2 Rumours: New Cities And New Planes

[spacewaitress]

And those composite verticle stabilizers are wonderful. Just take it easy with the rudder!

 

[jimntx]

This discussion may all be academic anyway. I would doubt that Airbus will provide the exit bankruptcy financing for United. Although they could have a hand in it, there are laws against aircraft manunfacturers and foreign companies from investing in US airlines. On both of those counts, a direct Airbus investment in UA will be hard to justify.

[post="200765"][/post]​

At the risk of sounding like a flag-waver...
Even if a way could be found for Airbus to provide the financing without taking a stock position in UAL--thereby avoiding the foreign investment stricture--there is the issue that Airbus is still subsidized by the European governments that created it. The money for that exit financing could be seen as coming from the UK, French, and German governments in return for buying their product. Boeing does not have such government subsidies. This would not be a level playing field for Boeing to compete on.

If I am wrong on the subsidies, I apologize, but I thought I saw something on this issue not long ago.

 

[Ukridge]

I as well would be interested in learning how much subsidy is still flowing into Airbus. More specifically it is EADS which subsumed Airbus.
Without question, for years European governments sprinkled funds into these projects. Over the past years however, I have been told that there has been much more transparancy in the accounting and that EADS is more than ever a "stand on its own" entity. Airbus is selling aircraft that the customers seem to want and so there is perhaps a modicum of reason behind the subsidy.
I as a social democrat will get nowhere coming to an American chat forum to espouse poltical views. I would maintain however, that if "pork" (as it is so aptly described in North America) is to be doled, then this has been a pork project of success. I would consider it to have been a seed investment by the various countries. Only now has the crop grown to profit and along the way it has set the stage for a significant competative stance. By this I mean that it has employed legions of well-educated and technically skilled workers. One need to look no further than what EADS is offering. The expertise in these engineering fields will only overflow into other areas.
I am open to other opinion, but I have frankly never have seen a problem with this. America has its sugar subsidies. We supported Airbus. Where this of course breaks down is when you get into the abhorent farm subsidy programs that are a staple on both sides of the Atlantic.
There is no coercion for an American firm to purchase an Airbus aircraft. If an airline deems it a ft over Boeing so be it. A CEO gives not a whit who subsidized the production of it - only if it will produce revenue.
Cheers

 

[ZMAN777]

Both WorldTraveler & UKRidge make valid points. From my perspective any aircraft UAL may choose to add to its fleet in the future (assuming successful exit from BK and its route structure intact) will most assuredly come down to how much each respective aircraft adds to the bottom line in terms of cost savings and operational capability.

I don't think this is a discussion of Boeing vs. Airbus, or at least it shouldn't be. I've flown both brands (777 currently) and will be the first to acknowledge the merits of each design. Enough said on that. Lets look at a few observations.

First, it's a given that the Int'l market will continue to be the place where UAL and the rest of the big legacy carriers will continue to dominate. As their operational costs come down (read labor, fuel efficiency savings, lease rates, etc.) this will only increase over their international competitors as well as increasing the barriers to market entry by some upstart LCC's on the horizon. Simply said, the legacy carriers will all choose to play to their strengths. With the advent of newer aircraft technologies and their inherent capabilities, what had been the perceived conventional path to entering/developing markets is rapidly changing. (This also holds true for LCC's eyeing the Int'l market.)

Second, new aircraft models on the horizon and their capabilities (777-200ER, 7E7) will make strong arguements when these Int'l carriers design their strategic 5-10 year plans. The questions that should be asked are what is the short-term need for such capabilities (7,000-8,500 nm range), the cost associated with such a purchase, as well as will the market on such city pairs support such an investment. For UAL, with its focus on Asia and China in particular, such aircraft loom large in their strategic plans and make much sense.

I think within the next 12 months we'll see at least a few of the major US Int'l carriers vie for delivery postions of the 7E7 for a number of reasons, not the least of which is the need to get their delivery positions locked in sooner rather than later. Both aircraft makers know this is happening and basically it'll come down to competition as to what direction the various carriers go.

There may be something to rumors of a sweetheart deal with Airbus on aircraft (both wide and narrowbody) should UAL elect to go in that direction. But the very same arguement can be made for Boeing, which definitely does not want to see UAL swing to Airbus for its widebodies (Boeing has all but conceded UAL narrowbody sales to Airbus).

That being the case, I think UAL will be doing more than just rethinking existing markets and city pairs. In either case (Airbus or Boeing), UAL, and the other US legacy carriers as well, will be looking at entirely new routes that such aircraft will make economically feasible.

To be sure, many will make the case that some of this "economical feasibility" will be at the expense of current labor agreements, work rules, etc. I'm not going to argue that it hasn't, but rather, that you play the hand your dealt. That is a subject for another thread entirely.

Just my thoughts.


Cheers,
Z B)

 

[uafa21]

My thought on this is that UAL is not going to be able to lease or purchase additional planes for quite some time.

The company cannot get out on lease planes in BK then turn around and lease more plane directly out of BK. UA has already turned back several 777's and there may be more. In a 10Q filing statement UA said they were going to ask for more consessions from lessors and that lessors may want the equipment back instead of lowered payments.

It's fun to think of Ua getting new planes and new routes, they have to pay the piper first. Something they haven't done in a long time.

 

[Fly]

I was under the assumption that Airbus can loan the aircraft to United with a debt that would have to be paid back in the future (isn't that how JetBlue got their Airbus?) In that scenario, Airbus would not have a stake in United per se....just outstanding loans.

 

[TechBoy]

On the ownership issue, a foreign entity could take up to 25% of UA's voting equity and 49% of total equity.

On the subsidies issue, Airbus still receives "launch aid" from government, but is required to pay it back with interest. Of course, Airbus probably gets better than market rates from the governments so it is still some subsidy, but probably much less than before. And Airbus would contend that Boeing is subsidized through military/space contract, but Airbus gets those as well.

On the rumors, it seems highly unlikely that United can afford any new planes. While it is possible that Airbus could lease them for no/low initial cost (which is NOT what they did with JetBlue), they would have to be really crazy to become a huge unsecured creditor to a company with a very shaky financial future. Precious few people have made money investing in mature airlines.

 

[JungleClone]

When you're an airline in United's situation, you listen to every single offer. I'm not surprised by this rumor, as I had information from a VERY reliable source at WHQ that said that Airbus was interested in helping finance United's Ch. 11 exit as well as help finance some aircraft. But the info I got was that Airbus wanted to help UA get rid of all it's aging B737's and replace them with more A319/320 aircraft and possibly A318's. However, that was over 6 months ago. It wouldn't surprise me to see the deal morph into one for Airbus widebodies. That's because United's focus is now on international growth at the expense of the domestic system. While it would be an odd widebody fleet mix with A330's or A340's along with B777's, it's my view that United is one sweet offer away from getting rid of the B744's. As for the new cities, if they're not international or carribean cities, chances are they'd be started with UAX RJ's, not the mainline. So my feeling is that most are international. Tilton himself has been quoted as saying that a couple more new international cities are close to being finalized for 2005 launch. But UA is getting to the point where adding more international service is going to be difficult without more aircraft. The only widebodies that fly domestically now are basically there for maintenance/ETOPS rotation purposes. I'm pretty sure that all the domestic floating widebodies are gone. So adding 10 new cities would necessitate adding aircraft. That's hard to do in United's situation, unless someone like Airbus is willing to help you out. But the underlying theme of this is that you can plan to add all the new cities and aircraft that you want, but if you don't fix the problems that face you today, you won't be around for very long.