was without the knowledge that Mr. Forgeard was selling stock. It was common knowledge inside the industry that the A380 was in trouble several years ago. That combined with Forgeard's staunch denial of anything wrong, particularly that the stock was a good buy, gave off a sense of foreboding that only made the stock a don't touch to me at that time. Its a great aircraft but its too bad that the break even frames has risen into the 400+. It will absorb capital that is needed for the narrow body replacement. That is the true market sector of the business where the profits are, making as much or more than the wide body sector that gets all the glamour.
The A380, while a great airplane, will be remembered as a giant snooker deal where Boeing bluffed their way into dominance on the wide body sector of the market, getting the 787 into play with no Airbus counterpart. 700+ sales with no Airbus competitor is the market position that companies dream about. And the A380 delay was icing on the cake as it demanded allocation of scarce resources that were needed for the A350 and consequently, the A32X replacement. So while Boeing works on Y1 and Y3, Airbus is just now getting the final config for the A350 announced with the full design engineering and product development to go. It will be 5-6 long years before we see the A350 EIS with no positive cash flow.
Give Boeing the oppportunity to counter the A350 with a 777 Lite, and then put in play Y3 before Airbus gets around to a narrow body study and you could have the scenario of Boeing dominating the mid-wide body market with the 787, doing a 787 style dominance of the narrow body market, and reaching a current 737/A32X 50/50 market share with the 777Lite/A350 large wide body market. The A380 VLA would be the only sector that Airbus would be the master with product development demanded there also.
Years ago, by making a seemingly major play in the VLA end of the market with the 747-400X, and then ceding the market and not countering as Airbus devoted all their resources to the A380, this might been seen as master stroke of marketing genius. We'll see how it works out over the next 10 years, but right now, imo, the cards are certainly aligned for Boeing and against Airbus. A lot of ground to make up and no hiccups allowed this time around.
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dj

[rffrydr]

The 380's innaugural flight and two visions of the future of air travel--which means asia of course:

http://economist.com/business/displaystory.cfm?story_id=9944806
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Ironically, this may be what brings EADS - Airbus done, as opposed to the higher Euro and other operational problems:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/05/cneads105.xml

[rffrydr]

BooYah.... Humungous orders at Paris Air Show.

http://www.iht.com/articles/2007/06/18/business/airbus.php

Some things nobody wants one of...no matter what.
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

There she blows:

http://www.cnbc.com/id/15840232?video=219898811&play=1
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Despite its knocks won't buy here but....

http://www.latimes.com/news/local/la-me-airbus18mar18,0,2878946.story?coll=la-home-headlines


Structural shifts greater than the cycle will make it hard to stay away given a recessionary discount.

A standout lesson of this last bull (and to be expected in a globalized world...but isn't) is that politics play a PRIMARY role in most the world's markets. In top performer Russia you could almost say that politics IS the market. We've gotten all too smug on all too many matters here in this country.
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Today is the Tomorrow you worried about Yesterday!