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Airline Wars

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  • Airline Wars

    I personally am not a good American and don't care for Boeing over Airbus, may whoever makes the best planes win I say. But I've been following the airline wars for some time now, probably because I am a habitual Economist reader, and this news today was pretty shocking:


    Singapore was the first carrier to buy the A380, ordering 10 with an option to purchase another 15. Airbus said the first delivery to Singapore was still expected by the end of this year.

    But deliveries will likely be limited to nine in 2007 instead of the 20 to 25 initially planned, Airbus said, with an additional shortfall of five to nine A380 deliveries expected in 2008 and "around five" in 2009.


    Airbus parent European Aeronautic Defense & Space Co. saw billions of dollars wiped off its value Wednesday as shares plummeted by 26 percent to close at 18.80 euros ($23.63), after it warned that operating profit would be cut by about 500 million euros ($625 million) each year between 2007 and 2010.

    Shares in Boeing Co., meanwhile, rose 5 percent to $80.88 on the
    New York Stock Exchange.

    Revising first year production schedules from 20-25 down to 9 - when that year is only six months away is going to hurt. These kinds of delays must not be rare with major new designs like this, but still...
    A policy of freedom for the individual is the only truly progressive policy. -F.A. Hayek

    "$250,000 a year won't get me to Central Park West."

  • #2
    Re: Airline Wars

    I find it unlikely the A380 will deliver at the beginning of 2007. Optimistically April or May of 2007, realistically end of 2007.

    It is simply the size of the complicated systems involved.. very little more then that - a little thing called reality.


    • #3
      Re: Airline Wars

      I find it accurate to liken the A380 to the Space Shuttle. Developers overly optimistic in touting it's place in history, racked with design problems and production delays, grossly overbudget, and I'm sure they'll be trouble shooting for quite a while after.


      • #4
        Re: Airline Wars

        Now there are allegations the co-chief executive of EADS (which owns 80% of Airbus) sold a lot of his company shares in March before the cat was out of the bag...

        Oh well, maybe he can call Martha for some tips on making it in the Big House.


        • #5
          Re: Airline Wars

          The Financial Times did a big writeup several months ago about the competition between the Airbus and Boeing. The Boeing guys were making snide comments about how Airbus continues to receive financial aid from the EU, so the development cost of the A380 won't be reflected in the profitability analysis described to shareholders. FT also talked about Boeing going more toward carbon fiber materials while the new Airbus designs continue to be based on mostly aluminum which is heavier, more expensive, and more prone to cost variation. Boeing has won a bunch of new contracts because the resulting planes are lighter and more fuel-efficient.

          Basically, the stock taking a dump isn't a big surprise.




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