Things you find in the paper
Airbus resorts to huge discounts on A350- <LI class=byline>David Robertson
- April 20, 2007
AIRBUS is giving away billions of dollars in revenues in an attempt to keep up with the runaway success of the Boeing 787 Dreamliner.
The European manufacturer has cut the price of its A350 by half and is also offering other inducements to persuade airlines to order its aircraft. Airbus has been caught out by the success of the Dreamliner, which is now the fastest-selling commercial jet in history.
The list prices for the A350-800 and 900 models are US$189 million and US$215 million, but Airbus is understood to be offering either one for US$102 million, a discount of 46 per cent and 53 per cent respectively.
Discounts are common in aerospace, but industry sources say that such large price reductions are rare. Boeing, by comparison, is thought to be offering discounts of one third on the 787, reducing the price from US$153 million to US$102 million.
The decision by Airbus to match Boeing on price means that airline customers are being given big incentives to buy. Emirates is poised to announce an order for 100 A350s next week in a deal that would be worth between US$19 billion and US$21.5 billion at full price. The discount means that the bill for these aircraft will be about US$10 billion, but Emirates is likely to pay even less than that.
Airbus is thought to be giving the airline extra aircraft free as compensation for the two-year delay to the A380, the largest passenger aircraft in production. Industry sources suggest that Emirates will receive a two-for-one deal, effectively cutting a further third off the bill.
Emirates is not the only airline benefiting from Airbus’s desire to win orders. US Airways is expected to buy between 20 and 30 A350s this year after Airbus “forgave” a loan of US$90 million. According to a US Securities and Exchange Commission filing last May, the American carrier was let off the loan and interest. Airbus said yesterday that the loan was being incorporated into another deal, but would not reveal further details.
Finnair is another airlinethat has picked up a bargain from Airbus. It ordered A350s before the manufacturer increased the price after a redesign last year. Finnair is understood to have been given the new aircraft at the old price — a difference of about US$45 million. Therefore, the nine orders that were converted were discounted by US$396 million.
Airbus has been left behind in the orders race for these midsized aircraft because it has concentrated on developing and building the A380 superjumbo.
The Dreamliner is also proving popular with carriers because its fuel efficiency is about 20 per cent better than that of existing aircraft. This feature cuts fuel bills and carbon dioxide emissions.
Neither Airbus nor Boeing would comment on the discounts they offer.
Just because they are cheap doesn't mean they are nasty....right??
Don