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| Home Front: Economy |
| The Rise of Boeing (v. AirbusT) |
| 2005-04-29 |
| Just as Airbus's super-jumbo makes its maiden flight, Boeing bounces back WHEN the new A380 took off from Airbus's French production base in Toulouse on April 27th, it should have been the European aircraft manufacturer's big week. The successful first test-flight of a 555-seat super-jumbo was quite an event. Instead, Airbus's American rival Boeing almost stole the show. On April 25th, Boeing said that, if all the options are taken up in a new order for widebody jets from Air Canada, the value at list prices would be around $15 billion—making it one of the biggest aircraft orders ever. The following day, Boeing landed a second huge order from Air India. Soon it will announce a third, this time from Northwest Airlines for its new 787 long-haul aircraft. The timing may well have been deliberate. Nevertheless, the three orders are more than marketing hype, and should worry Airbus. They all come from airlines that have long been big Airbus customers, and they reflect a new sense of purpose at Boeing, which now looks like outselling Airbus for the first time in recent years under its new super-salesman, Scott Carson. They also bring the tally of launch orders for Boeing's new 787 to over 200—impressive for a new plane which has been on the market for only a year. Airbus, by contrast, has only one customer for its rival A350 long-haul plane, and sees orders for the A380 obstinately stuck at 154. |
| Posted by:Captain America |
| #16 Phil,the issue of runways is going to be big in the US. Just trying to get favorable enviromental impact statements,not to mention all the permits,etc. will be bruising political fights. Then there is cost of buying land in some cases-land which the owners know has to be bought. Land seizures will be fought in court. Homes that were blocks away from the runway will find themselves next to it and they will file lawsuits. While the runways are being expanded,they will have to be shut down,causing all kinds of disruption. And we haven't even started discussing who's going to pay for them. Even if we pretend Boeing won't be lobbying against such expansion any proponents have a tough fight on their hands. I'd like to meet the State or Local politician who supports a massive bond issue to finance runway expansion for just 1 type of airplane while opponents are screaming for money for education(think of the kids!),health care,etc.,all during times of tight budgets. Trying to get money from the Feds will be problamatic at best(let's ignore most of the logical airports are in BLUE states-we all know Bush doesn't hold grudges),because it is for so few airports,10 at best-what's in it for the rest,esp. when they can legitimately claim Federal funding should go to upgrading the obsolete Air Traffic Control System. |
| Posted by: Stephen 2005-04-29 10:11:18 PM |
| #15 Never happen at O'Hare. Never. Da Mayor can't get the airport reconfigured (he wants to build 8 parallel runways and scrap the current 5 completely). If he did that, the A380 might be able to do it, or at least block only 2. But the NIMBYs around the airport are particularly ferocious so the runways aren't going to be built for a good 20 years. Don't worry, a Daley will still be Mayor then. |
| Posted by: Steve White 2005-04-29 9:08:07 PM |
| #14 I wouldn't read too much into the runway issue. The market is transpacific and the Kangaroo run from Oz to SEA and then Europe. Perhaps 2 dozen airports have to accomodate it and the only US one that must is LAX, but SFX, Seattle, JFK and Chicago would be desireable. |
| Posted by: phil_b 2005-04-29 7:51:47 PM |
| #13 It seems targeted mainly at China and other Asian emerging mkts that are building new airports. |
| Posted by: thibaud (aka lex) 2005-04-29 4:24:08 PM |
| #12 Having long enough runways in LA,NY,Memphis(lots of air cargo) does you no good if you are over Kansas and you need to land NOW! The same is true of most of the ocean. |
| Posted by: Mrs. Davis 2005-04-29 4:22:19 PM |
| #11 The other major problem w/the A380 is the limited # of runways that can safely accomodate the plane. Most airports around the world will have to expand and reinforce their runways,which in US is EXTREMELY costly as you would have to buy private property at extremely high prices. Add noise abatement regulations and this turkey will find few places to roost. Typical Euro-French arrogance-they just assume if they build it others will make long enough runways.(Fortunately for them,I forsee a lot of EU foreign aid being tied to EU countries getting contracts to build airports in poor countries.) But one aspect of lack of proper runways is what happens if there is an in-air emergency and the plane has to divert? Having long enough runways in LA,NY,Memphis(lots of air cargo) does you no good if you are over Kansas and you need to land NOW! |
| Posted by: Stephen 2005-04-29 4:02:43 PM |
| #10 As an investor, I am thinking Concorde redux. The Concorde, you recall, was the fastest bird. The AirbusT A380 is the fattest. I see a pattern here, folks. Hard to recall the concorde nowadays. |
| Posted by: Captain America 2005-04-29 2:38:48 PM |
| #9 If the competition's intense, and governments are involved as well, then the discounts could easily top 50%. They could range very widely, too. |
| Posted by: thibaud (aka lex) 2005-04-29 12:54:47 PM |
| #8 The max takeoff weight of the A380 is about 900K pounds. The site I got the 590K from put the empty weight in the MTO field. Still, the 1/2 ratio applies and the 787 should be the economic winner in the freighter game. I don't know the customary discount in the airliner biz. But I read a rumor somewhere that the launch customer (Japanese: Japan Air Lines?) got a fantastic 50% discount. Of course, no one is going to get that discount again on the 787. |
| Posted by: ed 2005-04-29 12:51:36 PM |
| #7 Ed - that's list price. Do you have a range for what the actual prices will be? Is it correct to assume that Airbus's discounting will not be greater than Boeing's discounting? Also, what's the pipeline? The Economist seems to suggest that Boeing's adding to its pipeline while Airbus is not ("obstinately stuck at 154"). This is only the first inning. I wouldn't leap to conclusions, especially with the global airline industry. |
| Posted by: thibaud (aka lex) 2005-04-29 12:36:55 PM |
| #6 ..while Boeing's much smaller indirect subsidies come from supplier countries (e.g. Japanese subsidies of their companies design and manufacture of the 787 wings). According to the idiots at Airbus, they claim that Boeing's military contracts amount to "indirect subsidies". Apparently, they don't seem to understand that Boeing just might be making stuff that the U.S. military, or other nations' military entities even, want to buy. |
| Posted by: Bomb-a-rama 2005-04-29 12:31:31 PM |
| #5 Whoops. Can't count my zeros. A380: 154 x $275 million list price = $42.3 billion 787: 200 x $120 million list price = $24.0 billion If the 787 is as efficient as advertised and has 1/2 the payload (max take off 450K lbs / 590K lbs = .76[first order payload approx]) then it will always be cheaper and more flexible to buy and operate 2 787s vs 1 A380 freighter. |
| Posted by: ed 2005-04-29 11:24:10 AM |
| #4 I think the ultimate market for the 380 will be the air cargo version. IMO the insurance companies will quail at the tought of one of these things augering with a full load of economy class passengers. Some how a full load of Chiliean fruit is not quite as unsettling |
| Posted by: Cheaderhead 2005-04-29 10:58:09 AM |
| #3 A380: 154 x $275 million list price = $4.23 billion 787: 200 x $120 million list price = $2.40 billion Airbus, as a company, will do fine. The EU is paying (loan guarantees and direct subsidies?) for the $15 billion A380 development, so Airbus will make a profit, while Boeing's much smaller indirect subsidies come from supplier countries (e.g. Japanese subsidies of their companies design and manufacture of the 787 wings). The 747 ($200-230 mil) passenger plane market has been dead, and I think the freighter market will also die due to 50% greater payload and lower ton-mile costs. |
| Posted by: ed 2005-04-29 10:42:37 AM |
| #2 If the A380 is a bust, then hopefully its not the kind that involves the Airbus special: tails falling off. |
| Posted by: Laurence of the Rats 2005-04-29 10:23:42 AM |
| #1 I think Boeing's ace-in-the-hole is that the 787's operating costs are supposed to be 20% less that equivalent aircraft. Given the cost of fuel these days, not insignificant. I think the A380 will prove to be a bust; just a niche aircraft. |
| Posted by: Spot 2005-04-29 7:52:16 AM |