Airbus Continues To Blunder On A350XWB Funding

US Trade Representative Ron Kirk has made clear on more than one occasion, both prior to and after the publication of the preliminary WTO ruling that it would vociferously exercise the right to lodge further complaints if Airbus continues to fund its commercial projects in the same vain as the A380.

 

Airbus’ executive VP for Europe/Asia Christopher Buckley may have brazenly claimed that it had “absolutely no plans to change the funding for the A350 at the moment", however EADS near-term cash outlay is precisely why this statement was made – because it is bleeding more money than sense on the A380 and A400M, with the A350XWB poised to leapfrog both of their costs.

 

To make the A350XWB a credible 777/787 competitor, Airbus has to plug the void in the $17bn bill to make it a reality.

 

Collectively, France, Germany and the UK have stumped up just under $5bn with Spain yet to contribute a meaningful sum.

 

Airbus parent EADS will have little choice but to throw in part of the funds from its coffers and seek the balance from open market financing as well as marginal risk-sharers on the program.

 

Airbus is battling weight issues on the A350XWB that are exponentially bigger than those in contrast to the 787 given that it’s a larger airplane. New material research, development and fabrication all cost (time and) money – particularly when Airbus had claimed it would “never” build a composite airplane in their initial response to the 787.

 

Airbus is behind the composite learning curve compared to Boeing. Of course, the US manufacturer has been itself caught out on various engineering issues such as the wing/side-of-body problem. No doubt, they’ll catch up but the path will be a painful one – not least because of the panel approach it has to take to build the A350XWB fuselage given Boeing’s patent on the monolithic assembly on the 787.

 

If the EU states agree to sink more public money into the A350XWB then this simply underscores the sheer contempt that Europe has for decision making and the respect for implementing it. Europe cannot afford a trade war with the USA – it’s that simple.

 

The USA was never fond of Concorde – imagine a prospect of punitive action on A380 and A350XWB landing fees in the US, for example – operators would be up in arms – particularly the likes of Middle Eastern airlines that hold the bulk of orders for those types.

 

Europe could do the same but EADS is already seen by the financial community as a near and present danger because of the risk attached to upsetting customers if they are unable to either finance or defer those jets while global traffic still wanes.

 

 

That’s before we consider the Airbus-backed loans to failed operators like US Airways that took the money so that Airbus ensured it didn’t suffer an A350XWB order termination.

 

The USTR will have little choice but to move against funding on the A350XWB. It probably cannot contest a retrospective case against the A330/A340, but given the success scored against the A380, the USTR could add another feather to its cap by hitting Airbus hard with another complaint.

 

With so much risk attached to Airbus’ fortunes through the A350XWB, it may well turn out that for all the hype and belligerence behind its public statements on funding it, Airbus may end up having to pay back the illegal loans on the A380 and A350XWB sooner than many may think.