Some THAI directors worried Saudi prince's offer for Airbus too low

[dogeatdog]

The singapore airlines fleet of 5 A340 are still in service plying the ultra long haul routes. I beleave this is the only airline still doing so??

 

scheduled for retirement very soon.  I was asked if I wanted to fly on the last flight, still thinking about it...

 

I actually didn't mind the ultra long flights, and it was fun to have the captain tell you "we're now overflying the north pole"

Thats a great shame. It is in fact a very good aircraft. [Quiet in the cheap seats/Boeing lovers]

But the market changes like it has for many good products. The history of aviation is littered with these stories.

[bobfish]

The A340-500/600 family was doomed to history as soon as the B777 was given ETOPS330 in 2011. [Airbus are going for ETOPS350 with the A350XWB.]

For the layperson, ETOPS, or Extended range Twin OPerationS, defines how many minutes you can plan to fly from a suitable airport on the remaining engine. 330 minutes: That's a long way over the pole....

There is another casual definition of ETOPS: Engines Turn Or Passengers Swim.

Maybe the Prince doesn't like water.

[Shaksey]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

Well, I'm no great fan of Airbus...

But things didn't go too well for the Thai Air Boeing 737 that blew up on the ground at Don Muang in 2001, or the TWA Flight 800 Boeing 747 that blew up in mid-air in 1996 off the U.S. East Coast -- both found to have been caused by the ignition of flammable fuel/air vapors in the fuel tanks, believed triggered by sparks or short circuits.

All aircraft have their design and manufacturing issues, some smaller and few, others greater and many. I haven't seen anything to prove to me that Airbuses overall are safer airplanes than Boeings.

Yes, not forgetting all the 737's that fell out of the sky and killed a lot of people because of the tail issues that Boeing tried to ignore.

Or the 737's that the roofs have torn off in flight because of Boeing not being able to drill rivet holes the right size or in correct alignment.

Both the above are huge scandals and damning indictments on the quality of Boeing aircraft and safety standards, expecially as the 737 is the most popular plane ever made - you'd think they'd have been able to get it right after 30+ years of making them which is when these aircraft were produced.

[JAG]

A private super luxury A340 500.....

Should come in handy if (when) he needs to make a quick exit from The Kingdom, pursued down the runway by the plebs waving machetes!

Could never happen, they said that about the Shah of Iran didn't they?

Sent from my Nexus 7 using Thaivisa Connect Thailand mobile app

Edited September 19, 2013 by JAG

[Sing_Sling]

I cannot believe that these inept cretins - as cretins are generally - are actually in charge of ANYTHING.

Depreciation is a valid factor

No other offers is a valid factor

So sell. Have an open process to avoid allegations of corruption, it works elsewhere.

Pathetic

Edited September 19, 2013 by Sing_Sling

[BarryM]

Erm....would the sale not go through a lot faster if the Prince offered each member of the board 'a little something in an envelope' for a rainy day ?

I imagine the delay is being caused by the size of the envelopes and the make up of the distribution list

[dogeatdog]

It's not really a thai problem here, more a worldwide problem compounded by many factors.

The effectiveness and capabilities within the Thai board of directors are proberbly no better or no worse than any others. Just some airlines have more effective confidentiality and PR management.

Its a little bit like,

You buy an aircraft for 10 million Usd.

To make this purchase you borrow 100% of the value.

Your 10 million loan is spread over 5 years interms of phisical payments and you plan for your aircraft to be in service for 10 year's before retirement.

You as a bussiness have structured bussiness model for the cost of your aircraft over its intended life (10 years) is now at a cost of 1million per annum.

You expect the aircraft to depreciate on its value by 20% in year 1, then 18% in year 2 and continue at that rate of 2% per year.

So follows, your 10 mil aircraft after the first year is now worth 8 mil. Then by the end of year 2 around 7.8mil... etc............By the end of year 5 (mid way through your planed life) its now worth just under 5 mil (The physical payment has finished and you own the aircraft but your structure is for a further 5 years)

By the end of your planed life for the aircraft (10 years) your project value of your aircraft (asset) is worth around 3.6 million. But its all yours!!!

Now back to the problems. At the 5 year point you own that aircraft outright, but now you have invested 10 million in your asset but your asset is only worth 5 million.

However you have 5 years of revenue from the operation. And plan to operate the aircraft for another 5 more years.

Then disaster strikes at the 5 year point. The costs over operating the aircraft have escalated due to fuel rises low pax intake. Simple profit and loss is now showing that this aircraft is now costing you money to operate. Shit happens to the best of plans sometimes.

You desperately try to fit the aircraft type in to other routes that wont cost you money. Even if it means just breaking even that would be cool.

But after many bussiness models you look at there is nothing that fits. So the sensible thing to do is to park the aircraft up. Not ideal as the aircraft will still cost money to maintain in storge but this is less than trying to operate it.

So the aircraft sits for 1 more year on the ground. You have paid 10 million for it have lost 1 years revenue already and it still owes you 4 more million on the books for the remaining 4 years left.

Markets are reviewed and best guess is it will not improve. So the board make the decision to sell.

Now your 6 years old aircraft has an estimated value is around 4.4 million (thats your book figure) however that probably does nolonger reflect the real market value. If you have marketing problems with that aircraft then the rest of the world has the same.

Yes true some airlines because of there size and money can make the odd aircraft work, but the majority cant.

Remember concorde?? Beautiful advanced etc.... But trying to make profit out of that type was almost impossible. The only thing that enabled concorde to remain that long in service was its charter business in the late 80's and in to the 90's. Commercially it was a disaster but with ba and airfrance, because of the prestige factor of concorde it remained in service. The A340 500 an't got that sex appeal.

So back to it you paid 10 mil got 5 years of revenue out of it owes you another 4 years revenue. In terms of depreciation you need at least 4.4 million to balance your books on just the asset and write off the next 4 years plus lost revenue for total of 5 years.

Ouch!!!!!!!! Thats going to hurt a lot on paper. But hey it needs to be done and you review your business and you dicide your business can swollow that loss but it will hurt your share price to do so but it is manageable.

But because of unforseen problems in the market fuel costs etc...your estimates are way off for your aircraft.

You are made an offer for 1 million for the aircraft the only offer you have and to be honest the only offer you may ever get.

So what do you do???

Just on the asset alone. The projected aircraft finance structure is for another 4 years so thats 4 million. Your estimated value was 4.4 million. Now some clown only offers 1 million. This really sucks and screws you.

You have 2 options really,

"A" make the sale and record the loss.

"B" park the aircraft for the next 4 years your book value will be zero because finance structure over the ten years it now ows you nothing now. Your estimated value of your asset after 10 years was 3.6 million. But that depreciation % can now be further increased due to the aircraft being stored for 5 years.

So on the books its written off. Thus paper wise even if you were to sale now it would always be 100 % profit. Sell it for $1 and $1 becomes100% profit. First time in 5 years its made a profit.

Plan "A" is cool if your big enough only! To have to record a write off of this size could send tremors through you're company and the bussiness in general.

Companies have filed for bankruptcy for thease sort of actions. Its called minimising your losses and protectect for your company.

So forget my stuid 10 million and put the real figures for an airbus in now you can see the scale.

If the board of directors are concerned then all should be concerned. Peoples jobs rely on these sorts of discussions.

This problem is the same world over. AA, BA, Singapore Airlines, Malaysian Airlines and so on.. ..

Good thing is the whole industry has changed since then and this problem will go away sooner or later.

[hansgruber]

They should paint the plane to resemble a blue diamond before he takes delivery.

[Zolt]

I'm not sure how it works for Thai, but I do know my company's tax auditors would throw a hissy fit if we tried to sell an asset one baht below book value. That offer is for less than a third of book value, so in theory Thai airways can't accept it in the first place.

[dogeatdog]

I'm not sure how it works for Thai, but I do know my company's tax auditors would throw a hissy fit if we tried to sell an asset one baht below book value. That offer is for less than a third of book value, so in theory Thai airways can't accept it in the first place.

Correct. That is the problem and the same over with ever airline (in this case)

Remember the "Enron" scandel???

The whole aviation after market bussiness was propped up by the same bussiness technique.

Basically if people arent familiar with this we are talking about pyramid sales.

One large company fabrics an aircraft part and makes a sale to a satellite company. We will call that company A (that it owns). So price to company A is "fabrication" price + 10% = 1x profit. Company A sells it on to company B for fab + 10% +10% = 1× prifit. Company B sells it to company C for fab +10% +10% +10%. And so on.......

But company A B & C are all owed by the OEM.

In the financial reports the OEM is doing record bussiness. They record in this case 3 sales from fabrication.

The problem is 3 sales yes...

But there still is only 1 item and they have only have sold between inter company's.

But for the share holder looking from outside. The OEM is doing great business. So buy buy buy shares, this is what classed as over inflating your business. You declared 3 sales, but technically you have not sold any and you still own the item but now at a super inflated price that no one will buy.

In these days because of this bussiness strategy liquidity was gold. Spend spend spend.

The Enon collapse caused major us investigation and that style of business went away of night.

Money got tight and still is today!!

Biggest problem in aviation is trying to be profitable.

And theres no money in aviation.

[dogeatdog]

From my previous post. Its a wiki price but we can use it.

New cost of an A340-500 was around $261.8 million.

So ok brave ones. Who wants to explain 50% loss of that? ???

[Shaksey]

Remember concorde?? Beautiful advanced etc.... But trying to make profit out of that type was almost impossible. The only thing that enabled concorde to remain that long in service was its charter business in the late 80's and in to the 90's. Commercially it was a disaster but with ba and airfrance, because of the prestige factor of concorde it remained in service. The A340 500 an't got that sex appeal.

Agree with most of what you said but Concorde made BA average yearly profits of £30-50 Million. Total Concorde costs for BA were around £1 Billion and total revenue was around £1.75 Billion over it's service life for BA. It was still profitable when it was retired, BA would liked to have kept it flying until around 2007-2010 I believe.

Air France was a different matter though, it was thoroughly mismanaged and mis-operated by them and this lead to it's demise.

Concorde was and remains a very misunderstood aircraft.

[Shaksey]

A private super luxury A340 500..... Should come in handy if (when) he needs to make a quick exit from The Kingdom, pursued down the runway by the plebs waving machetes! Could never happen, they said that about the Shah of Iran didn't they? Sent from my Nexus 7 using Thaivisa Connect Thailand mobile app

Yes, the House Of Saud will fall in the not too distant future and they will want big aircraft with long range and high payload to get the hell out of there with as much Gold and assets as they can carry.

[dogeatdog]

Remember concorde?? Beautiful advanced etc.... But trying to make profit out of that type was almost impossible. The only thing that enabled concorde to remain that long in service was its charter business in the late 80's and in to the 90's. Commercially it was a disaster but with ba and airfrance, because of the prestige factor of concorde it remained in service. The A340 500 an't got that sex appeal.

 

 

Agree with most of what you said but Concorde made BA average yearly profits of £30-50 Million. Total Concorde costs for BA were around £1 Billion and total revenue was around £1.75 Billion over it's service life for BA. It was still profitable when it was retired, BA would liked to have kept it flying until around 2007-2010 I believe. 

 

Air France was a different matter though, it was thoroughly mismanaged and mis-operated by them and this lead to it's demise.

 

Concorde was and remains a very misunderstood aircraft.

All very true. But those profits to which you reference, (Btw thanks for adding the figures, adds more depth to the conversation) are profits from the charter business.

Now i have to "wing" the conversation a little, memory not quite what it was. So appoligies if info not exact. But please research and correct accordingly.

As far as I can recall around end of the 80's BA was a little bit stumped as to how to keep an exspensive aircraft that was so high profile, in service without costing maybe the company.

BA could ill afford to retire the type as the PR alone would be costly.

Then basically they recieved a chistmas present. A holiday company Goodwin or Goodwood travell??? (Please correct)

wanted to charter concorde and offer ultra high end travell packages ulitlizing its speed and luxury.

Cut a long story short they accepted and that charter company begain to sell seats big time.

Remember end of the 80's early 90's. Yuppie time for sure and all the who's who wanted to travell.

If I remember some of these seats were selling £2500 to £3000 pp add the hotel etc... and bingo. That was big money back then.

This made alot of money for BA and the travel company. All the pictures you may find on the net of concorde in exotic destinations were from this time.

All was fine up intill the time noise abatement regulations came in around mid to late 90's and this basically prevented concorde from flying to many places.

In the end with such restrictions the travell company with started to withdraw and BA was basically left with revenue from LHR to JFK and that was it.

So yes it made a profit but never really on a regular scheduled revenue route, only charter.

As for the french....... well they have problems marketing everything.

Do you know the French have one of the oldest aviation companies in existance and it is huge even today. The the name is refered to an acronym S.N.E.C.M.A.

Many fingers in many pie but I bet no one (without looking it up) can tell me anything about that company.

So thats how good the french are at marketing.

Sorry a bit off the original topic but it is related to the story in the fact thay director's have to make unpopular choices at times for the saviour of ther rest. Including Thai Airways.

[Shaksey]

Remember concorde?? Beautiful advanced etc.... But trying to make profit out of that type was almost impossible. The only thing that enabled concorde to remain that long in service was its charter business in the late 80's and in to the 90's. Commercially it was a disaster but with ba and airfrance, because of the prestige factor of concorde it remained in service. The A340 500 an't got that sex appeal.

Agree with most of what you said but Concorde made BA average yearly profits of £30-50 Million. Total Concorde costs for BA were around £1 Billion and total revenue was around £1.75 Billion over it's service life for BA. It was still profitable when it was retired, BA would liked to have kept it flying until around 2007-2010 I believe.

Air France was a different matter though, it was thoroughly mismanaged and mis-operated by them and this lead to it's demise.

Concorde was and remains a very misunderstood aircraft.

All very true. But those profits to which you reference, (Btw thanks for adding the figures, adds more depth to the conversation) are profits from the charter business.

Now i have to "wing" the conversation a little, memory not quite what it was. So appoligies if info not exact. But please research and correct accordingly.

As far as I can recall around end of the 80's BA was a little bit stumped as to how to keep an exspensive aircraft that was so high profile, in service without costing maybe the company.

BA could ill afford to retire the type as the PR alone would be costly.

Then basically they recieved a chistmas present. A holiday company Goodwin or Goodwood travell??? (Please correct)

wanted to charter concorde and offer ultra high end travell packages ulitlizing its speed and luxury.

Cut a long story short they accepted and that charter company begain to sell seats big time.

Remember end of the 80's early 90's. Yuppie time for sure and all the who's who wanted to travell.

If I remember some of these seats were selling £2500 to £3000 pp add the hotel etc... and bingo. That was big money back then.

This made alot of money for BA and the travel company. All the pictures you may find on the net of concorde in exotic destinations were from this time.

All was fine up intill the time noise abatement regulations came in around mid to late 90's and this basically prevented concorde from flying to many places.

In the end with such restrictions the travell company with started to withdraw and BA was basically left with revenue from LHR to JFK and that was it.

So yes it made a profit but never really on a regular scheduled revenue route, only charter.

As for the french....... well they have problems marketing everything.

Do you know the French have one of the oldest aviation companies in existance and it is huge even today. The the name is refered to an acronym S.N.E.C.M.A.

Many fingers in many pie but I bet no one (without looking it up) can tell me anything about that company.

So thats how good the french are at marketing.

Sorry a bit off the original topic but it is related to the story in the fact thay director's have to make unpopular choices at times for the saviour of ther rest. Including Thai Airways.

Yes I know and remember Goodwood travel well, I travelled on Concorde through them on a round the Bay of Biscay trip. They were always very popular as well as the more exotic trips they organised. They certainly helped BA to turn a profit on it. The Goodwood travel flights ended after the accident when BA did not have the fleet availability to run these as well as run the daily schceduled BA1,2,3,4's and their seasonal bi weekly's I think to Barbados. There was talk of them starting up again just for the Bay Of Biscay trips on a more limited basis if BA had done the post-accident mods to the 2 remaining a/c they had that did not have them yet. The mods were part of a wider upgrade which would have given them all new cabins, toilets and galleys etc. BA were committed to the a/c as it still made them a profit on the daily scheduled flights post accident even without the Goodwood charters, albeit not as much.

Air France made nothing on it ever though and put a stop to it all and that was that.

I know SNECMA made the reheats and inlets for Concorde's Olympus 593's and I think they make the Ariane rocket engines....buy you're right, the average man on the street has never heard of them.

The decision to retire was certainly the most unpopular that BA's directors had to make in a long time, or more accurately accept without choice. It was a lot easier for the Air France directors to make as the accident had eroded public appreciation of Concorde rather a lot and there was also a lot going on behind the scenes that was not made public (another very very near accident).

[fish fingers]

terrible plane, the reason i stopped flying Thai on the LHR route. The angle they flew (why?)meant that getting out of your seat and walking to the toilet was either like climbing a very steep hill or sliding down one.

Edited September 19, 2013 by fish fingers

[Mosha]

Only the A340-200 had worse sale figures. They should be happy to be rid of one.

[Mosha]

Read elsewhere. Lufthansa will soon have A340s and 747s coming on the market as they will be replaced by 777x and A350-900 aircraft. Thai maybe better off not haggling too hard.

[Bagwan]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

Space shuttles Columbia and Challenger? Ford Edsel?

Who brain washed you? You seem to lack BS antibodies.

[Sing_Sling]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

Space shuttles Columbia and Challenger? Ford Edsel?

Who brain washed you? You seem to lack BS antibodies.

I thought Spare's comment was too ridiculous to comment on . . . but changed my mind.

(Not the 'ridiculous' part, rather the commenting part)

Edited September 20, 2013 by Sing_Sling

[eddie61]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

do they still make things?

[Sing_Sling]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

do they still make things?

Weapons

[robblok]

I'm not sure how it works for Thai, but I do know my company's tax auditors would throw a hissy fit if we tried to sell an asset one baht below book value. That offer is for less than a third of book value, so in theory Thai airways can't accept it in the first place.

Why its quite normal to depreciate a object linear. That is normal in the Netherlands and so the fiscal book value does not represent s the real value. Selling it at market price as a loss is normal depending on when the sale is.

Sent from my GT-I9300 using Thaivisa Connect Thailand mobile app

[MAJIC]

Just sell them,before they end up like this!

http://www.youtube.com/watch?v=cpYiNusK2mw

[dogeatdog]

Just sell them,before they end up like this!

 

 

 

 

Nice link thanks.

But the only difference in these aircraft and the 4 parked up by thai airways, is that the ones in the desert are probably better maintained. Certainly climate wise which is why there parked in the desert.

The just for info all those aircraft parked there are in storage and owe people a lot of money. Which is why they are parked there.

They are not scrap. Well for now anyway....

[dogeatdog]

I'm not sure how it works for Thai, but I do know my company's tax auditors would throw a hissy fit if we tried to sell an asset one baht below book value. That offer is for less than a third of book value, so in theory Thai airways can't accept it in the first place.

Why its quite normal to depreciate a object linear. That is normal in the Netherlands and so the fiscal book value does not represent s the real value. Selling it at market price as a loss is normal depending on when the sale is.

Sent from my GT-I9300 using Thaivisa Connect Thailand mobile app

Depending on when the sale is a big factor within that fisical year. Also depends on the rest of your bussiness and how you write down this loss.

Can thai airways afford to write it down?

The only thing that airframe is costing thai airway is parking and storage maintenance. Which at worse is two guys driving don muang once every 7 days for about 12 man hours ago.

As for the lease aircraft thats a different ball game altogether

[dogeatdog]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

 

Can't go wrong with anything made in the USA.

do they still make things?

No out of production long time ago.

[Mosha]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

do they still make things?

No out of production long time ago.

Only sold 34

[bobfish]

Just sell them,before they end up like this!

http://www.youtube.com/watch?v=cpYiNusK2mw

Nice link thanks.

But the only difference in these aircraft and the 4 parked up by thai airways, is that the ones in the desert are probably better maintained. Certainly climate wise which is why there parked in the desert.

The just for info all those aircraft parked there are in storage and owe people a lot of money. Which is why they are parked there.

They are not scrap. Well for now anyway....

Nice video.

Dogeatdog; not "all for storage because they owe people a lot money".... Some are sold on, refurbished and take to the skies again. Others simply stored by airlines during a downturn [think 2008 crisis and fuel spike] and then put back in service. Particularly true of freighter aircraft. Others are parted out and scrapped. That can of Chang you're drinking may have been doing Mach 0.8 a short time ago - drink fast!

An oldish [2008] CNN report here: http://edition.cnn.com/video/#/video/international/2008/10/12/quest.us.aircraft.graveyard.cnn

[rodroy]

Told you.

Should not have bought any Airbus.

Stick to Boeing, it is the right choice.

Can't go wrong with anything made in the USA.

Well, I'm no great fan of Airbus...

But things didn't go too well for the Thai Air Boeing 737 that blew up on the ground at Don Muang in 2001, or the TWA Flight 800 Boeing 747 that blew up in mid-air in 1996 off the U.S. East Coast -- both found to have been caused by the ignition of flammable fuel/air vapors in the fuel tanks, believed triggered by sparks or short circuits.

All aircraft have their design and manufacturing issues, some smaller and few, others greater and many. I haven't seen anything to prove to me that Airbuses overall are safer airplanes than Boeings.

Or the Airbuses which crashed into the Atlantic off Brazil, Or in Toulose , or Johanesburh, or Katmandu or Nagoya, or Medan, or JFK Airport or Birmingham Alabama!