Wednesday, December 20, 2006

Last Minute Reprieve Ordered For A380? UPDATE

Bloomberg reports this afternoon that Qantas has converted eight options for A380s to orders. This brings their total ordered to 166. This is a welcome piece of news along with the good news from Singapore Airlines, and no doubt there are a few glasses being raised in the bars across the street from the Airbus plant in Toulouse.

However, it is, as people say, a long way to Tipperary, and it is also a long way towards the break even point for the program which is said to be 420 frames more or less. What we've seen the last few days is not, as one might say, new customers, but rather the confirmation of already committed buyers. It is thus not unequivocally great news, although welcome.

As this is the first substantial move in the right direction for the program since 2005, one wonders where the additional 250 orders are going to come from. They certainly can't come out of options that aren't spoken for as yet.

Bloomberg is reporting this morning that Singapore Airlines has ordered an additional nine A380 aircraft from Airbus. According to the report, this follows an initial commitment made in July for the aircraft and it includes a further six options.

Up in the Idle Speculation Department, we're wondering whether this accounts for all or most of the long lead items that were contracted for in the recently cancelled Federal Express order. When aircraft manufacturers decide to build an airplane, contracts are placed for so called 'long lead items', which are parts that may take two or three years to complete. This could include things like landing gear, avionics, and major structural components.

As I recall, JAT had ordered two MD11s when I was at Douglas, and then Yugoslavia disappeared when the aircraft were about fifty per cent complete. No problem. They were sold to American Airlines at a nice discount, the rework drawings were produced to modify the avionics and interior packages to AA standard, the parts were produced and the aircraft were delivered more or less on schedule.


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