24 May 2007

For Airbus - what is the compensation for the delay of the Whaleliner?

Disclaimer - this blog entry is pure speculation on our part. However we believe the numbers to be accurate for the aircraft concerned.

For some time we have been trying to assess the likely impact to Airbus customer airlines for the delays. We now believe that the offer is pretty clear. It is a 5% free off IF a further aircraft is purchased. Rather a kind of buy one get one free to the affected airlines. We know that Virgin has opted to take a delay with a small compensation. However for the major players this translates into bolstering the order book. As a result We estimate that a total of 18 aircraft will be added to the production order book as a result of this special offer. Not quite compensation for the cancellations of the Freighter version of which 20 were ordered but then cancelled by UPS and Fedex.

T2 estimates that the current order book changes (prior to the Paris Airshow) will be as follows:
EK +4 (announced), AF +2 (announced) QF +8 (of which 2 will be compensation - announced), We believe that ILFC and SQ will announce 2 additional orders each. LH will add 3 with one a piece going to KE, TG and MH. A possibility exists that QR and EY will vie to order at least one a piece. However it is wrapped up into whether the orders for A350s will be made permenant. We dont think the (at least 1) private A380 will actually be taking up the twofer deal. Total cost at book value to Airbus in these special deals will be over 2.2 Billion Euros.

Airbus is planning some blockbuster announcements for Paris. Some of those orders will be part of these deals we believe. Boeing will be low key as they have been having a lot of basking in the sun at Airbus' expense of late.

Stay tuned. This could be fun



23 May 2007

Why Iberia? Can BA capitalize?

Flanking the Skyteam Alliance anchored around 2 Northern European airports (CDG and AMS) has been a goal of BA. Of late BA has been feeling the heat with the infrastructure failures at LHR which has resulted in generally a loss of connecting traffic at the world's busiest international airport. As someone who connects frequently through the major EU hubs I can assure you they are usually pretty bad. But AMS is still the champ at this. I am sure many of my fellow travellers can recite tales of horror from FRA (the furthest A gates) LHR (the staircase to heaven or the escalators to hell), or CDG (the bus rides around Northern France). The new Madrid airport terminal feels like a positive dream. BA is hoping its new T5 will be just as terrific and give them the edge against all its new competitors.

BA desperately needs another platform to retain its dominance. Wednesday's (May 23) article in the WSJ was a good overview of the motivations. But BA has been either very lucky (financially from its 2 major investments) or very unlucky (less than fulfillment of traffic potential) in its alliances. This time its hoping for success on both accounts.

BA's failures have been when it meddles in other people's markets. The US Air investment and involvement was unhappy for all concerned. But Qantas worked out just fine. Because Ayling and his successors wisely left them alone. TPG's team is not a group of hands off players. So we can be prepared for some fireworks in execution if the team wins. Right now they are the only game in town. With 35% of the shares locked up - anyone else hoping for a look in will be hard pressed. Let’s just hope there isn’t a repeat of the APA debacle.


Is Boeing Fudging on 787 Delays?

Boeing has committed in very public pronouncements on the roll out for the 787 on july 8 07. A huge embarassemtn for them if they miss it. But they wont. Flying it will be a different matter.

The delivery of several important components are not all coming together at quite the right time. So there will be some parts that are going to be late. Specifically sources tell us - the wiring wont be ready and they will be installing this long after the actual roll out.

We wish Boeing ALL the luck with 787. Having seen and actually touched a test subject - I can assure you that it is going to be a great aircraft. However it is ground breaking and there are many aggressive new components that make up this ambitions design. Comparing sections side by side with a conventional metal based fuselage shows just how different it is. Across the airport not more than a mile or two away from where the 787 is being assembled there is a fine example of what can go wrong. Volunteers mostly from Boeing are nearing the end of their 11 year restoration of a Comet (a 4C originally delivered to Mexicana). Lets just hope that Boeing hasnt made the same mistakes that De Havilland did with the original Comet 1.

Still lets see if they make an early first flight with the 787. If there is a screw up on the dates and significant slack time is taken up - it could make for some bad press for Boeing and bad news for the current high flying stock.



21 May 2007

Will Willie make a run at Iberia?

So far Willie Walsh's tenure at the head of the World's Favorite Airline has been a bit of a dud. While vowing to clean house he has been relatively low profile and not a heck of a lot seems to be going on at Waterside these days. Not quite what the Board wanted in a CEO after kicking out Ayling and having the able Rod Eddington stabilize the business.

But this is about to change. Frustrated with the pace of change and now faced with the impending loss of Bermuda II rights at LHR - BA needs to make its move on to the continent and soon.

Iberia is a perfect candidate - already a strategic investment vehicle for BA and a OneWorld member there is little overlap between the airlines. But with OpenSkies coming within the next 12 months the time to build up alliances is not something that happens overnight. For success to happen now - BA needs also to benefit from a loosening of the leash on its relationship with AA. The argument is there already. If DL and AF and their sub-partners can have a nice a tight alignment there is no longer a reason to restrain BA and AA. It will just depend on how far the US DoJ and the EU can come to terms in fairness and openness on the Transatlantic.

If BA does not push the issue then we can be pretty sure that they have received the word that such a boost in the alliance would be frowned on and result in a somewhat pyrrhic victory - with BA being forced to surrender slots at LHR. Something right now it doesn't want to do.

Interestingly this would be a coming together of Spanish and UK interests hard on the heels of last year's takeover of BAA by the Spaniards. Sir Francis Drake must be spinning in his grave.