Posted on 06/14/2006 5:40:38 AM PDT by ConservativeStatement
SINGAPORE, June 14 (Reuters) - Singapore Airlines ordered Boeing aircraft worth $4.52 billion after it was disappointed with new delays on the A380 superjumbo and is seeking compensation from Airbus parent EADS for the setback.
Airbus revealed delays of at least six months in deliveries of the A380 on Tuesday, an embarrassment expected to blow a 2 billion euro ($2.5 billion) cash hole in Airbus parent EADS (EAD.PA: Quote, Profile, Research) starting in 2007.
"We are disappointed with the news of further delays, but will work with Airbus to minimise the delays and their impact," said a spokesman for Singapore Airlines (SIAL.SI: Quote, Profile, Research), which plans to be the first to fly the world's biggest passenger aircraft at the end of this year.
Later on Wednesday, Singapore Airlines announced an order for 20 Boeing (BA.N: Quote, Profile, Research) 787-9 Dreamliners worth $4.52 billion at list prices and said it would take rights for another 20 planes
(Excerpt) Read more at today.reuters.com ...
Looks like the A-380 is dead. Emirates, the biggest customer has announced it will review it's decision to buy the A-380.
To hear some talk, Boeing should have been bankrupt by now because we put the hex on the Dubai deal. Just goes to show you, people will flock to buy the best made American products.
aerospace ping
If true, how about all those airports who have spend money designing or building new facilities for these planes? Think they will be a little ticked off?
Well, I didn't mean to imply none will be produced. There will be some delivered because some airlines have invested too much already. However, Emirates is having another look and Malaysian Airlines announced today it is rethinking it's order. Singapore opted for Boeing today but UPS announced they will stick with their order so it's a mixed bag.
What I meant when I said the plane is dead is that this news will result in some lost orders, a decrease in interest for future orders and a less than break even production run. It's a white elephant along the lines of the MD-11 which, although still flying, never made any money for it's manufacturer.
How did it go again? "If you're a day trader buy Boeing; if you're an investor buy EADS?"
Good call...
Airbus parent falls 34% on A380 delays Drop wipes out $7 billion of market cap for EADS
By Aude Lagorce, MarketWatch
Last Update: 9:17 AM ET Jun 14, 2006
LONDON (MarketWatch) -- Shares of EADS, the European defense company that's also the majority parent of Airbus, fell as much as 34% on Wednesday after a warning that deliveries of its new A380 superjumbo would be delayed by up to seven months because of a production problem. Only nine of the Airbus aircraft are likely to be delivered in 2007, seriously affecting the financial results of the parent group, EADS (FR:005730: news, chart, profile) said in a statement.
The group warned that operating profit would be cut by "about 500 million euros" ($625 million) a year between 2007 and 2010.
EADS was down 25% in early afternoon Paris trading. It was the group's busiest trading day so far this year. BAE Systems (UK:BA: news, chart, profile) , which owns the rest of Airbus, saw its shares fall 2.7% in London. Also see Europe Markets.
In Paris, 22.9 million EADS shares were traded in the first two and a half hours. The average daily volume in EADS over the last three months has been 4.21 million shares.
The news wiped out one-quarter, or more than 5.65 billion euros ($7.1 billion), of EADS' market capitalization.
"I am extremely sorry vis a vis investors that have placed their confidence in EADS," co-CEO Noel Forgeard said in a conference call.
"This announcement came as a big blow. But we will create recovery," he said.
Some observers, however, felt the news might spell doom for the plane maker.
"For a government-backed company with an unbelievable number of lucrative contracts to lose 26% of its value in one sitting is an absolute catastrophe of the highest order," said David Buik, a strategist at Cantor Index. EADS attributed the new delays to industrial issues stemming from bottlenecks formed in the definition, manufacturing and installation of electrical systems. It's the second time in the program that delays push back the delivery schedule, but Airbus insisted that the 555-passenger aircraft would be certified by regulators on schedule at the end of this year.
EADS currently owns 80% of Airbus, while the U.K.'s BAE Systems holds 20%, though it has signed an agreement to sell that holding to EADS.
Delays could sap confidence in other programs Analysts for Exane BNP Paribas said this second warning -- about similar customization issues as spelled out in the first A380 warning -- came a bit late, thus raising "credibility issues."
"While the likelihood of a further delay was not really a surprise, the magnitude of the delay and the EBIT shortfall is much more significant than we had anticipated and seems to relate mostly to exceptional costs," the broker said. The delays are likely to hurt other Airbus programs, including the A350 product, conceived as a rival to Boeing's 787 Dreamliner. But following weak sales for the A350, Airbus recently announced a review of the program. It's now expected to launch a replacement for the A350 program during the U.K.'s Farnborough air show in July. Deutsche Bank said the A380 delays "will no doubt increase concerns over Airbus' ability to manage A350 development risk."
Signed, a much wealthier "day trader".
The A380 is not dead. It'll just take a little longer to recoup the initial investment. Since there are various governments supporting Airbus/EADS, they are not a susceptable to the whims of the market.
Airbus is smart. They'll figure out a way to drop prices (and recover the lost cash elsewhere) and save face.
Remember what you just said five years from now when Airbus is eating the losses from this program. Even when it was still on schedule there was debate about whether it would ever be profitable. That it won't be profitable is now a foregone conclusion.
Not until Boeing fixes the fuselage panels...
I never said it (A380) would be profitable. Only that Airbus won't loose their (collective) shirt. Their government sponsors will keep them floating.
Note: I am not a fan of EADS/Airbus. In fact, I have turned down job offers from them.
I actually had an open offer to anyone in my office for a large sum of money that the A380 would not fly on time. No one would take the bet. The test flight was late, now delivery will be late.
They already have.
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