Posted on 05/30/2007 8:00:35 PM PDT by lowbuck
Qatar Airways has come to the rescue of the Airbus A350-XWB, ordering 80 of the next-generation jets in a move that effectively underpins the development project.
The $16bn (£8bn) deal is a major shot in the arm for the struggling plane maker, which had to scrap plans for the original metal-based A350 last year as customers flocked to Boeing's 787 Dreamliner, made of carbon composites.
Until yesterday, Airbus had just 13 firm orders for the revamped model due in 2013, leaving it doubtful whether the aircraft would ever be built.
Nick Cunningham, an analyst at Panmure Gordon, said the orders were heavily discounted at prices that may not generate a profit at the current exchange rate. "This helps a lot but the A350 is technically very complicated and Airbus still faces the problem of the weak dollar, with hedging costs going up."
Qatar's state-owned carrier previously had 60 orders for the old A350 blueprint, so the roll-over to the newer version is no great surprise. advertisement
The gas-rich sheikdom of Qatar has long viewed Airbus orders as a way of securing access to cutting-edge weaponry from Europe. Yesterday's deal came as top figures at EADS, the Airbus mother company, face a widening probe into possible insider trading in EADS stock before troubles in the A380 superjumbo came to light last year.
Arnaud Lagardere, co-president of the EADS board and chair of Lagardere publishing group, has been questioned by France's stock market watchdog over his decision to sell half of his group's 15pc stake in EADS in April 2006.
The French newspaper La Tribune said there was growing evidence that the board knew the A380 was facing delays as early as March 7 last year.
Police have obtained a tape-telephone conversation by one of the board members talking to a third party after the meeting about the "serious industrial problems".
Gotta wonder who got greased on this order & how much. You can bet the French were looking for a sugar-daddy on this project. Back-door bailout?
OTOH, it might just be sound business practice. At some point you gotta figure Boeing’s order book is going to be full-up. Only way to get a 787 might be to pay another airline a premium to get their production slot.
Bailout?
IMHO, no.
Let's see what this order looks like a year from now.
Sounds good like you say but Im with you.I will bet its not the deal that it seems to be up front.
If not that lucky 13, they would be out of luck.
Oh, that.
I figure that Kuwaitt has lots of money, and are a US ally. For our friend to bail out a Euro company makes the Euro’s just a little bit more enthusiastic about supporting something other than the latest terrorists and dictators.
Note: this is the 350, not the super-duper-jumbo 380 plane.
Two reasons are given in the article. First, the sale may be at or below cost. Second, “The gas-rich sheikdom of Qatar has long viewed Airbus orders as a way of securing access to cutting-edge weaponry from Europe.”
But what was the political cost?
Isn’t dumping exports, selling at below cost, illegal?
What exactly is below cost? Most new aircraft are steeply discounted to launch customers. It makes sense for a manufacturer to sell them that way so long as they cover the variable costs.
Fixed + variable = cost.
If they sell at below that, isn’t it dumping.
If they sell at below that, isn’t it dumping.
And over how many units do you amortize fixed costs? As I recall, fixed costs aren't part of marginal costs. The marginal cost is dC/dQ. The first derivative of a constant =0, so fixed costs are irrelevant. Even if a firm is losing money, they won't shut down production if it is covering variable costs, because they would lose even more money by shutting down. It's not uncommon in capital intensive industries in which fixed costs are a large proportion of total cost to have to sell products at a loss.
Nonetheless, cost accounting provides a means to arrive at cost. The numbers arent’ just pulled out of the air. I ask again, is exporting below cost not dumping?
I have reread you post and have come to the conclusion that you have been unduly influenced by Milo Minderbinder of Catch-22. When losing a little on each item you sell, contrary to Milo, you do not make up for it in volume. Milo was wrong, well, unless you like chocolate covered cotton and contracting with the enemy bomb your own fields.
No. I’m influenced by my economics professors. Dumping is defined as selling below variable cost.
Airbus would probably be better served by shelving the A350-XWB for now and focusing on making sure their supposed bread-and-butter plane is in good shape.
Yep, 80 planes, with a seating capacity of 350, divided into Qatar's population, means that on average, each Qatari will be taking between two and three trips per month...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.