1
1
The A380 Program
Speaker: Mario HeinenA380 / Senior Vice-president
Global Investor Forum19th & 20th October 2006
2
3
The Company disclaims any intention or obligation to update these forward-looking statements. Consequently the Company isnot responsible for any consequences from using any of the below statements.
Certain of the statements contained in this document are not historical facts but rather are statements of future expectations and otherforward-looking statements that are based on management‘s beliefs. These statements reflect the Company‘s views and assumptionsas of the date of the statements and involve known and unknown risk and uncertainties that could cause actual results, performance orevents to differ materially from those expressed or implied in such statements.
When used in this document, words such as “anticipate”, “believe”, “estimate”, “expect”, “may”, “intend”, “plan to” and “project” areintended to identify forward-looking statements. Such forward-looking statements include, without limitation, projections forimprovements in process and operations, new business opportunities, revenues and revenues growth, operating margin growth, cashflow, deliveries, launches, compliance with delivery schedules, performance against Company targets, new products, current andfuture markets for the Company products and other trend projections.
This forward looking information is based upon a number of assumptions including without limitation:· Assumption regarding demand· Current and future markets for the Company‘s products and services· Internal performance including the ability to successfully integrate EADS‘ activities to control costs and maintain quality· Customer financing· Customer, supplier and subcontractor performance or contract negotiations· Favourable outcomes of certain pending sales campaigns
Forward looking statements are subject to uncertainty and actual future results and trends may differ materially depending on varietyof factors including without limitation:· General economic and labour conditions, including in particular economic conditions in Europe and North America,· Legal, financial and governmental risk related to international transactions· The Cyclical nature of some of the Company‘s businesses· Volatility of the market for certain products and services· Product performance risks· Collective bargaining labour disputes· Factors that result in significant and prolonged disruption to air travel world-wide· The outcome of political and legal processes, including uncertainty regarding government funding of certain programs· Consolidation among competitors in the aerospace industry· The cost of developing, and the commercial success of new products· Exchange rate and interest rate spread fluctuations between the Euro and the U.S. dollar and other currencies· Legal proceeding and other economic, political and technological risk and uncertainties
Additional information regarding these factors is contained in the Company‘s
Safe Harbor Statement
“registration document” dated 26th April 2006.
4
Achievements and 2006 major milestones
– Static tests completed, Fatigue test specimen at 15.790 flight cycles.All test benches in operation
– Both Rolls Royce and Engine Alliance engines certified
– March 26th 2006: MSN 007 Successful Emergency Cabin Evacuation Trial 853 passengers and 20 crew members in 78 seconds!
– 7th May: First Customer Aircraft flown to Hamburg
– Early Long Range flights successfully completed with MSN 2
– Main airports are prepared to receive the A380
2006: Flight testing will be finalised by end of Oct, followed by Type Board Meeting Mid November, and
CERTIFICATION MID DECEMBER
3
5EF Wing after test start September 2005
A380 Major Structural Testing
Rear End Test/max VTP bending testJan 05
ES Ultimate Wing Bending test February 2006
Fatigue Test Specimen (EF)Test Purpose: 2.5 times Aircraft life=47500FC
• Oct06: 18,559 FC and C-Inspection• at TC: more than 1 DSG
Major Static Test (ES)All TC tests and all Residual Strength tests
completed
Rear End Test (RET)All tests completed for TCDT testing stopped for
Inspection at 3800 FC
6
Successful Evacuation Test26th March 2006, Hamburg
•• 873 occupants873 occupants853 853 passengerspassengers: 538 MD + 315 UD: 538 MD + 315 UD18 18 cabin crewscabin crews and 2 flight and 2 flight crew members crew members
•• EvacuationEvacuationSemi Semi darknessdarkness50% of 50% of doors inoperativedoors inoperative
In 78 SecondsIn 78 Seconds…………..
•• MSN 007 MSN 007 EvacuationEvacuation Test Test witnessedwitnessed by by Airworthiness AuthoritiesAirworthiness Authorities(EASA (EASA withwith FAA participation)FAA participation)
EASA and FAA approved 853 as the maximumpassenger seating capacity for the A380-800.
EASA and FAA approved 853 as the maximumEASA and FAA approved 853 as the maximumpassenger seating capacity for the A380passenger seating capacity for the A380--800.800.
4
7
MSN002: Early Long Flights (ELF)4 – 8 September 20064 ELF 7 hours
10 hours12 hours (overnight)15 hours
474 passengers on each flightpassengers on each flight
Full cabin serviceFull cabin serviceFacility assessmentsFacility assessmentsQuestionnaires & interviews“Real Life’ systems check
The quietest, roomiest, lightest cabin in the skyThe quietest, roomiest, lightest cabin in the sky
8
A380 flight test status A380 flight test status –– October 16th October 16th
MSN 001 First Flight: 27 April 05
Hours flown: 1172 Take-offs: 968
MSN 004First Flight: 18 Oct 05
Hours flown: 757Take-offs: 515
MSN 002First Flight: 03 Nov 05
Hours flown: 230Take-offs: 59
5 flight test Aircraft, 2247 hours, 1564 take5 flight test Aircraft, 2247 hours, 1564 take--offsoffsAs at 22As at 22ndnd September 2006September 2006
MSN 009First Flight: 24 Aug 06
Hours flown: 81 Take-offs: 19
MSN 007(In Hamburg for cabin fit)First Flight: 19th Feb 06
Hours flown: 7Take-offs: 3
5
9
ToulouseToulouse Le Le BourgetBourget Le Le BourgetBourget
Le Le BourgetBourget TarbesTarbes FrankfurtFrankfurt
SingaporeSingapore Kuala LumpurKuala Lumpur Kuala LumpurKuala Lumpur
BrisbaneBrisbane SydneySydney MelbourneMelbourne SydneySydney DubaiDubaiDubaiDubai
DubaiDubai MedellinMedellin IqaluitIqaluit PointePointe--àà--PitrePitre SingaporeSingapore
London LHRLondon LHRSingaporeSingapore London LHRLondon LHR London LHRLondon LHR BerlinBerlin
ToulouseToulouse ToulouseToulouse
FrankfurtFrankfurt FrankfurtFrankfurt
FrankfurtFrankfurt SingaporeSingapore
10
A380: What Airline Pilots Say
“Compared to the A320, you do not feel the difference in flight. Although much bigger than the A320, the A380 is easy to taxi.”
“I have been flying all the fly-by-wire types of Airbus. It’s the same situation here with the A380: it’s very easy to fly these aircraft because handling characteristics are extremely similar and it’s a real family.”
“The aircraft is much more responsive than anticipated, it doesnot feel like a big aircraft. Cockpit innovation and new technologies are combined well with Airbus cockpit philosophy. Coming from the A330, you feel at home and the transition is very easy.”
“The aircraft, for its size, is extremely manoeuvrable: very responsive, easy to fly, very stable. Actually, I would like to take this plane home and start flying with it immediately.”
“Please do not change the handling qualities of this a/c!”
“The cockpit and flying characteristics are similar, so it is easy for somebody who has flown an Airbus before to fly this airplane. I thought that because the A380 is bigger there would be a lot more lag in the controls, but to my pleasant surprise it is very lively and very stable - it’s a lovely plane.”
“The aircraft is very stable but also very responsive; more like flying an A320 than an A340.”
6
11
– Huge step in technology successfully implemented
– Outstanding Handling Qualities confirmed by airline pilots
– Excellent take off and landing performance
– Noise levels better than commitments
– Emissions significant lower than current limits
– Cabin comfort (internal noise and vibrations)
· setting new industry standards
· A380 cockpit the quietest in the sky
– Proven airport compatibility
– Turn Around Time comparable to 747
A380 is technically an excellent aircraft
12
Industrial ramp up problems over-shadow technical achievements:
– Lower level of section completion versus May 2005 Planning
– Related out of sequence work in FAL has led to delays on “Electrical Power On” – a major milestone in the build process
– Following Jun06 Communication to all customers a thorough “bottom up” and “top down” review completed by end of Sept06
A380 Industrial Situation : The Facts
7
13
A380 Industrial Situation: Findings
A crucial element, the 3D Digital Mock-up Unit (DMU) used for the installation of the physical routing and packaging of electrical harnesses is not at the required level of robustness and finish for the fuselage sections 13-18 unlike those of the other fuselage sections (11-12 & 15-21) due to:
– to continuous changes of functionality and geometry
– lack of strict control and management of changes
– the combination of the complexity, the amount of the electrical systems and equipment and the specificities of the A380 space allocationconstraints
– inefficiencies of the processes and tools used
– higher degree of offered customisation compared to previous programs
14
Complexity of A380 Electrics
Define electrical function
Group wires to harnesses
Place harness in DMU
Install in aircraft
1,150 electrical functions
98, 000 wires with 40,000 connectors
508,000 items in the DMU
530 km wires in every A380!
8
15Main Electric/Electronic Bay
The Volume Factor - Nose Fuselage S11-12
Main electronic Bay below flight deck
Emergency Electronic Bay
• Number of wires 100 000 • 530 km of wires bundled into 350 km of cables
16
Electrical Systems Installation
Forward fuselage
Electrical Installation
9
17Install wire bundles
Design of Electrical Harness InstallationDefine electrical function
Based on final routing model:- Launch manufacturing of
physical wire bundles - Structural support parts
installation- Wiring installation drawings
Changes from development process and customisation
Continuously update the
digital model for electrical
installation
Allocate wires to bundles
Define geometry of harnesses in DMU. Place harnesses into digital aircraft & cabin model.Design routing
Not brought to latest
definition
- Number of changes,- Insufficient Tool
Performance - Early Learning Curve
Installation Conflicts
18
A380 Industrial Situation: The Consequences
– Inefficient tools and processes lead to a high number of time consuming changes
– Creating Out of sequence work and Increase in outstanding work
– Imposing slow down of industrial flow to increase level of completion
– Present process clearly limits ramp up capability
– Additional delay of 1 year
Quality and Safety are in no way compromised
10
19
Finalization of electrical
installation is the key in order
to start the station properly
Station 37Station 37HTP Preparation
Station 41/40Station 41/40Structural Station
Station 45Station 45Wing Movables Instal.
Station 31/30Station 31/30Structural CompletionEqt & Powerplant install.SystemsTesting
Station 18Station 18Outside Tests
Station 15Station 15Production Flights
Station 23Station 23A/C Handling
& Defueling
Station 20Station 20Aircraft
Furnishing
Station 12Station 12Aircraft Painting
Station 11Station 11CabinProduction Flights
Station 07Station 07Customer Delivery
(EUR & M/E)
Station 14Station 14A/C Preparation
Ferr
y Fl
ight
Ferr
y Fl
ight
TLS
TLS
HA
MH
AM
Ferry FlightFerry FlightHAM HAM TTLSLS
Station 36Station 36VTP Preparation
Station 13Station 13Customer Delivery
(Rest of World)
Stations 50/51/52/53 Stations 50/51/52/53 Fus. MCA
Preparation
Stations 16 Stations 16 VTP Painting Recovery points for harness integration
Final Assembly Line – The Bottle Neck
4 aircraft
13 aircraft
Harness installations start here
20
A380 Industrial Situation : Decisions– Tools & Processes successfully used and proven on other sections will
be applied on front and rear fuselage
– Dedicated trans-national team in Toulouse will re-design and adapt the new DMU tool to sections 13 and 18
This will provide the solid and robust basis for a proper ramping up of series production.
– New Process oriented Organisation Structure implemented in Hamburg:- Transversal integration fuselages-cabin-systems- Integrated teams collocated at aircraft- International electric design plateau
– New Program Organisation structure with dedicated skills and resources
11
21
New Organisation : Airbus-Germany
CFSIWave 1
Cabin & CargoWave 1
FAF Section Engineering
Wave 1
ElectricWave 1
SystemsWave 1
Functional
Integration
Geometrical
Integration
Zone 1-Zone n
EYV LNL
CFSIWave 2
Cabin & CargoWave 2
FAF Section Engineering
Wave 2
ElectricWave 2
SystemsWave 2
Customer
Definition
Cabin Architect
Realizer
Freighter
Quality
BFE / SFE Mngt.
Installation
3D/2D
Harnesses &
Kits
Change
Control
HoE
Primary
Structure
Longitudinal
Structure
Mech.Sys.Inst.
Secondary
Structure
MAP
FAL 1
ElectricLNAL
U. Fresenborg
CFS IntegratorLNAI
H. Warnecke (i.PU)
Systems
A. Janke (i. PU)
Cabin & CargoBCN
S. Scholz
BC
Progr. Mngt.Wave 2LNA2
G. Falk
Progr. Mngt.Wave 1LNA1
H. Lütjens
LNE
CE Wave 1
CEWave 2
Chief EngineerLNER
H. Warnecke
Chief
Engineering
MAP Arbitration
A380 HAM PlantLNAM
G. Mecke
TBD
A380 Programme GermanyLNA
R. Fuchs
ES
FAF Sec.E.LNAE
K. Kalmer
HRLNAH
J. Kutzim (i. PU)
PLNAP
R. Hoppe
FLNAFN.N.
QLNAQ
H.G. Schrader
Processes & ToolsLNAA
A. Carcasses (i. PU)
FAL1OSW
FAL2OSW
St.-O.-Ltg.TLS
MCA
SNZOSW
= Reinforcement from other Programmes
22
The Revised Programme Ramp up
•This has led to the following programme:
New Planning June062006 - 0 22007 - 1 252008 - 13 372009 - 25 452010 - 45 50
12
23
Thank youThank you
1
1
A380 financial update
Andreas SperlAirbus Chief Financial Officer
Global Investor Forum19th & 20th October 2006
2
2
3
The Company disclaims any intention or obligation to update these forward-looking statements. Consequently the Company isnot responsible for any consequences from using any of the below statements.
Certain of the statements contained in this document are not historical facts but rather are statements of future expectations and otherforward-looking statements that are based on management‘s beliefs. These statements reflect the Company‘s views and assumptionsas of the date of the statements and involve known and unknown risk and uncertainties that could cause actual results, performance orevents to differ materially from those expressed or implied in such statements.
When used in this document, words such as “anticipate”, “believe”, “estimate”, “expect”, “may”, “intend”, “plan to” and “project” areintended to identify forward-looking statements. Such forward-looking statements include, without limitation, projections forimprovements in process and operations, new business opportunities, revenues and revenues growth, operating margin growth, cashflow, deliveries, launches, compliance with delivery schedules, performance against Company targets, new products, current andfuture markets for the Company products and other trend projections.
This forward looking information is based upon a number of assumptions including without limitation:· Assumption regarding demand· Current and future markets for the Company‘s products and services· Internal performance including the ability to successfully integrate EADS‘ activities to control costs and maintain quality· Customer financing· Customer, supplier and subcontractor performance or contract negotiations· Favourable outcomes of certain pending sales campaigns
Forward looking statements are subject to uncertainty and actual future results and trends may differ materially depending on varietyof factors including without limitation:· General economic and labour conditions, including in particular economic conditions in Europe and North America,· Legal, financial and governmental risk related to international transactions· The Cyclical nature of some of the Company‘s businesses· Volatility of the market for certain products and services· Product performance risks· Collective bargaining labour disputes· Factors that result in significant and prolonged disruption to air travel world-wide· The outcome of political and legal processes, including uncertainty regarding government funding of certain programs· Consolidation among competitors in the aerospace industry· The cost of developing, and the commercial success of new products· Exchange rate and interest rate spread fluctuations between the Euro and the U.S. dollar and other currencies· Legal proceeding and other economic, political and technological risk and uncertainties
Additional information regarding these factors is contained in the Company‘s
Safe Harbor Statement
“registration document” dated 26th April 2006.
4
A380 backlog & market remain robust• 159 firm orders & no cancellations as of today• Strong market demand for long term capacity • Competitive economics compared with competition,
reinforced by high fuel prices
A380 will be a very efficient aircraft• Product performances confirmed through flight tests• Certification on track for end 2006
A380 profitability • Long term profitability to be viewed over full programme life• Ramp-up disruptions will mainly impact next 5 years
A380 Financial UpdateIntroduction
3
5
• 84 aircraft to be delivered for period 2006 to 2010 vs 159 deliveries planned in the original business plan
75 deliveries postponed beyond 2010
• Huge negative impact on EBIT & Cash from 2006 to 2010
A380 New Deliveries Profile
2
37
50
1
13
45
25
45
25
0
10
20
30
40
50
60
2006 2007 2008 2009 2010
OriginalBusiness PlanSept.2006
6
Overall shortfall of €4.8bn for the years 2006 to 2010 compared to the original Business Plan
• Delivery volume shortfall: €2.0bn postponed beyond 2010
• Gross margin deterioration on 2006/2010 deliveries: €2.8bnThis amount assumes:
A large deterioration of unit costs during the ramp-up phaseContractual obligations with our customers
• Provisions for A380 loss-making contracts booked in 2006
Mitigation measures undertaken through power8
EBIT Impact of A380 Delivery Delays
4
7
2006 EBIT and Hedging A380 negative impact of €1.1bn on 2006 Airbus EBIT:• Loss making contracts : - €0.6bn current estimate
Unit cost deterioration + liquidated damages allocated to contracts €/$ Assumption ~ 1.3
• Inefficiency on early aircraft : - €0.5bn Out of sequence workModifications to electrical harnessesLearning curve postponed to wave 2 aircraft
Hedging:• Hedging instruments maturing in 2007/2008 will be used for $
exposure on other Programmes ( SA ramp-up )• New hedges are still implemented according to EADS/AIRBUS
hedging policy for 2009 and beyond
8
Cash Impact of A380 Delivery DelaysOverall shortfall of €6.3bn for the years 2006 to 2010
compared to the original business plan
• Gross margin shortfall: €4.8bn
• Net working capital deterioration: €1.5bnThis amount assumes:– postponement of pre-delivery payments linked with delivery delays– working capital requirements linked to additional aircraft production
lead-time
• Peak A380 negative net working capital in 2009 : - €3bn
Mitigation measures undertaken through Power8
5
9
0
0,5
1
1,5
2
2,5
2001 2002 2003 2004 2005 e2006 e2007 e2008
A380 R&D + Capex in € bn
A380 R&D and Capex Ramp-down confirmed from 2006 onwards
Note: intangible assets (IAS 38) included for €0.7bn
R&D / Capex (Airbus Share)€11.7bn (cec)
(all variants at completion)
completedby end 2006
> 80%
• > 80% of (R&D + Capex) completed by end 2006 vs 60% end 2004
• Additional R&D effort in 2006/07 mainly on electrical design : €0.2bn/0.3bn
• Ramp-down closely monitored for maturity at Entry In Service in 2007
10
A380 Business Case Sensitivity Analysis
2005 updated Business Case:• IRR outlook: 19%• Breakeven point: 270 a/c• Expected deliveries: 751 a/c• Long term €/$ rate : 1.12
2006 updated Business Case: • IRR outlook : 13%• Breakeven outlook: 420 a/c• Expected deliveries: 751 a/c• Long term €/$ rate : 1.12 ( outlook )
The main parameters of A380 Business Case have changed significantly
Strong deterioration of IRR reflects the impact of delayed deliveries (-4%) and cost overruns linked to major disruptions in the ramp-up phase (-2%)
With starting reference 2007 notional A380 breakeven is 150 a/c
6
11
Conclusion
• A380 delays have a significant impact on 2006/2010 profitability
• Measures undertaken through Power8 to mitigate financial impacts
But:• More than 80% of (A380 R&D + Capex) will be spent at end of 2006
• The A380 program remains strongly profitable beyond 2010
• A380 will generate €9bn NPV from 2007 till 2021
• A380 customers are still on board and new customers will come
Key objectives:Protect A380 Backlog – All customers treated in a fair manner
Restore confidence with our customers
12
THANK
YOU
Top Related