Mar-04-2007 UPS begins talks with Boeing for possible order(topic overview)CONTENTS:
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Mar 3, 2007 Troubled Airbus has suffered its second hammerblow in a week after the last cargo customer deserted the freight version of its delayed A380 superjumbo, days after the planemaker announced 10,000 job cuts. United Parcel Service Inc. said it planned to cancel an order for 10 Airbus A380 freighters, worth approximately $3 billion at list prices, joining its rival FedEx which cancelled an identical order last year. [1] The move four months after UPSs rival, FedEx, also abandoned an order for 10 of the planes leaves Airbus without a customer for the A380 freighter. It represents a fresh blow to the company, which faces threats of mass strikes by unions in France and Germany after it announced this week that as many as 10,000 jobs might be cut to save billions of euros after costly production delays of the A380.[2] UPS said it had intended to complete an internal study of whether it could wait until 2012 for the aircraft, "but now understands Airbus is diverting employees from the A380 freighter program to work on the passenger version of the plane," a company statement said. "Based on our previous discussions, we had felt that 2012 was a reasonable estimate of when Airbus could supply this plane," said David Abney, UPS' chief operating officer and president of UPS Airline.[3] "Airbus is disappointed that UPS intends to cancel the A380 freighter order,'' said Justin Dubon, an Airbus spokesman in Toulouse, France. "We respect the airline's decision, and this is consistent with the agreement we reached last week.'' Airbus, the world's biggest maker of commercial aircraft, was at least two years behind schedule in deliveries of the A380 freighter, prompting other customers to void their orders or switch to the passenger version.[4] The 555-seater plane arrived in Beijing Thursday as part of a series of final test flights intended to lead to the superjumbo's air-worthiness certification by the end of the year. UPS Inc., the world's largest shipping carrier, said Friday, March 2, 2007 it will cancel its order for 10 Airbus A380 freighters, following delivery delays. The decision will leave the European aircraft manufacturer with no firm orders for its jumbo freighter.[5] The move comes just a week after UPS, the world's largest shipping carrier, and Airbus announced a revised agreement that gave either party the right to terminate the order. In a statement, UPS said it decided to cancel after it had learned Airbus was diverting employees from the freighter program to work on its passenger-plane program.[6] UPS said the final cancellation decision will be formally presented to Airbus on the first date specified under last week's agreement. "We lost confidence in their ability to meet those schedules," UPS spokesman Mark Giuffre said of Airbus. Four months ago, UPS rival FedEx Corp. scrapped its 10-plane order, which now leaves Airbus with no orders for the superjumbo freighter.[7] Last month, the company ordered 27 Boeing 767-300ER freighters valued at as much as $3.89 billion. UPS said those planes will be used for shorter routes and weren't intended to replace the A380s. UPS was left as the sole customer for the freighter after FedEx Corp. dropped its 10-aircraft order in November, and International Lease Finance Corp., the world's largest plane lessor, switched its order for five freighters to passenger versions of the A380 a month later.[4] People familiar with the talks said UPS is eyeing Boeing's planned 747-8 jumbo jet, said the report. UPS's commitment to the A380 freighter had been uncertain because it was the only remaining customer out of four initial buyers, and the delivery date of its order recently slipped to 2012 from 2009. The shipping company terminated its order this week, which had a catalogue value of roughly 3 billion dollars.[8] PARIS: The last customer for the cargo version of Airbuss A380 superjumbo jet said Friday that it was walking away from its $2.8 billion order, citing concerns that the troubled plane maker would not be able to meet even a delayed delivery schedule agreed last week.[2] "We no longer are confident that Airbus can adhere to that schedule." The announcement by UPS comes four months after rival FedEx Corp. also scrapped its 10-plane order, and leaves Airbus with no orders for the superjumbo freighter - dealing a new blow to its A380 program, whose two-year delay cut $6.6 billion off profit forecasts for 2006-2010.[9] UPS had wanted the planes delivered in 2012 after originally expecting the first delivery in 2009 and later in 2010, Abney said. UPS, the world`s largest package-delivery company, is the latest freight customer to cancel its order for A380s. FedEx Corp. and American International Group Inc. `s International Lease Finance Corp. canceled their orders last year amid repeated delays to the superjumbo jet`s construction schedule.[10] Airbus still plans to build a freighter version of the 555- seat superjumbo plane, said Bergsma, the company spokeswoman. Airbus is targeting "market potential of approximately 400'' freighters over 20 years, she said. Airbus notified UPS, the world's largest package shipper, in October that delivery of its first A380 freighter would be delayed to May 2010 from the fourth quarter of 2009 amid difficulties in installing wiring in the planes.[11] March 1 -- Airbus SAS, struggling to end a financial crisis sparked by delays in the A380 superjumbo jet, postponed the freighter version of the plane after customers dropped or deferred their orders.[11] PARIS/BOSTON, March 2 - Troubled Airbus suffered its second blow in a week on Friday when the last customer for the freight version of its A380 superjumbo dropped the aircraft maker, days after it announced it was cutting 10,000 jobs.[12] PARIS -- The Airbus superjumbo program suffered a major new setback Friday as UPS Inc. said it would cancel its order for 10 A380s, leaving the aircraft maker with an empty order book for the cargo version of its much-delayed flagship.[13] Airbus made a "gusty'' decision in introducing the A380 freighter in tandem with the passenger version, said consultant John Walsh, president of Annapolis, Maryland-based Walsh Aviation Inc. Planemakers generally introduce a passenger model first, and offer a cargo version later. "To have it come this far and not proceed with the certification, along with the passenger aircraft, certainly seems a bit strange,'' Walsh said in an interview.[11] There's a key thing here. Airbus is shifting employees from their freighter version to their passenger version. Now, I'm not an expert on these matters, but I would think that a fairly stripped-down freighter would make it to market more quickly than a passenger plane, which has all sorts of seats, trim, and detail work involved.[14] Deliveries of the passenger version of the giant plane are now two years behind schedule, putting a severe strain on Airbus' finances and damaging the company's reputation among clients and investors. Airbus is expected to report an operating loss for 2006, a sharp turnaround in its fortunes after years of bumper profits.[3] The Airbus has said in a statement that it was "disappointed" by UPS's decision, but adding the move would free up Airbus to focus on the more important passenger version of the two-deck plane.[8] Atlanta-based UPS wants more cargo on each plane into China and other Asian countries where flights are limited. "It's a rational business decision on both parties' part,'' said Jim Corridore, a Standard & Poor's analyst in New York. "Airbus makes a lot more money from its passenger planes than its freighters. They need to fix that business. UPS needs to find a partner that's going to work with them.''[4] "UPS is and remains a valuable and strong customer and business partner for Airbus.'' The A380 program as a whole "is progressing well and in line with the new timetable, with the first delivery to the first customer in October 2007,'' she said, referring to launch customer Singapore Airlines _ set to become the first carrier to take paying passengers in the double-decker plane.[15] The A380 program fell behind schedule because of problems with the plane's electrical wiring. Last week, the companies revised their purchase agreement to allow either party to terminate the order. They also revised the delivery schedule for the aircraft, moving the delivery date for the first freighter to 2012.[16] The U.S. express companies were the sole industrial buyers of the superfreighter, which Airbus had hoped would break the Boeing 747's dominance of inter-continental airborne cargo. Like other buyers, they were angered by delays that pushed the ambitious A380 project back two years. The cancellaion was unexpected after UPS reached agreement with Airbus last week to delay taking deliveries of its 10 aircraft beyond 2010, while it reviewed its purchases.[12] "The final cancellation decision will be formally presented to Airbus on the first date specified under an agreement reached last week that gives either party the right to terminate the order," said UPS, also known as United Parcel Service, in a press release.[17] Last week, United Parcel Service Inc. decided to postpone taking delivery on the A380 freight version. It was the last remaining customer the freightliner, and said it would decide later this year whether to move ahead with a plan to purchase 10 of the jets or cancel the order completely.[18]  Last month, UPS announced an order for 27 Boeing 767-300ER freighters worth about $3.8 billion. Those planes are due to be delivered from 2009 to 2012. UPS said at the time that the Boeing order was not related to its review of its A380 order. [2] De Crozals said no date had been set for work to resume. "That's not defined yet," she said in a telephone interview. FedEx Corp. canceled its order for 10 A380s in November, saying Airbus's production problems were threatening its international expansion plans. It ordered 15 Boeing 777 freighters and options for 15 more in a deal valued at about U.S.$3.5 billion at list prices.[19] Airbus said Thursday it had frozen work on the A380 freighter program and will focus instead on making the plane`s delayed passenger versions.[10] The cargo carrier cancels the deal after the European jetmaker said it is delaying development of its A380 freighter.[9] The announcement added to the woes of the European consortium and appeared to end plans, for now, for a cargo version of the giant Airbus plane, which will be the world's biggest airliner.[3] The U.S. company was the sole remaining customer for the cargo version of Airbus' enormous new plane, whose troubled development has caused much turmoil in Europe.[3] EADS shares fell 4% to 23.62 euros. The highly unusual public spat ended a dire week for Airbus, which warned on Wednesday its survival was at stake as it cut jobs and put plants up for sale, triggering union walkouts. The leader of one of France's biggest unions said he feared there would be forced lay-offs in the Airbus restructuring plan, despite assurances from the company and the French government. [1] Shares of Airbus parent European Aeronautic Defence and Space Co. declined 99 cents, or 4 percent, to 23.63 euros in Paris. UPS will give Airbus a formal cancellation letter later this year, on the first date allowed under the agreement reached by the companies last week, Giuffre said in an interview. He declined to provide the date.[4] Private companies miss deadlines all the time, and there's often nothing that can be done about it. Of course, there are some political considerations, such as European nations forcing Airbus to have production facilities in their own countries, which partly led to a big wiring problem that has been a lion's share of the delay.[14] The U.S. express firms were among buyers angered by delays of up to two years in A380 deliveries, and had been the sole takers of a superfreighter version on which Airbus had pinned hopes of challenging the Boeing 747 in global airborne trade. [20] Toulouse, France-based Airbus is struggling to survive the crippling fallout from a two-year delay to the A380 and the weaker U.S. dollar, in which the planes are priced.[18] "We no longer are confident that Airbus can adhere to that schedule." UPS, which celebrates its 100th anniversary in 2007, ordered its first 10 A380 aircraft in January 2005 for use on U.S.-Asia routes.[17] There is a new development schedule for the freight version A380F, Hauger said, adding that the company believers there is a sales potential for 400 models of the A380 freight aircraft in the next 20 years.[21] UPS declined to comment on whether the company was likely to order other aircraft from Airbus or turn to Boeing Co. to fill the gap left by the cancellations.[6] Chris Lozier, an analyst for Morningstar Inc., said the cancellation is a crippling blow for the entire Airbus cargo program and a boon for Boeing. "It almost spells the demise for that cargo business because the alternative to the 380 is the 747," he said.[6] Mario Heinen, head of the freighter program, told Airbus workers today that the program was halted because of the financial demands and limited prospects for the freighter, the newspaper reported.[11] 'We no longer are confident that Airbus can adhere to that schedule.' Airbus said it respected the decision and remained confident of delivering the first passenger plane in October. [20] Airbus pushed deliveries to 2012 through 2013 from the original 2009 to 2012 schedule. The order had been in question since October, when Airbus first told UPS its initial delivery would be moved from the later part of 2009 to May 2010. "Investors will be happy that the worry about this issue is now over,'' said S&P;'s Corridore, who has a "buy'' rating on UPS shares. "To the extent this worry was hanging over the stock, it's gone now.''[4] UPS, the world's largest package-delivery company, said it was concerned that Airbus, a unit of EADS, could not fill the orders in a timely manner. It originally expected its first plane ordered to be delivered by 2009. [22] UPS said today it is confident it has the resources to continue expanding internationally, but it did not immediately announce any aircraft orders to make up for the A380 cancellation.[23] The decision will leave the European aircraft manufacturer with no firm orders for its jumbo freighter.[24] Airbus's decision yesterday to delay the freighter was intended to help stanch losses that may reach 4.8 billion euros by 2010.[4] The two-year delay in the A380 program has knocked $6.6 billion off profit forecasts for 2006-2010.[6] UPS is and remains a valuable and strong customer and business partner for Airbus," said a spokeswoman. "The A380 programme is progressing well and in line with the new timeline, with first delivery to the first customer in October 2007," she added.[25] Airbuss parent, European Aeronautic Defense Space, warned last month that A380 production problems and the continued weakness of the dollar against the euro would push the company to a significant financial loss for 2006. EADS is scheduled to report its full- year results next Friday.[2] German workers at European jet maker Airbus said Thursday they felt cheated by plans to slash jobs under a drastic restructuring bid, while officials touted their success in limiting the damage. [3] Airbus, the world's biggest maker of commercial aircraft, plans to cut 10,000 jobs over four years and sell or find partners for six factories due to A380-related costs.[11] UPS had planned to use the A380s to add freight capacity on U.S. -Asia routes where government restrictions make it difficult to add flights to support growth, it said. It will now use other aircraft, including Boeing Co.' s 747 and MD 11 models, on those routes, it said. [26] The A380 superjumbo project has faced many prominent delays, with wiring problems putting it two years behind schedule.[22] Analysts said the Airbus decision to reallocate personnel to other programs made perfect sense from an industrial point of view. [2] ''We respect the client's decision,'' Airbus spokeswoman Barbara Kracht said in response to the cancellation.[27] Howard Rubel of Jefferies and Co. said in a note to investors that the cancellation "effectively gives Boeing complete ownership of the very large freighter market for the foreseeable future." [28] UPS has built one of the largest airlines in the world in order to ensure reliable service to our customers, and we're confident we have the resources to continue doing so in the future."[29] 'Although we have an intra-store Web site in place to support store operations, we are reminding our employees how to access the external BestBuy.com Web site to ensure customers are receiving the best possible product price,' the company said in a statement. [10]
REFERENCES 1. UPS cancels Airbus order | BUSINESS | NEWS | tvnz.co.nz 2. UPS bails out of contract with Airbus - International Herald Tribune 3. US Freight Group Scraps Plane Orders in Further Blow to Airbus | Business | Deutsche Welle | 02.03.2007 4. Bloomberg.com: Europe 5. ABC News: Airbus Losing Remaining A380 Cargo Order 6. Philadelphia Inquirer | 03/03/2007 | UPS cancels Airbus deal for 10 cargo planes 7. UPS cancels superjumbo order - baltimoresun.com 8. People's Daily Online -- UPS begins talks with Boeing for possible order: report 9. HeraldNet: Airbus loses 10-jet UPS order 10. Business Roundup - Business 11. Bloomberg.com: Europe 12. UPS cancels A380 freighter in new blow for Airbus | Transportation | Reuters 13. Memphis Commercial Appeal - Memphis' Source for News and Information: Business 14. The Liberty Papers »Blog Archive » UPS Cancels Airbus A380 Order 15. KOTV.com - The News On 6 16. UPS canceling Airbus order - Business First of Louisville: 17. Xinhua - English 18. IOL: Airbus stops work on freight version of superjumbo 19. Airbus ends work on A380 freight version 20. The Peninsula On-line: Qatar's leading English Daily 21. Germany Puts Freight A380 on Ice | Chron.com - Houston Chronicle 22. UPS says to cancel order for 10 Airbus A380s | Transportation | Reuters 23. UPS to cancel orders for 10 Airbus A380 freighters: Business & Technology: The Seattle Times 24. FOXNews.com - UPS to Nix Order for 10 Airbus A380 Air Freighters - Business And Money | Business News | Financial News 25. Airbus says A380 plan still on track | Business | Reuters.co.uk 26. UPS Cancels Airbus Order For A380 Jets - Biz News - Playfuls.com - Business & World 27. HeraldNet: UPS cancels Airbus order 28. AP Wire | 03/03/2007 | Airbus losing remaining A380 cargo order 29. TEXT-UPS cancels Airbus A380 order | Reuters |
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