A350 Scrapped?

[PropPiedmont]

A350 may be history
Robert P. Mark
5/11/2006

Yesterday’s Seattle Times said pressure is mounting on Airbus to either radically change the current A350 design or start form scratch. Many potential customers have said the A350 in its current configuration does not fit their needs.

An announcement to scrap the A350 and build a totally new A370 could come by July. If the change comes, it would put the European manufacturer at a distinct disadvantage. The A370 would not appear until nearly four years after Boeing’s competitor 787 begins deliveries.

 

[USA320Pilot]

Airbus to Spend $10 Billion on New Plane as Orders Sag

Click here for the story.

Best regards,

USA320Pilot

 

[CapnCockroach]

This situation is too funny! Very, very "USAir".

 

[ONT_CP]

This situation is too funny! Very, very "USAir".

I would not be surprised seeing the new US go to the Boeing 787 as they will need some replacements soon. Do you think they would get more 330s??

 

[etops1]

This situation is too funny! Very, very "USAir".

are you implying that usairways has something to do with this? :huh:

 

[BoeingBoy]

That $90 million "special item" in the quarterly report was part of the $250 Airbus loan. Our not having to repay it (hence the "special item") was contingent on getting the A350. So it would seem that we're more tightly hitched to the ebbs and flows of the A350 program than ever.

There's a couple of articles on the A350/A370 from last week I linked here.

Jim

 

[Flying Titan]

Jim -
Run that by me again. I thought US just repaid the Airbus loan during its recent refinancing. Are you saying that all but $90M was repaid...and that the $90M was forgiven/waived by Airbus in exchange for sticking with the A350?

 

[FWAAA]

It appears that BoeingBoy, as always, is correct. I was mistaken earlier about the repayment of the loan.

From the 10-Q:

The $161 million loan entered into as of September 27, 2005 between US Airways and AWA and Airbus Financial Services, for which US Airways Group was the guarantor. At the time of repayment on March 31, 2006, the outstanding balance of the loan was $161 million. US Airways and AWA also had an $89 million loan from Airbus Financial Services entered into as of September 27, 2005. In accordance with the terms of the loan agreements, the outstanding principal amount of the $89 million loan was to be forgiven in writing on the earlier of December 31, 2010 or the date that the outstanding principal amount of, accrued interest on, and all other amounts due under the Airbus $161 million loan were paid in full, provided that the Company complies with the delivery schedule for certain Airbus aircraft. As a result of the prepayment of the $161 million loan on March 31, 2006, the $89 million loan agreement was terminated and the $89 million loan, of which $89 million was outstanding, was forgiven along with $1 million in accrued interest.

http://phx.corporate-ir.net/phoenix.zhtml?...CZhdHRhY2g9b24= (bottom of pagbe 14)

Assuming that the bolded portion refers to the A350+ (A370, whatever it's gonna be called), then LCC is still wedded to the A350.

 

[Flying Titan]

Wow. Talk about locking up a customer! On the one hand, it's great anytime you can get $90M for free...but I question whether it will ultimately be worth it if US has to wait until 2012 or later for delivery of new widebodies.

I suppose there are other options...

- US can see if Boeing would consider sweetening the deal on 787s enough to offset the value of that $90M loan from Airbus. Probably not...but you never know.

- US may be able to convince Airbus to give it a short-term deal on some A330-200s - say running from 2008 through 2014 - which would then begin to be swapped out for the "all new" A350s. Earlier deliveries of A350s (2012-2013) could be brought in to replace the 767s first.

- Perhaps US could get out of the A350 trap by commiting to order more Airbus narrowbodies - A319s, A320s or perhaps the occasionally rumored A322s as the 757 fleet will have to be replaced beginning in the next decade, anyway.

Short of these or some other more creative options, it seems like US is in a real bind over this widebody situation.

 

[WorldTraveler]

Airbus will be happy to build 332s to carry customers over. Other than improved economics, the 332 is all US needs unless they start flying to Asia. Of course, Airbus doesn't have a huge incentive to offer good terms on 332s since they hold $90M one way or the other.

 

[whlinder]

What does US need more widebodies for in the future, other Star airlines will be more than happy to carry passengers on long-haul sectors. That is why US is in the alliance in the first place, to feed the rest of the alliance.

 

[700UW]

Because the 767s are getting old and will be too costly to maintain, and the newer planes are more efficient.

 

[DCAflyer]

Wow. Talk about locking up a customer! On the one hand, it's great anytime you can get $90M for free...but I question whether it will ultimately be worth it if US has to wait until 2012 or later for delivery of new widebodies.

If I'm not mistaken, LCC still has firm orders for for 20 A330-200 models (delivery beginning in 2009 or 2010) in addition to the 20 A350s. I believe the purpose of adding the 350s to the fleet was for the added range it offers.

Personally, I'd like to scrap the whole 350 plan and go with the 777 for future markets beyond our current reach. Alternatively, depending on when we are able to actually take delivery of 787's, convert the Airbus widebody orders to 320 family orders, use Boeing as the widebody fleet with a mix of 777 and 787 (there is cockpit commonality, I believe???). We can then sell/sublease/get rid of the 330-300s and work toward an aircraft growth goal of (1) small mainline jets being Embraer 170/190/195; (2) narrow-body mainline jets being A320s and 757s; and (3) widebodies being 767 (on high-capacity long-haul domestic, Carribean/Central American routes)/777 (where range is needed)/787 (European routes).

 

[700UW]

There are only 10 A330-200s on order I believe.

 

[Flying Titan]

700, You're correct on the A332s.

DCA, There are a couple of problems with your scenario. Boeing is not making the 757 anymore and many of the US 757s are already pretty long in the tooth. Second, the A332s were supposed to replace the 767s, which are also aging. IIRC, the A332s were ordered before the A350 was announced. After the announcement, it has been pretty widely assumed that there was a good chance US would convert all of its orders to A350s.

With the delay of the A350 program, it may not be practical to wait. That leaves US with the choice of going with A332s that it doesn't really want, waiting even longer for the "all new" A350, or finding a way out of the financing deal.

None of these are good options. It probably means the fleet will have to look different in 2010 than the folks in the Sand Castle had hoped.