Briish Airways Splits the Difference Orders both the A380 and the 787

In an much anticipated order BA has ordered 12 A380 and 24 787. Some were caught by surprise and its the first new order for the A380 in two years.

The order of the 787 takes its book to over 700 sold.

www.forbes.com...

Airbus is denying that it is selling the A380 below cost, but some questions remain.

www.businessweek.com...

The article says that BA is also considering buyng the 747-8 as well for thiner routes that would not need a A380

[edit on 9/27/07 by FredT]

I hate to say it, Fred, but for a moderator, your bias is showing.

BA did not "Split the difference" as you put it. As a traditional Boeing purchaser, their acquisition of the Boeing 787 was entirely predictable and expected. A good choice on the part of BA and part of their strategic plan. If they had opted for the Airbus A350XWB, BA would not be getting the planes until the latter part of the next decade, which does not meet their timeframe.

The A380, on the other hand, serves a markedly different purpose. As a flag carrier, one of the most recognizable airlines in the world, BA will always have a significant element of hub-to-hub traffic, which the A380 will serve better than any current or planned competition. A no-brainer on the part of BA.

Just for a change, there was no fence-sitting. BA made the smart choice all round. Who knows, I may even fly them again (one day).

KW

Originally posted by KwazyWabbit
I hate to say it, Fred, but for a moderator, your bias is showing.

Hmmm, if its just showing then I did soemthing wrong. If you look back over the years (Waynos will agree) I have never held back as to what I feel is the giant European Jobs program that is Airbus. I mean they wont have to even begin to replay the loans aka launch aid untill the sell the 420 th A380. Hows that for a compedative advantage eh? But that is a topic for many other threads

That being said, im not sure how you can infer bias? They split the order between the two companies, thats pretty cut and dry eh? The A380 is for slot limited, high traffic long hual routes and the 787 it seems will be used on lower density long hual routes as well.

In the slot limited airport, the A380 will perform its job well. My objections to the aircraft are not on its technical merit but rather on the politics involved in its production.

When you refer to the politics of subsidy, be sure to include Boeing in you consideration, as the countersuit before the WTO attests. Just because it is not an open book affair such as Airbus has doesn't mean that it doesn't happen.

My interpretation of bias on your part was written without reading the reference material in your second post. The politics of subsidy is, in my opinion, best left to the nefarious, backstabbing imbeciles of this world ..... they're called politicians ..... to fight it out amongst themselves.

As a moderator initiating a thread about an order like this, a simple statement of fact would have been a better way to open the thread. Instead, there was "surprise" at the A380, and chest-beating about the number of 787 orders. And that's just not cricket, old boy.

The only surprise I felt was that BA didn't place this order as soon as the 787 was first touted. Oh, but then that would have meant BA having management and brains. Silly me.

KW

Originally posted by KwazyWabbit
Instead, there was "surprise" at the A380, and chest-beating about the number of 787 orders.

Hmmm did you read the first article?

for refreshment purposes

Though the size of the order was as expected, the decision to order a number of Airbus' A380s in addition to 787 Dreamliners from BA's long-term supplier of long haul aircrafts took the market by surprise.

The order for the A380's was a surprise plain and simple. As far as chest beating, I hardly do that anymore unless I am wooing the missus.

Originally posted by KwazyWabbit
I hate to say it, Fred, but for a moderator, your bias is showing.

So what if it is? Apparently you've never read this thread:

Moderators Are People Too. (and they have opinions),


On topic, I'm sure BA made its decision based on what they predict their future business needs will be.

Yes Fred, I do agree

I think the reason the A380 order was a surprise was because BA have been loyal Boeing buyers for half a century (see also my thread on the VC-7) and BA had been giving every impression of just waiting for the 747-8 to come along. They had also said that they would never be a launch customer for the type so, having captured an order from Lufthansa it appeared that, despite noises of a competitive evaluation, the choice of the 747-8 was a mere formality. The surprise is that they seem to have actually looked at it properly and bought the best plane for the job.

Even then, their fear of upsetting their girlfriend is betrayed by the remark that they might still buy some 747-8's after all, when they can find an excuse.

Originally posted by FredT
Airbus is denying that it is selling the A380 below cost, but some questions remain.

www.businessweek.com...

The article says that BA is also considering buyng the 747-8 as well for thiner routes that would not need a A380

Airbus cannot sell the A380 below cost, they *need* to make money on every airframe sold at this point in time and they know it. To sell to BA at a loss would not positively affect the program and thus it seems like a stupid idea.

However, BA will have received substantial discounts off their *list* price, and that is the norm in the industry - they also will have got good discounts on the 787 list price as well, despite Boeing having sold 700 of them.

Also the article is wrong when it says BA is still looking at the 747-8i, all current indications is that it has been dropped from consideration:

But BA is still working on the replacement of the remainder of its 747-400 fleet. It lists the candidate aircraft as the 787-10, 777-300ER and A350 XWB, but no mention is made of the 747-8.

www.flightglobal.com...

BA says it will “continue to consider the most suitable aircraft to replace its remaining [Boeing] 747-400 aircraft and is examining the 787-10, 777-300ER and A350XWB”. No mention is made of the 747-8.

www.flightglobal.com...

Both of those are variations on the same quote, but I have included both as a highlight.

Originally posted by FredT
I mean they wont have to even begin to replay the loans aka launch aid untill the sell the 420 th A380. Hows that for a compedative advantage eh?

Actually the first Repayable Launch Investment loan repayment happens on the 15th October 2007 - next month.

Repayments happen from the very first airframe delivered (they are called royalty payments under the 1992 RLI agreement), so I have absolutely no idea where you get your 420th airframe figure from?

RP,

the figure for the break even point comes from Airbus itself.

Clearly because of the difficulties of the A380, the break-even point has increased," Gallois said. EADS now isn't giving specific targets on the number of A380s it needs to sell to break even on the project, he said.

Airbus has currently sold 156 A380s. Last year it said it needed to sell around 420 of the planes to break even. This break-even guidance was given before Airbus unveiled a major cost-cutting program known at Power8.

Gallois is also joint CEO of EADS.
online.wsj.com...

In addition it is my understanding that the per plane royalty is a very minor payment AND is not exactly the same as servicing the debt any other company would have to do in similar circumstances. Also, if they do not sell as many planes they never have to pay off the debt inuccred

Launch Aid. Launch aid, or direct subsidies for the development of new models of Airbus
aircraft, is the principal type of subsidy that Airbus has used to develop its product line.
Launch aid is up-front, no- or low-interest financing from EU governments that Airbus
only needs to repay if the aircraft model being financed is successful. (Repayment is via
a per-plane levy, so if the aircraft does not sell well, some or all of the financing is
forgiven.)
www.ustr.gov...

Originally posted by FredT
RP,

the figure for the break even point comes from Airbus itself.

The break even figure is the point at which Airbus has no investment to repay.

In addition it is my understanding that the per plane royalty is a very minor payment AND is not exactly the same as servicing the debt any other company would have to do in similar circumstances. Also, if they do not sell as many planes they never have to pay off the debt inuccred

Your understanding is wrong - the royalty payments are calculated so as to repay the RLI within a certain number of frames that was decided when the RLI was awarded. This would be the original break even number that Airbus calculated at program launch, and that would be around the 200 plane mark. It is a fairly substantial figure per airframe delivered.

Since then, Airbus has incurred further costs which has increased the break even number to above 400 at last count, but the RLI repayment plan stays fixed in that Airbus is required to pay the investment off by 200 frames.

There is another limit involved as well - 17 years from award of RLI, and there are no clauses in the 1992 agreement for non-payment.

Most of the stuff I read about the 1992 agreement on forums tends to be wrong, so all my own information comes from actually researching the subject and reading the agreement itself. Its quite amazing the gulf between what is being said and what is actually true.

Thanks for that Richard, Jeez you waded through the legalise of an international agreement, man I salute you
(reading UK Gov regulation & legislation was a part of my job once upon a time, so I know exactly how mind-numbingly tedious and plain aggravating it can be.....a 'hot' read these kinds of docu's are not, eh?! )

Anyhoo, BA bought Airbus and the A380 at that.

Wow.

Wonders will never cease.

I must admit I had thought them to be practically molecularly welded to Boeing that they never would.

Nice.

[edit on 8-10-2007 by sminkeypinkey]