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October 29, 2006
Putting The Future On The Line
Companies often base their future on one piece of new technology, new division, or new strategic direction. When things go well, they go down in history as a success. When things go bad, they simply become history.
Airbus is trying to figure out which of those two is happening to them right now.
While I generally hate to quote from Wikipedia, they have a good summation of the delivery problems plaguing Airbus over their new, $300m A380 aircraft right now:
Airbus announced the first delay in June 2005 and notified airlines that delivery would slip by six months, with Singapore Airlines receiving the first A380 in the last quarter of 2006, Qantas getting its first delivery in April 2007 and Emirates receiving aircraft before 2008. This reduced the number of planned deliveries by the end of 2009 from about 120 to 90-100.
On June 13, 2006 Airbus announced a second delay, with the delivery schedule undergoing an additional shift of six to seven months. Although the first delivery was still slated before the end of 2006, deliveries in 2007 would drop to only 9 aircraft, and deliveries by the end of 2009 would be cut to 70-80 aircraft. The announcement caused a 26% drop in the share price of Airbus's parent, EADS, and led to the departure of EADS CEO Noël Forgeard, Airbus CEO Gustav Humbert, and A380 program manager Charles Champion. In the wake of the new delay, Malaysia Airlines and ILFC were reported to be investigating the cancellation of their orders. Launch customers Singapore Airlines, Emirates and Qantas also were reported to be angered by the delays and expecting compensation. However, on July 21, 2006 Singapore Airlines ordered a further 9 A380s and stated that Airbus had "demonstrated to our satisfaction that the engineering design for the A380 is sound [and that] it has performed well in flight and certification tests and the delays in its delivery have been caused more by production, rather than technical, issues."
On October 3, 2006, upon completion of a review of the A380 program, the new CEO of Airbus, Christian Streiff, announced a third delay. The largest delay yet, it pushed the first delivery for Singapore Airlines to October 2007, to be followed by 13 deliveries in 2008, 25 in 2009, and the full production rate of 45 aircraft per year in 2010. The delay also increased the earnings shortfall projected by Airbus through 2010 to € 4.8 billion. The customer with the largest A380 order, Emirates, saw its first delivery pushed back to August 2008 and said as a result that it was considering scaling back its order, potentially in favour of the rival Boeing 747-8. Virgin Atlantic deferred its deliveries by four years, to 2013. Initial deliveries for the A380 freighter were delayed into 2010.
So, in practical terms, what does this mean for Airbus? Earlier this week, Virgin Atlantic, one of the initial buyers of the A380, decided to defer their purchase for four years.
Virgin Atlantic has said that they are deferring their order for the new Airbus A380 by four years. The company had ordered six of the new superjumbos for delivery in 2009 but they now want them delivered by 2013.
A380 plane has been a problem for Airbus as it has already suffered too many delays. Market had been speculating that Virgin would ditch the plane altogether but they have responded by stating that they still are confident about this plane.
Virgin added that they now want the company to prove the worth of this craft in commercial service and they would wait for a couple of years before putting its own A380s into operation. The company had originally wanted the deliveries of the plane in the current year itself.
Airbus is now aiming to deliver the first of the units to Singapore Airlines in October 2007.
Speculation had arisen that Virgin would pull their purchase order completely, but it seems as thought they’re willing to go into a “wait and see” period for the time being. With a development cost of over $11 billion, Airbus will be eager to sell aircraft and start getting a return on their investment. A delay on delivery, combined with debt from the cost of delivery, could allow competitors Boeing (passenger aircraft) and Antonov (cargo aircraft) to try and maneuver around Airbus, and chisel away at their market.
Only time will tell if the A380 will put Airbus in the history books as an amazing success, or an amazing failure.
Posted by PJ at 10:27 AM | Comments (0) | TrackBackOctober 27, 2006
Black Humor
"Three dollars a minute for technical assistance for my computer? If I'm going to spend that kind of F--KING money, I'd just as soon have phone sex."
Lewis Black on customer service.
Posted by PJ at 07:24 AM | Comments (0) | TrackBackOctober 24, 2006
American Politics: A Summary
CNN has been able to sum up American politics in a single paragraph (perhaps the best thing they've ever put on their website, by the way):
"Porn star gives up candidacy to be with sick mom"
LOS ANGELES, California (Reuters) -- Porn star Mary Carey said Monday she was dropping out of the California governor's race to be with her ailing mother, who has been hospitalized in Florida since jumping off a four-story building last month.Posted by PJ at 06:44 AM | Comments (0) | TrackBack
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October 23, 2006
It looks so small!
Here's a cool one. Photos of the space shuttle launch, taken from the International Space Station.
October 10, 2006
Rise of the Aerotropolis
(Cross-Posted from HedgeStop.com)
You’re a company. You’re looking to do business in the third world, because the labor is cheap. If you make some smart moves, you can lower your production costs and increase your profit, all at the same time. So what’s the problem? Usually, the thing getting in your way is the transportation system you’ll use to get the goods from the third world producers to the first world consumers.
In Rise of the Aerotropolis, Fast Company magazine examined the increasingly massive transportation systems (usually airports) that are being built in developing nations to make them more attractive to manufacturers. The article focuses on Professor John Kasarda at the Kenan-Flagler Business School at the University of North Carolina. Kasarda proposes that airports (massive airports at that) should be built, and cities developed around them. Here’s an excerpt:
In the relatively obscure world of urban planning, Kasarda, a professor at the University of North Carolina's Kenan-Flagler Business School, has made a name for himself over the past decade with his radical (some might say bone-chilling) vision of the future: Rather than banish airports to the edges of cities and then do our best to avoid them, he argues, we should move them to the center and build our cities around them. Kasarda's research has laid bare the invisible plexus of air-cargo networks that have shrunk the globe (much as railroads did for the American West). And his conclusions are expressible as a series of simple numbers: Over the past 30 years, Kasarda will tell you, global GDP has risen 154%, and the value of world trade has grown 355%. But the value of air cargo has climbed an astonishing 1,395%. Today, 40% of the total economic value of all goods produced in the world, barely comprising 1% of the total weight, is shipped by air (and that goes for more than 50% of total U.S. exports, which are valued at $554 billion). Raw materials and bulkier stuff still take the slow boats, but virtually everything we associate with our postindustrial, value-added economy--microelectronics, pharmaceuticals, medical devices, Louis Vuitton handbags, sushi-grade tuna--travels via jumbo jet. We may think of the 1960s as the jet-set era, but the supremacy of (soft) airpower has only now begun to reshape our ideas about how cities should look, how they should function. "They're now effectively a part of global production systems," Kasarda says, "and without that connectivity, you're out of the game."
Those statistics lay out much of the story line of the coming age of global competition, and it's a story being written by many of our most formidable current and future rivals. Hong Kong is premising its entire world-trade strategy on the primacy of the airport: Its Chek Lap Kok already has a mini-city stationed on a nearby island for its 45,000 workers, and SkyCity, a complex of office towers, convention centers, and hotels will soon be visible from its ticket counters. On the Chinese mainland, construction has begun on Beijing Capital Airport City, a $12 billion master-planned city of 400,000, and a massive airport expansion is coming to the city of Guangzhou, in the Pearl River Delta. Thirty-three miles to the south of Seoul, New Songdo City, billed as the most ambitious privately financed project in history, is taking shape in the Yellow Sea: The metropolis of 350,000 people, many of them expatriates living and working on-site for multinationals, is being built on a man-made peninsula the size of Boston. The estimated $20 billion cost is being underwritten by Korea's largest steel producer and by the real-estate developers from the U.S.-based Gale International.
What are the potential ramifications? Think about a total shift in population centers. Here’s a brief overview, from People & The Planet, outlining how the world lives relative to oceans:
Human populations have a tremendous impact on the quality of coastal and oceanic environments. A full two-thirds of the world's population - 4 billion people - live within 400 kilometres of a seacoast. Just over half the world's population - around 3.2 billion people - occupy a coastal strip 200 kilometres wide (120 miles), representing only 10 per cent of the earth's land surface. With this population distribution, increasing human numbers and mounting development pressures are taking a grim toll on coastal and near-shore resources.
One of the primary reasons for this geographic distribution has been transportation systems. (Remember, air travel is a relatively new thing. 50 years ago, if you wanted to get goods from Asia to Europe, you likely did it via a shipping container in the hold of a very large boat. Those boats aren’t going away soon, but air transportation will certainly take a bite out of them.) Currently, the 10 largest cities in the world are all located on a coast:
1. Tokyo, Japan – Coastal
2. Mexico City, Mexico – Inland
3. Mumbai, India – Coastal
4. Sáo Paulo, Brazil – Inland
5. New York City, USA – Coastal
6. Shanghai, China – Coastal
7. Lagos, Nigeria – Coastal
8. Los Angeles, USA – Coastal
9. Calcutta, India – Coastal
10. Buenos Aires, Argentina – Coastal
If John Kasarda is right, and we see the rise of massive airports located inland, that top ten list might shift dramatically over the next 100-200 years. We might also see the health of our oceans improve as fewer people are living directly on them.
How else might we see these Aerotropolis’ change the world?
Posted by PJ at 08:11 AM | Comments (0) | TrackBackOctober 04, 2006
Does Innovation Drive Profitable Growth?
(Cross-posted from HedgeStop.com)
An interesting study from Accenture on innovation, asking if effective innovation really drives profitable growth:
Does effective innovation drive profitable growth? The link is hard to prove, but the evidence is mounting. Let's define innovation as the implementation of new ideas in an attempt to create value. Innovation can be narrowly focused—for example, on the creation of appealing new products or services—or it can tackle the big picture, as in the crafting of effective new business models.
Over the past decade, research in different industries has shown that effective innovation—at least to the extent it can be measured—is correlated with better total returns to shareholders and thus to high performance; similarly, Accenture's research into the components of high-performance business confirms that innovation is critical to an organization's ability to continually renew itself. Consider the following:
1. Spending on research and development, which is not the same as innovation, but is measurable, returns 25 to 30 percent.
2. Companies that own widely cited patents and that are quick to commercialize those patents outperform stock market averages by 1000 percent over 10 years. In seven industries that generate large numbers of patents, a patent cited 14 times by other patents is worth 100 times more, on average, than a patent cited only 8 times.
3. Each new product introduction announced in the Wall Street Journal between 1975 and 1984 resulted in an average return to shareholders of $115.7 million beyond the industry norm (in 2004 dollars).
Executives find these tidbits of research provocative, but not terribly useful. To see whether their own innovations are translating into corporate success, executives need measures they can trust and track.
The executive summary can be found here. The full report can be found here. Information on the author, Dr. Jane Linder, can be found here.
Posted by PJ at 11:07 AM | Comments (0) | TrackBackOctober 03, 2006
"We've been hit."
In a corporate jet flying 37,000 feet above the Amazon rainforest, I heard the three words I will never forget: "We’ve been hit."
Posted by PJ at 08:18 AM | Comments (0) | TrackBackOctober 02, 2006
On a Wing and a Prayer...
An Israeli military training mission gone bad. A mid-air collision during a simulated dogfight. An A-4 Skyhawk goes down, and an F-15 Eagle decides to try and make it the 10 miles back to base. When the pilot lands, he finds out that he has definitively answered the question, Can this aircraft fly on just one wing?
Posted by PJ at 11:12 AM | Comments (0) | TrackBack
