Fed Ex cancels A380 buys 777F

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ON Fed Ex
November 07, 2006 11:09 AM Eastern Time
FedEx Express to Acquire Boeing 777 Freighters
Company Cancels A380 Order

MEMPHIS, Tenn.--(BUSINESS WIRE)--FedEx Express, a unit of FedEx Corp. (NYSE: FDX), announced today an agreement with The Boeing Company (NYSE: BA) to acquire 15 new Boeing 777 Freighter aircraft with options to purchase an additional 15 aircraft. The decision to purchase the 777F was made after Airbus announced significant delays in delivery of the A380. FedEx Express notified Airbus that it has cancelled its order for 10 A380-800Fs.

"Global demand for air cargo and express services continues to grow rapidly and FedEx has made significant investments in our network to meet customers’ needs and fulfill our business objectives. Therefore, it was necessary and prudent for us to acquire the Boeing 777 Freighter." said Frederick W. Smith, chairman, president and chief executive officer, FedEx Corp. “The availability and delivery timing of this aircraft, coupled with its attractive payload range and economics, make this choice the best decision for FedEx, its customers, shareowners and employees.”

FedEx Express continues to be Airbus' largest wide-body airplane customer and will add additional new and used Airbus wide-body aircraft to its fleet in coming years. Six new A300-600 aircraft are scheduled to join the FedEx fleet in 2007.

http://home.businesswire.com/portal/site/fedex-corp/index.jsp?epi-content=GENERIC&newsId=20061107005865&ndmHsc=v2*A1104584400000*B1162944825000*C4102491599000*DgroupByDate*J2*N1000731&newsLang=en&beanID=1700974478&viewID=news_view

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Oh dear..

Thats certainly a kick in the teeth for the A380F program

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To add to that UPS is also re considering its A380F orders.

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ouch!

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Was bound to happen!

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Was bound to happen!

Interesting comment, care to elaborate?

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Interesting comment, care to elaborate?

What i was going on about was, that with the on-going delays with the A380, airlines possibly are not willing to wait around for a product that was promised to be in operation well before they were supposed to take delivery of it.

As the press release says, FedEx need to grow rapidly, and they won't do much growing whist waiting around for the A380

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I'm sure I did an FX 772LRF mock up a while back too. Will go digging in my archive

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Here we go:

http://img50.imageshack.us/img50/7633/777200lrfcw4.th.jpg

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I wonder if they will follow this up by and order for the 747-8F?

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That would be the ultimate kick in the teeth for the A380F for sure.

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It would indeed. Airbus can't surely be too surprised at this move - unless they offer FedEx X amount of temp aircraft to compensate for late delivery, FedEx can't be expected to hold of expansion plans just to wait for the A380.

Speaking of the 747-8, anyone know why there haven't been any orders for the 747-8i yet? Is it because there isn't a demand for them? I can't see anyone designing and releasing a plane if there wasn't an expected demand for it, so am curious as to what another reason may be....

Symon

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Fedex will be back. I think this move to buy the 777F is just a temporary measure to fill the capacity gap - I think Fedex will reorder the A380 in years to come - such an aircraft like the A380 which (will) offers more cargo-carrying-capability than any other aircraft (both now and in the foreseeable future) will be just too tempting and worthwhile for Fedex.

It will also allow Fedex to see how the A380 operates performance wise, and to allow more time for (more) airports to adapt to the aircraft before Fedex might begin to fly the aircraft.

I don't think it really desperately worries Airbus. If UPS pull out as well, then maybe Airbus might start to get a little more sweaty. just a little.

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Speaking of the 747-8, anyone know why there haven't been any orders for the 747-8i yet? Is it because there isn't a demand for them? I can't see anyone designing and releasing a plane if there wasn't an expected demand for it, so am curious as to what another reason may be....

No . There are reports which suggest LH will be the first Customer to pick up the 747-8I with a order of 12. BA is considering it and so is Emirates ( T Clark reported to be in nogotiations for the 747-8i) while there are 3 orders out . Boeing is yet to officially launch the 747-8I program. Many airlines will take their time to decide as the 747-8I wont be delivered until mid 2010 due to delivery slots being taken up by the F version.

Boeing Firms 747-8 as Passenger Version Nears
Aviation Week & Space Technology 11/06/2006
Authors: Robert Wall and Jens Flottau

Boeing appears close to signing its first customer for airline passenger versions of the 747-8, but with the program moving from concept to design, some of its milestones appear to be slipping.

First flight of the freighter version is now planned for January 2009, says Boeing 747 Vice President Dan Mooney. The event was planned for the last quarter of 2008, though a company official backtracked and acknowledged that 2009 seems more likely. No single program development is seen as causing the delay.

Also, first delivery of a passenger version, the so-called 747-8 Intercontinental, is now set to occur a year after the first freighter is delivered to Cargolux in late 2009. That's about one quarter later for the passenger model than planned, says Mooney.

Capturing a first passenger order this year was never a firm milestone, although it had been a goal for Boeing officials this year. The absence of such a commitment has stood out in particular because of brisk sales for the freighter model. Mooney notes, "We potentially could have an order by the end of this year," although he said he wasn't "confident" that would be the case.

LUFTHANSA IS EMERGING as a strong prospect. The carrier's supervisory board is likely to approve an order for 12 747-8s later this month, according to company sources. The airline is looking at replacing its 30-aircraft-strong fleet of 747-400s.

Although the carrier already has ordered 15 Airbus A380s, it is interested in a 450-seat aircraft that can fill the gap between the 345-seat A340-600 and the A380.

The deal would be a major breakthrough for Boeing. The manufacturer has not logged an order from Lufthansa in more than a decade. The sources say negotiations have been tense mainly because of Boeing's pricing. Lufthansa also is in the market for long-range widebodies to replace 28 A340-300s, but that decision is likely to be made next year. Lufthansa is evaluating the Boeing 777 and 787 and Airbus A350.

Lufthansa would become the second dual A380/747-8 customer, although it would be the first to buy passenger models of both. Emirates Airlines is purchasing the freighter version of the Boeing transport, although it is considering the passenger model as well.

The passenger aircraft is still in its definition phase, and Boeing recently decided to make it the same size as the freighter, although that means reducing its range somewhat. Currently, it's planned as a 467-seat aircraft. Mooney says some airlines have discussed moving the galley into the skyloft on the upper deck to free up space for 12 additional passengers, but the demand hasn't been huge.

FIRM CONFIGURATION SHOULD take place in about six months. The aircraft maker also is building a mock-up of the cabin to get customer feedback. It has already adjusted some elements, including the position of the stairway to the upper deck, although its remains near the No. 2 door. The environmental control system on the 747-8 also is being changed to accommodate the larger aircraft.

Boeing has had airline customers interested in both the longer-range and the capacity-enhanced configurations. From a tooling perspective, the company believes it could build both with relative ease, but, Mooney notes, the business case is another issue. The plan is still in place to offer a single passenger model. European carriers have less of a range demand than potential Asian buyers.

Mooney notes that eventually, strong freighter sales could take production slots that otherwise might be available for airliner buyers. Sales so far have surpassed the company's expectations, Mooney says, but at this point slots remain available.

Meanwhile, Boeing last week completed the firm configuration review for the freighter, clearing the way for detailed parts design. Orders for long-lead items also are being placed. Much of next year will be focused on design activities, with 2008 representing the major build and assembly period.

Fedex will be back.

And you know this how? If they wanted to be back why not simply defer a order to a later date Like what Virgin has done ? A cancelation is a major step and also requires cancellation charges .

Here we go:

Here's another one -

http://img169.imageshack.us/img169/2962/00006352le0.jpg

and one from boeing -

http://www.boeing.com/news/releases/2006/photorelease/q4/061107a_lg.jpg

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UPS reviewing order for Airbus A380s - report

LONDON (AFX) - US parcel carrier United Parcel Services is understood to be reviewing an order for a fleet of Airbus A380s, according to a report in The Times.

If UPS cancelled the order for 10 freighters, it would leave Airbus with just five orders for the cargo version of the superjumbo, the newspaper reported.

Yesterday, UPS rival FedEx Corp became the first airline to cancel its order for the troubled A380, ordering 15 new Boeing Co 777 Freighters instead.

FedEx blamed the cancellation on the delays in production of the A380, which has put back deliveries of the aircraft by two years and sparked a management shake-up and cost-cutting drive at Airbus, owned by European aerospace group EADS.

http://www.lse.co.uk/FinanceNews.asp?shareprice=&ArticleRef=94262&ArticleHeadline=UPS_reviewing_order_for_Airbus_A380s__report

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What i was going on about was, that with the on-going delays with the A380, airlines possibly are not willing to wait around for a product that was promised to be in operation well before they were supposed to take delivery of it.

As the press release says, FedEx need to grow rapidly, and they won't do much growing whist waiting around for the A380


I know Qantas aren't happy,..... there first one was supposed be delivered two months ago...... yet they've ordered another eight

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I know Qantas aren't happy,..... they're first one was supposed be delivered two months ago...... yet they've ordered another eight

Its called COMPENSATION !

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I know Qantas aren't happy,..... there first one was supposed be delivered two months ago...... yet they've ordered another eight

Yes, you can bet you bottom dollar they got an extremely favourable deal there.

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EADS CFO on A380F-

EADS Chief Financial Officer Hans-Peter Ring said Airbus' 15 remaining freighter orders — 10 from United Parcel Service Inc. and five from International Lease Finance Corp. — still need to be "reconfirmed."

All the freighter orders are now "in the cancellation zone," he said. UPS said late Tuesday the Atlanta-based company was still reviewing its options.

http://www.iht.com/articles/ap/2006/11/08/business/EU_FIN_EARNS_France_EADS.php

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Airbus

The making of a jumbo problem
Nov 9th 2006 | LONDON, PARIS AND TOULOUSE
From The Economist print edition

A botched privatisation at a bargain price started the storm that helped bring Airbus down to earth
Reuters
AS FRENCH stock-exchange regulators investigate share sales by Noël Forgeard, a former co-chief executive of European Aeronautic Defence and Space, questions are being raised about a controversial deal that eventually led to the creation of EADS, the parent company of Airbus. This was a privatisation overseen by a former finance minister, Dominique Strauss-Kahn, who is one of two rivals to Ségolène Royal in the contest next week for the Socialist candidacy in the 2007 French presidential election.

The deal was supposed to provide Airbus with a long-term French private-sector shareholder. Instead it risks driving the now-ailing aircraft-maker back into increased state ownership.

The tale is a sorry one: of a Socialist government selling off a state company—Aérospatiale (a leading partner in Airbus)—at a bargain-basement price to a firm belonging to an influential entrepreneur; of his protégés spending more time fighting each other than attacking Airbus's rival, Boeing; and of the new owner baling out at a vast profit, in part by selling shares back to the government, just before the scale of the mismanagement was made public.

The deal that doomed Airbus has its origins in the late 1990s. Back then a series of American aerospace mergers left the fragmented European aerospace industry looking outgunned. Rationalisation was badly needed. There was growing pressure to convert Airbus into a fully-fledged private company.

Airbus's German partner, DaimlerChrysler, and its British one, BAE Systems, were listed companies. They had no wish to merge their aircraft interests with Aérospatiale. The state-run French company's most valuable asset was its 37.9% share in the Airbus consortium. If the British and German firms were to merge, as they once planned to, France would end up as a junior partner in Airbus, an enterprise which is synonymous with French national pride. So Aérospatiale, which had been the French partner in the Concorde supersonic passenger jet and was the maker of Exocet missiles, had to come under private control.

Enter the Lagardère group, which has diverse businesses from magazines to missiles. It was founded by Jean-Luc Lagardère, who died in 2003. He was an astute entrepreneur who built a business empire with the help of his talent for hiring bright, well-connected civil servants. One of these was Mr Forgeard, a former adviser to Jacques Chirac in his time as prime minister before he became France's president. Mr Forgeard joined Matra, a defence firm, in 1987. Another useful attribute of the group was a media business that included the Europe 1 radio station, France's only Sunday national paper and Paris-Match. This ensured Mr Lagardère was courted by politicians, which put him in a powerful position when the government contemplated how to privatise Aérospatiale.

For the benefit of France
The terms of the deal were hammered out by Mr Lagardère and Mr Strauss-Kahn. Lagardère got 31.5% of Aérospatiale in return for folding into the company its defence-aerospace business, Matra Hautes Technologies (MHT). Lagardère would own one-third of the merged firm and have management control. The understanding was that Lagardère would always be the principal French private shareholder; the idea was to secure the group's future with a strong core shareholder—what the French called a noyau dur. The government would reduce its two-thirds share to 48% by selling 17% of the shares to the public. The terms were generous to Lagardère: Aérospatiale was by any measure (sales, assets, employees) at least three times bigger than MHT, a comparative minnow.

AP

An Airbus pair: Noël Forgeard and Arnaud LagardèreNews of the deal emerged in late July 1998, just as the French were packing their suitcases for their holidays. It was completed in June 1999 once all the formalities had been gone through. Part of this process was a review of the deal by court-appointed accountants. Their job was first to ascertain whether the MHT shares were worth at least their value of €618m in Lagardère's books. This they had no trouble doing, and their report is a matter of public record. The trickier task was to justify the one-third share of the much bigger company allotted to Lagardère. Their full report on this aspect is not a matter of public record, but their findings are contained in a document, a copy of which was obtained by The Economist, that Aérospatiale Matra had to file with the French stock exchange before the sale of shares to the public.

The experts clearly found themselves in a difficult position, as they noted. The document talks of “three key limiting factors” in their assessment process which “could affect the exchange value to an extent that it is difficult to put into figures.” One factor was “limited or late access to certain important information”. Another was “uncertainties beyond the normal range of forecasting” and a third was “assumptions underlying the preparation of cash-flow projections”. The basic justification for handing over as much as one-third of the shares to Lagardère was the strategic importance of the transaction for the French aerospace and defence industries and “risks for the Lagardère group”.

One leading Paris analyst, Jean Gatty, put a value on MHT in the range of €750m-1.4 billion. After the first day of dealing in the shares of Aérospatiale Matra, the one-third stake that Lagardère got in return for MHT was worth €2.8 billion. No wonder that at a recent aviation conference in Monte Carlo, attended by the legendary former Airbus boss, Jean Pierson, an Aérospatiale man to the core and whom Mr Forgeard replaced shortly before the deal, Airbus alumni were calling it “the hold-up of the century”. Airbus veterans are bitter at what “the Lagardère boys”, as they are known within the aircraft-maker, have done to the organisation they built up to take on Boeing.

In-flight manoeuvres
Several months after its creation, Aérospatiale Matra announced a merger with the aerospace arm of DaimlerChrysler to form EADS (a Spanish government body owns a 5.5% share and BAE Systems has since sold its Airbus stake back to EADS). Lagardère's right to control the management of Aérospatiale Matra translated into the right to nominate the four French directors of the Franco-German company. The two-headed nature of the firm meant it had to have a French and a German chairman as well as two chief executives, one from each country. This cumbersome structure was bad enough, but longstanding rivalry between Mr Forgeard as chief executive of Airbus and another Lagardère boy, Philippe Camus, his superior as initial French chief executive of EADS, made it progressively dysfunctional. Tensions grew not only between the French and the Germans but also between the parent company and its Airbus subsidiary (which accounted for four-fifths of its profits).

By the time Mr Forgeard had taken the reins at Airbus in 1998, its A320 and A330 models were flying off the shelves. Its new super-jumbo, the A380, was already being developed and the company was beginning to catch up with Boeing. Mr Camus had become the most senior figure in the Lagardère group next to its founder and chairman. On his way up the corporate ladder, Mr Camus used to report to Mr Forgeard, when the latter was running Matra Défense before leaving Lagardère to become boss of Airbus. But the Franco-German merger propelled Mr Camus to the top EADS job, and the tables were turned. Knowing that Mr Camus and his German counterpart had five-year contracts, due to expire in 2005, Mr Forgeard started to manoeuvre to replace Mr Camus. Not only that, he wanted to be the sole chief executive—which antagonised the Germans, always nervous about French attempts to dominate both EADS and Airbus.

Mr Forgeard's main claims to the top job would be Airbus's achievement under him of overtaking Boeing and the successful launch of the A380. The last thing he needed was any bad news about this ambitious project. By the time a six-month delay became public, he had already been named as the French chief executive of EADS. He had to share with a German, but he managed to hold on to oversight of Airbus. Arnaud Lagardère, son of the group's founder and by then its boss, had a preference for keeping Mr Camus. But Mr Forgeard had a more powerful mentor, his old boss, now the president of the republic. According to a recently published biography* the young Lagardère's hand was forced by a threat to cause inheritance-tax problems over his late father's estate. The head of the then finance minister's private office told the author of the biography the pressure put on Arnaud Lagardère came at the express wish of Mr Chirac.

So a diktat from a right-wing president of the republic provided a dramatic twist to the tale. Mr Forgeard, who was fired last summer as mounting problems rocked the company, sold 162,000 EADS shares and members of his family a further 128,000 last March, only weeks before news about delays to the Airbus A380 became public. They pocketed a profit after tax of €2.5m on the transactions. Investigators are concerned that Mr Forgeard might have been aware that further delays to the programme, which was already running six months late, would soon be announced.

In early April the Lagardère group agreed to sell half its 15% stake in EADS for €2 billion ($2.5 billion), or the equivalent of €32.60 a share. It was a week before more delays to the Airbus A380 became known to the board of EADS, according to Mr Forgeard. The programme was already running six months late. Lagardère had been looking to reduce its holding for three years. Questioned about the sale, Arnaud Lagardère said: “I have the choice of appearing dishonest or incompetent...I plead the latter.” Since the full extent of the delays has emerged, EADS shares have fallen to €21. The ensuing cash-flow loss is now reckoned to be €6 billion over the next four years.

A French state-owned bank, CDC, signed up for nearly one-third of the shares that Lagardère was selling. This purchase was intended to keep the French stake (the government owns 15%) superior to Germany's share of EADS. Because of the slump in EADS's share price, the French bank is now sitting on a loss of €200m on the stake it agreed to buy for €600m. This, and the earlier privatisation, mean that the French taxpayer has twice got the worse of a deal with Lagardère.

In oral evidence to a French parliamentary committee in June, Mr Forgeard denied that he (or other insiders who sold shares in March) had done anything wrong. One insider who did not sell was Mr Forgeard's German counterpart, Tom Enders. He thought it was inappropriate to sell because of the impending sale of 7.5% by DaimlerChrysler, the company which had appointed him as co-chief executive. The sale of the German company's shares will reduce its stake to 22.5%.

One consequence of the mess at Airbus could be that the French, German and Spanish governments may even end up increasing their stakes as DaimlerChrysler and Lagardère sell further shares. If so, it would mean privatisation and re-nationalisation in less than a decade, which may not do Airbus any good at all.

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With all the delays and angst among A380 customers...lets hope it doesn't turn out to be a white elephant like the MD11