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!

[rffrydr]

Not all bad in europe:

http://www.bloomberg.com/news/2012-03-08/eads-doubles-dividend-profit-to-surge-on-airbus-deliveries-1-.html
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Let's not have any more talk of "free markets" and eurocrats. Super Sarko has his and we have ours:

http://www.foxnews.com/world/2011/03/31/wto-rules-aid-boeing-illegal/
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

wikileaks shows, the "national champion" isn't such a strange idea here at home:

http://www.nytimes.com/2011/01/03/business/03wikileaks-boeing.html?hp
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Well that "shine" may finally be appearing. Global success story in a world of flops, Emirate Airlines, shows what can be done with A380. Throw in a euro down 14% and world of govt.-entwined companies and an economic recovery and you may have a buy story--in the debt.

http://www.businessweek.com/magazine/content/10_28/b4186018462112.htm
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

This model of a "government-owned private enterprise" cuts its' dividend which is momentous considering what that dividend has to represent. For all its troubles the euro run with fixed highest-priced labour and collapse of aircraft leasing SIVs was the final straw. That is going to start to fade and the uniqueness of the product, its concomitant margins and, most of all, its go-to role in an, ironically, anti-globalization world will gradually shine out.

The china panic over rail needs some development. Ironically it is Ryan Air et. al. in europe that have offered some push-back for short-haul air.

The time a recession like this gives these companies to refine their ground-breaking product cannot be underestimated.

With reference to the first post, often the best trades are those not taken--but the shakeout imagined in that post has surely come to pass. Maybe I'll listen to my own advice.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

The Airbus 350 - which is set to compete with Boeing's 787 - is now scheduled to fly its first flight in 2012 and for commercial delivery by 2013:
--------------------------------------------------------------------------------
Airbus A350 development on track
By EMMA VANDORE – 3 days ago

TOULOUSE, France (AP) — Airbus said Wednesday it is on track to deliver the wide-body A350 commercial jet by 2013 and vowed not to repeat the mistakes that marred the launch of the A380 superjumbo.

"Previous programs and the A380 in particular taught us some tough lessons," CEO Tom Enders said at a ceremony in Toulouse to mark the start of work on the final assembly line of the A350 XWB.

"That experience and the lessons learnt from it and the actions that are under way put us in a much stronger position."

The aircraft is designed to compete with Boeing Co.'s hot-selling 787, which is running two years late. Boeing last month announced a fifth set of delays that will set back delivery to 2010.

Airlines hoping to save on fuel bills are eagerly awaiting both the 787 and the A350. Both models are designed to be more energy-efficient than aircraft flying today thanks to a greater use of composite carbon materials.

Analysts say the technical setbacks dogging the 787 look greater than the troubles Airbus faced with its A380 superjumbo. But Airbus compounded what were essentially wiring difficulties with communication failures and management errors, leading to a two-year delay that wiped billions off profits.

Chief Operating Officer Fabrice Bregier said Airbus is anticipating technical setbacks with the A350 — as with any new aircraft program — and has trained its staff to flag problems in time to get them fixed.

"What for me is the most important is that we have changed the mind-set of our people: They tell us the truth," he told a news conference.

"What we want is not that they tell us there is no problem."

Bregier, who is responsible for Airbus's day-to-day operations, said his job is to "make sure there is nobody within Airbus who does not apply the rules." That system provides "a big safety net that if there is a drift we will be able to fix it."

The A350 XWB's first flight is scheduled for 2012, Enders said.

At the end of 2008, Airbus decided in an internal assessment that the A350-900 model is ready for a detailed definition freeze, which means the engineering focus shifts from the structure of the plane to parts design and the start of component production.

The A350 XWB will be available in three versions: the 270 seat A350-800, the 314-seat A350-900 — which will be the first model to enter production — and the 350-seat A350-1000.

The program was set back when Airbus had to redesign the plane after customers balked at an earlier version.

Airbus has 478 orders from 29 customers for the medium-capacity long-haul aircraft compared with 910 orders for the 787.

Bregier gave few details on how Airbus plans to finance the euro10 billion ($13.26 billion) A350 program. He said the development costs have so far been funded by Airbus and some of its suppliers in a risk-sharing program.

"We are not in a hurry to find other ways despite the difficulties we know our customers will face in 2009," he said.

Airbus may also seek government aid to create a "level playing field" with Boeing's 787, which he said "got a lot of subsidies."

Even though Airbus-parent EADS has cash reserves of euro9 billion, EADS CEO Louis Gallois said Tuesday that preserving that cash balance is a "top priority" as funding dries up in the credit crunch. Airline customers may need help with financing, which would drag on resources.

Airbus and Boeing are locked in a dispute over alleged large commercial aircraft subsidies and are awaiting a ruling by the World Trade Organization.

The U.S. and EU have accused each other of providing billions in illegal subsidies to the companies. The United States says EU subsidies have enabled Airbus to capture long-standing Boeing customers. The EU counters that Boeing receives U.S. federal and state tax breaks, development funding and grants, as well as large amounts of military contract.

[texfly101]

The last time I checked, Airbus had set 420-450 airframes as the break even point for the A380...200 means that they are not halfway there yet...and they canceled their freighter version, once predicted to be a third or more of the demand...so it will be interesting to see if they reach that number, probably not anytime in the near future as since the major Asian airlines have finished their ordering, there isn't any projected near term demand from US airlines nor European. But then again, they don't have to worry about losing money since they have development money from the partner nations...in a simplistic sense, it doesn't get repaid if they don't reach break even numbers...dj
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dj

[HenryTo]

Airbus A380 makes its first commercial flight - to JFK airport no less:
-----------------------------------------------------------------------------------
Airbus superjumbo lands at New York's JFK
Fri Aug 1, 2008 7:38pm EDT

By Bill Rigby

NEW YORK (Reuters) - Airbus's A380 superjumbo touched down at New York's John F. Kennedy International Airport on Friday, marking the first commercial arrival of the giant, double-decker passenger plane on U.S. soil.

The Emirates aircraft, carrying 489 passengers in varying degrees of luxury, landed smoothly and on time after a 13-1/2-hour flight from Dubai.

"Some of us were lucky, we had showers before got off the airplane," Emirates President Tim Clark said, shortly after disembarking, losing no time in marketing the plane's two "shower spas", 14 first-class suites, bar and lounge.

The plane, fitted out with lie-flat beds, flat screen televisions and spacious, windowed bathrooms in first and business class, is set to return to Dubai on Friday evening.

Emirates, owned by the government of Dubai, is the second airline to put the A380 into service, following Singapore Airlines, which started A380 flights to Sydney in October.

The plane, costing $327 million at list prices, did visit New York and Los Angeles in March last year for route-testing purposes, but Friday's flight was the first regularly scheduled arrival of an A380 in the United States.

With its huge capacity and relatively fuel-efficient engines, airlines hope the world's biggest passenger jet will be the most cost-effective way of serving high-volume routes linking big cities, especially in light of soaring oil prices.

Airbus, part of aerospace group EADS, says an A380 uses up to 20 percent less fuel per seat than a Boeing 747, and claims that when fully loaded and flying long distances it is more fuel efficient, per passenger, than a small family car.

The touchdown marks a hard-won victory for Airbus, which spent $10 billion and more than a decade on Europe's largest industrial project, in the face of widespread skepticism.

Airbus now has orders for about 200 of the planes from 16 airlines. The company is still struggling to iron out production problems after an 18-month delay in getting the first one out of its Toulouse, France, plant.

The delays ended up pushing Airbus into loss and toppling its management, and are still causing political aftershocks in France.

OUTSELLING BOEING

Despite problems, the plane is outselling its nearest competitor, Boeing Co's revamped, expanded 747-8 jumbo.

Boeing, which invented the concept of mass travel over great distances with its original 747 in the 1970s, has sold only 27 passenger 747-8s so far. The plane, known as the Intercontinental, can seat 467 people in a standard layout and is set to fly first in Lufthansa colors in 2010.

While the A380's success may be bad news for Boeing, plenty of U.S. suppliers are providing parts and electronics for the superjumbo, including Honeywell International Inc, Spirit AeroSystems Holdings Inc, Rockwell Collins Inc and Goodrich Corp.

The engines on the Emirates A380 are also U.S.-made, produced by the Engine Alliance, a joint venture between General Electric Co and Pratt & Whitney, a unit of United Technologies Corp.

Emirates, the world's number-seven airline in terms of international passengers, is the biggest buyer of A380s, with 58 on order. After New York, it plans to fly the planes to London from December, then Sydney and Auckland from February.

Some 20 airports worldwide can now handle the A380, which needs extra-wide runways for its wingspan and two-tiered facilities for loading passengers. The Port Authority of New York and New Jersey, which runs the region's airports, spent $179 million upgrading JFK facilities to accommodate the A380.

Emirates took possession of the plane in a glitzy ceremony in Hamburg on Monday, flying it to Dubai and then to New York. Emirates, along with Gulf-based rivals Qatar Airways and Abu Dhabi-based Etihad Airways, are expanding their fleets and routes even as European and U.S. carriers find themselves pinched by high fuel prices and waning demand.

City-state Dubai, part of the United Arab Emirates, hopes the new planes will help transform it into a world business and leisure capital in the next few years, aiming to attract 15 million visitors a year by 2012.

[rffrydr]

Yet there sits BA, 15% below its 200day, despite orderbooks for both these companies that are set to "defy cycles."--perhaps even once in a company lifetime.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

The rising Euro continues to be a lingering (and the biggest) problem for EADS:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUBPSMF_4XMg&refer=home

[texfly101]

They are really looking to hedge their exposure to the euro/dollar risks. It will be interesting to see if they still do this move given a loss of the tanker contract. The bet is that they will, even given the loss of the initial contract, as it is just the first of three projected contracts. The second one is probably a better fit as it is seen as a bigger aircraft that suits the A330 frame. Bidding on the first contract, being for a smaller aircraft and needing a competitor to Boeing, is probably just for NG and Airbus to get their hat in the ring and not necessarily thought to be a probable win. But between their Power 8 restructuring and the future defense contracts that definitely need a US industrial base, Airbus and NG are building a base to break the Boeing and Lockheed duopoly on partnering for major contracts. Any ideas on who the firm to be bought will turn out to be? An electronics entity like Raytheon would give them an additional expertise that they can use as aerospace contracts, while about the airframes, are a lot of time determined by the software and electronics integration.
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dj

[rffrydr]

Looks to the US--and dollar-based production:

http://us.ft.com/ftgateway/superpage.ft?news_id=fto011020081846561593
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Today is the Tomorrow you worried about Yesterday!

[texfly101]

Title: Please fasten your seatbelts, Airbus is in for a bumpy ride
The weak dollar and long delays on the A380 could mean job losses in Britain, writes Tim Webb
The Observer (UK) 12/09/2007
Author: Tim Webb
Copyright (C) 2007; Source: World Reporter (TM)

Tom Enders, the normally unflappable chief executive of troubled European aerospace giant Airbus, was getting exasperated. At the company's headquarters outside Toulouse in October, he was hosting a glitzy ceremony to celebrate the long-delayed delivery of the first superjumbo Airbus, the A380. But the assembled media circus was far more interested in the chronic financial turbulence at Airbus - and in the investigation into alleged insider trading at its loss-making parent EADS - than the new plane on the tarmac outside. 'Ask me about all that tomorrow,' he said perched uncomfortably on a stool, microphone in hand. 'Today is the day we want to celebrate. Have a look around - is it spoiling the party?'

Today, the thought of celebrating is the last thing on the minds of Airbus management and its 57,000 workers, with about 10,000 in the UK. On Friday morning, Enders, EADS boss Louis Gallois and other senior executives gathered for a sombre board meeting in Amsterdam. While the rain lashed down outside, they debated the proposed sale of nine plants in Europe, including the wing-component manufacturing facility at Filton, near Bristol, which employs about 4,000 people. Part of the Power8 restructuring plan announced in February, these sales will save €2.1bn annually and cut 10,000 jobs by 2010. But also on the agenda were ideas to make even deeper, more painful cuts than those originally planned. EADS said last month that as a result of the weakening dollar, an extra €1bn in annual savings would have to be found. Analysts say that the UK wing-assembly plant in Broughton, North Wales, which employs 6,000 people, could be next on the block.

Tom Williams, executive vice president for programmes and former head of Airbus in the UK, refused to rule out the possibility it could be sold or closed down. 'There are no guarantees,' he told The Observer. 'No one has any God-given right to any particular work share or programme of work in the future. We are in the situation where we are looking at everything.'

He said this could include cutting R&D spending or aircraft development programmes. 'Is there anything we should do which is more radical?' he added. 'Are there some programmes we can't afford to do?'

The euro's strength against the dollar is taking a massive bite out of Airbus's profits. Airbus's costs are largely in euros. And like oil, the planes it sells are priced in the greenback. Airbus says that every 10 per cent rise in the euro against the dollar costs it more than €1bn in operating profits. Two years ago, the euro was worth around $1.20. On Friday it closed at almost $1.47, yet Power8's cost-cutting plans were based on an anticipated euro exchange rate of $1.35. To add insult to injury, US-based Boeing's costs are all in dollars, giving Airbus's arch-rival a crucial advantage in an already cut-throat industry.

In recent days, the howls of pain from EADS executives have become louder. Analysts say this is one way of softening up workers for more cuts. Enders has said that the weakening dollar is 'life-threatening' for Airbus. 'It has gone beyond the pain barrier,' he added last month. Last weekend it was the turn of Gallois. The EADS chief executive, who had previously labelled the sickly dollar as 'unbearable', said it posed an 'existential' threat to the company. Williams, who was born in Glasgow, speaks more plainly. 'It's a bloody battle,' he said.

Last year Airbus made pre-tax losses of €572m. But this can't all be attributed to a weakening dollar. Its superjumbo is two years late, costing it an estimated €6.8bn in late delivery penalties and lost sales. There are also delays over its A400M military transport plane and countless redesigns of its wide-body version of the mid-range A350 jet have put its delivery further behind that of Boeing's rival 787 Dreamliner.

Airbus is moving more production overseas and into dollar-denominated areas such as China, and possibly the US, Japan and Russia. But this isn't just to limit currency costs. Its assembly plant in China which will open by 2009 is part of a joint venture which Airbus hopes will help it sell more planes to Chinese airlines, a huge growth market. Manufacturing costs in China are also lower than in Europe. As John Scholle, aviation analyst from Global Insight, said: 'The weak dollar is a big problem for Airbus. But expansion outside of Europe is probably going to happen anyway to cut costs.'

Williams admitted currency factors are not the only consideration for Airbus. 'We need to be strategic. We need to think "How do we do business in these countries? and how can we be local there?"' He added that the push overseas must not be driven by currency concerns alone: 'It's a bit like kids playing football - they all rush off in one direction onto one side of the field. We mustn't do something that three or four years later we wish we came to another conclusion.'

British defence company BAE Systems sold its stake in EADS last year. About 40 per cent of the company's shares are listed, with about half of the remainder owned by the French government and German state and private banks. Russian bank VTB, a Spanish state holding company and Dubai-based investors own the rest. German and French ministers have a history of powerful lobbying against job cuts in their own countries. Scholle from Global Insight said this makes the UK's highly efficient Broughton plant more vulnerable: 'Airbus becomes a point of national pride for French and German governments and it's a source of jobs, so there's always the potential for politicians to meddle. The UK government has less influence over the company.'

Williams insisted that secretary of state for business, John Hutton, and other ministers regularly lobby Enders and Gallois: 'I don't think it makes a big difference. There is no lack of pressure.'

Airbus is the result of a 40-year-old vision for European aerospace firms to collaborate, largely to compete against US firms including Boeing. But globalisation means the world is much bigger than the US and Europe. Markets such as China are emerging.

Howard Wheeldon, from BGC Partners, said: 'What we are seeing through the momentum of dollar collapse and the devastating effect that it is having on EADS probably marks the end of the great European dream for Airbus. Of course, it doesn't mean the end of Airbus - far from it. But as Boeing has already done, it requires Airbus to become a truly global company.' And in the long run, that could spell bad news for Broughton, soon to be the UK's remaining Airbus plant.
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dj

[rffrydr]

Ironic in light of Trichet's hawkish comments post ECB meeting today. But relief is coming.

Airlines have never existed outside the government's perview--look at the China freeze on Boeing purchases. It's always a dance, at any level. Fannie and Freddie is another example of Agency companies. Russia is an "agency" stock market and seems to be doing okay. Don't even start with BA's ties to American space exploration and the military-industro complex. Both of which are "subisdies" like no where else on the globe.

Next to Boeing, yes EADS fades--but as an investor you're not complaining. Next to most US stocks you're doing just fine--as much because of the euro as not. The companies book is backed by MidEast govts with strong political agendas for buying Airbus with euros and the very company is from inception a governmental entity. It's not that you can eject or "write-off" the tie-in here. France and Germany ARE the company. Reform is now a necessity--and is underway.

That, I think, is the best that's ever going to happen. Freemarketeers need to stick closer to home--that is, closer to one of the weakest performing markets anywhere this year.
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Today is the Tomorrow you worried about Yesterday!

[texfly101]

Airbus is warned about outsourcing. In a Financial times article, the following paraphrasing is written:

"French companies were warned on Wednesday not to move production outside the eurozone in hasty response to short-term currency movements.
Christine Lagarde, France’s finance minister, appeared to send a shot across the bows of EADS, the Franco-German aerospace group, suggesting that the government might reconsider its financial assistance to the company if it cut its operations in France.
Ms Lagarde told parliament she would ask Louis Gallois, EADS chief executive, in a meeting scheduled for Wednesday evening to explain “how he intends to manage his strategy and costs to optimise the sales and market share of the French aerospace industry”.
Mr Gallois said this week that EADS had “no choice” but to move production of some components outside the eurozone.
Ms Lagarde acknowledged that EADS faced real difficulties when its sales were priced in dollars but a large share of its costs were in euros. But she reminded parliamentarians that the government had recently promised extra aid for research and development worth €1.5bn to the French aerospace industry.
“We will be extremely attentive,” Ms Lagarde said. “At a time we are increasing our tax credits for research, it goes without saying that our industrial partners must also participate in French industrial policy.”
Mr Gallois’s message about production costs was echoed by Charles Edelstenne, chairman of Dassault Aviation, who said his company could not cope with a 30 per cent depreciation of the dollar against the euro in the past two years.
But that line of argument was also criticised on Wednesday by Pascal Lamy, the head of the World Trade Organisation, who said companies should not make such decisions on the basis of short-term currency fluctuations.
“I don’t think that these are things that one can decide on in the short term,” Mr Lamy told iTele television. “Today, compared to five years ago, the euro is a lot stronger and the dollar a lot weaker, but it will come back.” EADS and Dassault also had a lot of costs in dollars, he pointed out.
Mr Lamy also turned his fire on President Nicolas Sarkozy when he criticised a tendency among French political leaders to reduce the question of competitiveness to the strength of the euro against the dollar and blame foreigners for a problem that was home-grown. “That’s no longer credible,” he said.
Germany had adapted better to the euro than France by managing its margins against currency movements, Mr Lamy added.
Mr Edelstenne responded on Wednesday to union concern about his comments, reassuring employees that there would be no compulsory redundancies or plant closures in France under his plan to cut costs.
Aircraft design and assembly would remain in France, he said."

That would seem to be a definite threat to the company's announced Power 8 Plan for restructuring and establishing manufacturing concerns in countries like China. In Power 8, there was acknowledgment of the Dollar/Euro problems and that solving the currency problem and outsourcing were central to the success of the plan. Add in that the current WTO dispute involves the governmental subsidies that Airbus currently enjoys, and its a double threat to their continuation. Add in that they are struggling with the introduction of the A350 and trying to decide about how much startup subsidy to request and it is a very complicated circumstance. Maybe its time for them to end as the governmental influence due to the subsidies seem to be hindering the company's ability to react to financial realities. But it won't come easy nor will it come soon. Airbus's troubles will be a financial drag just as they are reaching significant production highs that should have meant record setting profits. Look at the difference between Boeing and EADS stock performance. EADS had not kept up with Boeing even tho they have kept pace with sales and production. Unfortunate maybe, but in the industry, its said that its only another sign that the company is mature enough to throw off the government subsidies and become a streamlined efficient business operation that doesn't have the inherently inefficiency of government involvement. Keeping the subsidies only ensures such government meddling and prevents the company from moving away from its current unwieldy management structure that is a pawn to the French and German governments. Airbus as currently structured is beholden to both governments and as such is used as a political strategy by them. Not a good business model to say the least. Maybe when business is good is the time to get rid of governmental involvement, particularly if its a drag on performance. Doing it when times are bad might hurt more. Only time will tell. If they do ever move to not using the subsidies and restructure accordingly, I think the stock will take off and perform in line with their fundamentals...dj
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dj