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Airbus pulls ahead on orders - How Significant Is It?

June 22, 2009

Analysis of:Airbus Had a Great Show | blackprogram.blogspot.com

Airbus strong week at the Paris Air Show has generated a significant backlog of new orders - with commitments for 127 aircraft versus 2 for Boeing.  Does this reflect a fundamental change in the market attractiveness of the products of both companies in the marketplace? Does it reflect traditional "saving announcements" for Paris by Airbus? Does it reflect heavy discounting by Airbus? How do the two manufacturers compare across their product lines?

Airbus Innovation Update - The View from Toulouse and Hamburg

June 15, 2009

Analysis of:Airbus Updates the Market | www.arabiansupplychain.com

Airbus believe their product line is superior to Boeing and that the company, with a record backlog, is well positioned vis-a-vis Boeing.   The recession has impacted Airbus, and like Boeing, they have become more reliant on export financing to support customers. Airbus believe their re-designed A350 XWB will stack up well against the Boeing 787 and 777 With record orders and deliveries, Airbus is well positioned to maintain an industry leadership position, especially when the A350XWB enters service Airbus admits that its problems are short-term, maintaining production in 2009 and 2010 given the economic downturn facing the industry and order cancellations plaguing both Boeing and Airbus.

A fact-based analysis of ILFC by three GLG aviation analysts

June 9, 2009

Analysis of:ILFC to order more jets as airlines replace older models | seattletimes.nwsource.com

AIG must sell ILFC, the world's leading aircraft leasing firm. Recent reports on the bidding process reveal that the Onex/Greenbriar team is current in the lead, and that the entity will not be split but sold as a whole.  In addition, Steve Udvar-Hazy, ILFC’s CEO, indicated that the company is currently in discussion with Boeing and Airbus regarding additional orders, indicating that a degree of “normalcy” is assumed for the future.

Have We Reached the Bottom in Business Aviation

March 17, 2009

Analysis of:Cessna VP Sees Brighter Days for Jets | www.kansas.com

Cessna has indicated that we may be nearing the bottom of the recession for business aviation.  This conclusion does not match the data from industry drivers, utilization statistics and aircraft available for sale. While able to obtain financing for customers, Cessna indicated that the financing market has tightened considerably.  Others, without an in-house finance unit, have not fared as well. Has the recent focus on executive salaries, bonuses and perks created a negative atmosphere for business aviation that will prevent a short-term recovery?  We believe the negative drumbeat, combined with proposed onerous regulations by TSA, will prolong the industry downturn.

The Large Deal is Off - but Small Deals that Could Roll-Up are Likely

March 16, 2009

Analysis of:EADS still eyeing smaller U.S. buys | www.reuters.com

EADS acquisition strategy turns smaller, to mid-market aerospace firms in the United States, rather than a large systems integrator. Politically, with a €5Bn Airbus support package from France, it would not look good to be "buying American". While this is a great opportunity to acquire strong companies at low market valuation, EADS cannot afford a large acquisition, but conditions are too tempting not to do something.  This could trigger further consolidation in the aerospace sector, with other OEM/System Integrators also considering acquisitions.

ILFC can weather the storms in 2009

March 12, 2009

Analysis of:AIG Told U.S. Failure May Cripple Banks, Money Funds (Update4) | www.bloomberg.com

In the midst of the AIG collapse, several questions about its ILFC aircraft finance unit provide indications that ILFC can weather the storm. How badly will ILFC be impacted by the current downturn, and what does that portend for value that AIG will receive one the unit is sold? Can ILFC generate enough secured financing in 2009 to cover expected $6.2 billion in debt this year given the market downturn and rating downgrades? What impact will re-negotiation of leases by airlines, in light of lower aircraft values, have on ILFC profitability?

Aegean is the Logical Choice for Olympic

March 10, 2009

Analysis of:Aegean bids to acquire Olympic | www.ft.com

1. A solution to the subsidy problem at Olympic, similar to Alitalia may be at hand2. The logical player is Aegean to take over Olympic, just as AirOne took over Alitalia3. The EU is forcing the hand of the Greek government to take action, and finally come up with a solution for the long moribund Olympic Airlines.

Will a Lack of In-House Financing Cripple Cessna

February 10, 2009

Analysis of:2 Leave Textron | www.forbes.com

Textron is preparing to divest its financial unit, which includes Cessna Finance, a captive financier of Cessna aircraft.  With the financial markets simply unavailable for aircraft finance at reasonable terms, the lack of captive financing may cause Cessna to lose sales it otherwise might have gained.  A captive finance unit is typically the lender of last resort - to those who might not have been able to obtain financing elsewhere.  Currently, that's just about everyone. Will Cessna be able to meet its forecast of 375 units, down from a record 467 last year?   With a record 17% of the corporate jet in-service fleet now available for sale, the outlook for Cessna and other business jet manufacturers is bleak for 2009.

Boeing's Widening Credibility Gap

December 12, 2008

Analysis of:Boeing Delays Dreamliner Again | online.wsj.com

1. Boeing's continuing delays on the 787 will be costly, both in credibility and payments to airlines.   2. It's reputation for being on-time with new programs has resulted in the 787 being nicknamed the 7-late-7, and with several delays, has analysts wondering whether this is indeed the last delay. 3. With the now two year delay in the program, Boeing's 5 year lead over Airbus has shrunk to 3, and those three years will have no available slots from new customers, as Boeing needs to catch up on late orders.  As a result, the competitive playing field has now been leveled.

This is not a surprise, given recent events

October 11, 2007

Analysis of:Boeing delays Dreamliners delivery to Q4 2008 | www.marketwatch.com

Boeing will have unhappy customers and some catching up to do.  The company will face performance penalties for late deliveries, albeit not as material as those Airbus faced for the longer A-380 delays.  The difficulties of new technologies combined with a new global manufacturing strategy proved too difficult for Boeing to deliver on time

Open Skies Deal Favors the US over Europe

March 28, 2007

Analysis of:Fasten your seatbelts | scotlandonsunday.scotsman.com

• Rights under the deal are not equal
• Negotiations for more US concessions already scheduled
• The US wins a major victory at Heathrow - albeit delayed
• Eliminating bilateral agreements enables consolidation on both sides of the ocean without losing international route authorities

A long-term view to economic development

March 21, 2007

Analysis of:China's Air Ambitions Face Obstacles | online.wsj.com

• China has decided to move into production of large commercial aircraft
• This is a difficult industry to enter - but Airbus provides an example
• Cooperation with Russian aircraft industry is likely, perhaps Ilyushin
• But the schedule of 2020 may be ambitious for world class products.

Malaysian Likely to Cancel A380 Orders, Other Cancellations Rumored

March 21, 2007

Analysis of:Airbus is facing uphill battle at keeping Malaysia Airlines as an A380 customer | www.atwonline.com

• MAS Cancellation another blow to A380 program
• Cancellation of 6 would reduce order book to point below 2005 sales
• Rumors persist of further cancellations, as aircraft is over target weight and subject of airline renegotiations
Bottom Line:  The A380 is rapidly becoming a market failure

Airbus Cash Cow will Soon be Vulnerable

March 5, 2007

Analysis of:A320 Ramp Up Key to Airbus Health | www.aviationweek.com

• Airbus expansion is necessary for cash flow, given two major failures (A350 and A380)
• This is risky and problematic, given Power 8 program, job cutbacks and political realities
• The opportunity exists for Boeing to leapfrog the A320 family with new technology, and create a competitive advantage, as Airbus could not afford to fund another new program without selling assets or changing how it develops aircraft.

Bottom Line:
Airbus short term advantage could quickly become a competitive liability if Boeing pushes its program forward.

Long-Haul Low Fare Service is Becoming a Reality

March 5, 2007

Analysis of:U.S. and EU Reach Agreement On Tentative 'Open Skies' Deal | online.wsj.com

• Open Skies is the equivalent of deregulation, which will invite new competition into the transatlantic market
• New Low fare carriers as well as business oriented carriers will enter the market and compete with existing legacy carriers
• Fares and yields will drop due to new competition, negatively impacting legacy carriers future earnings
• Consumers will benefit, but legacy carriers will need to tighten their belts and become more competitive

UPS Cancels 10 A380F Freighters - Good News for Airbus?

March 5, 2007

Analysis of:Ditching Airbus | online.wsj.com

• The last remaining customer for the A380, UPS has canceled its orders.
• Airbus can now defer development of the A380F and put additional engineering resources on the passenger version.
• Boeing will have the large freighter market to itself for the next few years with the 747-400F and 747-8F.

A Major Delay and More Problems at Eclipse

March 2, 2007

Analysis of:Eclipse’s Relationship with Avidyne Terminated | www.ainalerts.com

• Eclipse has been unable to attain a production certificate to being mass production of its aircraft
• A change in avionics manufacturer will likely result in further delays, possibly as much as a year
• Significant delays in deliveries and cash flow will result, as well as delays to DayJet, a major air-taxi operator with substantial orders
• Some financial institutions are beginning to cease lending on Eclipse orders

Why Boeing will accelerate new program development

February 27, 2007

Analysis of:Big U.S. Airlines Face Obstacles Updating Fleets | online.wsj.com

• Because major US carriers do not want to replace aging fleets with existing technology aircraft nearing the end of their lifecycle, they will not order existing models
• The potential for massive orders from American, United, Delta and Northwest will be perhaps $20B to the winner, an attractive goal for Boeing and Airbus
• Airbus is financially constrained from A350 and A380 difficulties, and Boeing could accelerate its 737 replacement to put further financial pressure on Airbus
• A 737 replacement is likely to enter service sooner than anticipated.

Deferred Decision the Worst Possible Outcome for Airbus in Short Term

February 27, 2007

Analysis of:UPS eyes 2007 decision on jumbo freighter: Cancellation could wipe last A380F orders off Airbus books | www.marketwatch.com

• UPS is the only remaining customer for the A380F
• By deferring a potential cancellation decision until later this year, Airbus needs to continue to develop the A380F and spend money during a cash flow crisis
• It would have been better for Airbus for UPS to cancel its order, deferring engineering and cash flow for a few years, then introducing the model once the passenger version is established and successful.

Federalism versus the States: A grey area when it comes to liquor

February 27, 2007

Analysis of:After Car Crash, Liquor Laws and Airlines Are Debated | www.nytimes.com

• Compliance is necessary
• Responsibility like a bartender appears to apply
• Potential liability for airlines, especially those unlicensed

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