Saturday, December 22, 2007

Straws In The Wind?

This has been a most interesting week, news wise.

The world (well, the part of the world that thinks about this stuff) watched from the bleachers as Airbus, disguised as the crooked faro dealer in a spaghetti western, unaccountably allowed Spirit, the rube who'd just arrived on the train from Kansas, walk away from the table with his grubstake intact.

Smart con men never let the mark go until the last buck is shaken loose from his wallet, and they don't ever let their accomplices outbid the sucker.

So you have to think something strange was going on here that has yet to reveal its significance, because as flimflam schemes go, Power8 seriously backfired this week.

One of the more interesting news items arrived unheralded from an obscure source. As I am a fan of analogies I'd liken this one to the unnoticed arrival of a gonorrheal spirochete in what should have been a moment of coital bliss.

The Hindu Business Line (bes' li'l ole scandal sheet on the Indian subcontinent, doncha know, because it's got mojo, cantcha see?) reported that the UB Group, Dr. V. J. Malya's adult beverage/aviation/fertilizer powerhouse is considering selling some of its order slots for aircraft back to Airbus-at a tidy profit, too.

The report says that after analyzing excess capacity, Deccan and Kingfisher plan to lease aircraft, defer their introduction or cancel their orders. Deccan has 30 aircraft to be delivered and Kingfisher has another 26 on order.

If orders are cancelled the production slots will be sold back to Airbus at about $5 million each.

Everything Dr. Malya touches seems to turn to money-lots of money. But if the report holds up, it would confirm my suspicions that there is a serious overcapacity overhang building that will lead to the next aerospace implosion like we haven't seen in a while-and this one's likely to be a doozy.

Another interesting and very hopeful item I stumbled onto was a lecture given by Dr. Daniel Fine back in April to the Heritage Foundation on the subject of unconventional and alternative fuels, primarily oil shale. Dr. Fine posits that in Colorado, Wyoming and Utah there are 1.3 trillion recoverable barrels of oil trapped in shale, a resource that is four times larger than Saudi Arabia's reserves of crude oil. The cost of extraction and the technologies are starting to look a lot better in these days of $90 a barrel crude.

It seems that reports of the lights going out all over America may well be premature, and that may give the lie to some of our European colleagues who enjoy nothing better than yet another "they're bankrupt wastrels! We knew this would happen!" exercise in the sort of envious schadenfreude they're hopelessly addicted to.


At 12:15 PM, Blogger Aurora said...

Did Kingfisher pay deposits? If Airbus is paying them $5million to recover the slots, what of the deposits? Or...can one conclude that Airbus doesn't require deposits? And this ain't even what one would consider a "premium" customer.

Does anyone seriously think Emirates paid a premium for those A350s? I suspect there was no money down, with the right to cancel at any time, for any reason.

At 7:43 PM, Blogger Robert Luedeman, attorney at law said...

I thought this was an interesting story. Back in the day "delivery positions" could be had for the CL600 for $5,000 USD each. Probably the price was modest for A380 and A350 buyins.

How did you like the little analogy?

If you liked that see my three card monte post.


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