Further Airbus A 380 delays?

Signs are accumulating that the Airbus A 380 superjumbo jet may face even further delays, a possibility that would have profound financial and market consequences for the airplane and for its manufacturer. AT  has been covering the competition between Boeing and Airbus closely.

The most recent delay of six months is reckoned by informed observers to cost Airbus over two billion euros in penalty payments to customers, arrangements for alternative interim replacement aircraft, and excess costs. A further delay would not only increase these costs, it would raise serious credibility questions and damage the reputation of the airplane itself. The last thing that Airbus wants is for the airplane to gain the reputation of a 'troubled' design. That would be poison for sales, which have stagnated while Boeing's 787 Dreamliner has steadily added customers.

The first sign of possible further delays came over the weekend in a German press dispatch:

Deutsche Lufthansa AG (Nachrichten/Aktienkurs) is to take delivery of its first A380 superjumbo jet from European aircraft maker Airbus (Nachrichten/Aktienkurs) with several months' delay 'in summer 2008,' a company spokesman said.

Originally, Lufthansa had been scheduled to take delivery of the first of a total 15 A380 jets in autumn 2007.

But then an initial delay set back the delivery date to the beginning of 2008.

'We're in close negotiations with Airbus. But they haven't given us any more details on the delivery timetable so far,' the spokesman said.

Now, the Sydney Morning Herald reports that British Aerospace (BAE), which is selling its 20% ownership in Airbus parent EADS even as a Russian bank is planning a 5% share purchase, is indicating a further delay and worse.

THE European aircraft manufacturer Airbus may have to announce further delays to production of its A380 superjumbo airliner, the head of British aerospace group BAE Systems said today.

"I would be surprised if there were not more delays" to the A380 program, BAE Systems chief executive Mike Turner told journalists.

An Airbus spokesman of course downplays this remark by stating that he 'doesn't know where it comes from.' However, no outright denial was issued, and reference was made to an 'audit' Airbus is conducting of the delays, whose results will be released at the end of this month.

It is quite possible that the news of the audit's findings is reaching customers like Lufthansa before the review is complete.

Even more startling is the news that Airbus may ask shareholders to advance money in order to overcome cash problems.

Mr Turner had said earlier today that he thought Airbus would ask shareholders to provide fresh funds to overcome its problems.

"I would not be surprised if there was a cash call on shareholders to invest cash in Airbus," he said in a conference call following publication of interim results by BAE Systems.

If these stories prove true, then the A 380 may go from showpiece of European aerospace prowess and transnational cooperation to an awkward and expensive market failure, much like its predecessor project, the Concorde.

Hat tip: Richard Baehr

Thomas Lifson   9 14 06

Signs are accumulating that the Airbus A 380 superjumbo jet may face even further delays, a possibility that would have profound financial and market consequences for the airplane and for its manufacturer. AT  has been covering the competition between Boeing and Airbus closely.

The most recent delay of six months is reckoned by informed observers to cost Airbus over two billion euros in penalty payments to customers, arrangements for alternative interim replacement aircraft, and excess costs. A further delay would not only increase these costs, it would raise serious credibility questions and damage the reputation of the airplane itself. The last thing that Airbus wants is for the airplane to gain the reputation of a 'troubled' design. That would be poison for sales, which have stagnated while Boeing's 787 Dreamliner has steadily added customers.

The first sign of possible further delays came over the weekend in a German press dispatch:

Deutsche Lufthansa AG (Nachrichten/Aktienkurs) is to take delivery of its first A380 superjumbo jet from European aircraft maker Airbus (Nachrichten/Aktienkurs) with several months' delay 'in summer 2008,' a company spokesman said.

Originally, Lufthansa had been scheduled to take delivery of the first of a total 15 A380 jets in autumn 2007.

But then an initial delay set back the delivery date to the beginning of 2008.

'We're in close negotiations with Airbus. But they haven't given us any more details on the delivery timetable so far,' the spokesman said.

Now, the Sydney Morning Herald reports that British Aerospace (BAE), which is selling its 20% ownership in Airbus parent EADS even as a Russian bank is planning a 5% share purchase, is indicating a further delay and worse.

THE European aircraft manufacturer Airbus may have to announce further delays to production of its A380 superjumbo airliner, the head of British aerospace group BAE Systems said today.

"I would be surprised if there were not more delays" to the A380 program, BAE Systems chief executive Mike Turner told journalists.

An Airbus spokesman of course downplays this remark by stating that he 'doesn't know where it comes from.' However, no outright denial was issued, and reference was made to an 'audit' Airbus is conducting of the delays, whose results will be released at the end of this month.

It is quite possible that the news of the audit's findings is reaching customers like Lufthansa before the review is complete.

Even more startling is the news that Airbus may ask shareholders to advance money in order to overcome cash problems.

Mr Turner had said earlier today that he thought Airbus would ask shareholders to provide fresh funds to overcome its problems.

"I would not be surprised if there was a cash call on shareholders to invest cash in Airbus," he said in a conference call following publication of interim results by BAE Systems.

If these stories prove true, then the A 380 may go from showpiece of European aerospace prowess and transnational cooperation to an awkward and expensive market failure, much like its predecessor project, the Concorde.

Hat tip: Richard Baehr

Thomas Lifson   9 14 06