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Posted: Tuesday, 22 April 2008 1:59PM
Airbus Raising Jet Prices
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Airbus said Tuesday the ever-cheaper dollar and the high cost of metals are forcing it to raise jet prices.
The European plane maker announced increases of as much as $4 million to catalog prices, besides the 2.74 percent annual hike for 2007 already programmed. The extra charge is between 1-3% of the new catalog prices, effective May 1.
Compared with the 15% rise in the euro, that change is "marginal," according to ABN Amro analyst Sandy Morris.
"It's nice to see them putting up prices, it's nice to see them behaving commercially," he said. "Had they announced a 10 or 20% increase in list prices I would have sat up and thought: 'my word.' Instead what they have announced is quite marginal in the context of the headwind they face from the dollar."
The European plane maker, which sells its planes in dollars while many of its costs are in euros, says each 10-cent rise in the euro against the dollar costs the company 1 billion euros ($1.59 billion).
The 15-nation currency hit another record high Tuesday, briefly crossing $1.60.
To protect itself, Airbus' parent EADS is remodeling its business to shift more of its costs into dollars.
EADS North America announced Tuesday it is boosting its defense capabilities in the United States with the acquisition of California emergency response service company PlantCML for about $350 million.
Airbus said it is adding an extra $4 million to the price tag of its super jumbo A380 and its wide-bodied long-range plans.
As of next month, the A380 will be priced at $327.4 million and the A350-800XWB $208.7 million.
Airbus also is charging an extra $2 million for single-aisle aircraft such as the A320, listed at $76.9 million.
"We have to keep pace with the world market price developments and secure profitable deals," said John Leahy, Airbus' chief salesman.
The cost of metal products increased 6.5% and the price of manufactured products made in the euro region rose 5% last year, Airbus said.
Airlines, which are facing soaring fuel costs themselves, still have some wiggle room because they often negotiate substantial discounts off the catalog prices.
Morris said Airbus is limited in how much it can increase prices because it's competing with Boeing, whose business is based in dollars.
Boeing spokesman Peter Conte said the company hasn't yet released its price increase for the year, but plans to do so next month.
Conte said the Chicago-based company may face similar pressures as its European rival.
"Typically, we look at the rate of inflation for manufactured goods, so that is something that we are factoring in," he said.
The price increases come in what has long been expected to be a sluggish year for jet sales.
High oil prices and a global credit squeeze are hurting the airline industry and dampening demand for new planes. After a record 1,341 net orders in 2007, Airbus is counting on around 700 new orders this year, of which it has already taken 395.
Plane makers will be cushioned from the slowdown by bulging order books that will take several years to fill. Airbus said it has existing orders for more than 3,700 aircraft, representing six years of production.
The problem for both plane makers will be keeping up with production. Boeing recently again pushed back delivery of its much-hyped 787 jetliner, marking the third revision to the super jumbo jet's delivery schedule. |
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