AIRBUS DOES A U TURN AND ADMITS THAT IT NEEDS TO HEDGE FURTHER AGAINST THE DOLLAR, WHILE DELTA INVESTS IN AEROMEXICO

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By TESTCustomwebLP TESTCustomwebLP August 12, 2011 08:32

AIRBUS DOES A U TURN AND ADMITS THAT IT NEEDS TO HEDGE FURTHER AGAINST THE DOLLAR, WHILE DELTA INVESTS IN AEROMEXICO

“What has sovereign debt got to do with Airbus?” – That is what a source at Airbus told us in reply to a question on the future problems of currency fluctuation and funding back in April 2011. Of course at the time we knew that was a very silly answer, now it seems the slow off the mark guys at Airbus/EADS have seen the light and realized that having a cost base in Euro and a revenue base in US dollars could well be a problem for their post massive US dollar hedge existence, as now they are in talks with customers to get paid in Euros and not dollars. We reported that they would take this action in April 2011 as the writing was on the wall then with the Euro climbing 4% (now more like 6%) against the US dollar, so we have to ask why it has taken this long to put the obvious into action and hedge against exchange losses from the US dollar once again? It is likely that the Air France order will paid in Euros but only very few sales have been made in Euros to date. The new Airbus policy could well see many airlines in the EMEA regions gain over the next few months and it could make Airbus aircraft far more attractive to some, although it must be remembered that Airbus would not be expecting the likes of Delta to pay in anything other than US dollars, which means that this program is selective and thus will not be large scale.

But Airbus/EADS has massive exposure to the dollar in the region of $21bn and so any action not implemented on a long-term basis that includes manufacturing costs will be too small to have a positive impact. Now we understand that suppliers in Euro regions are being asked to shift US dollar zones or other low cost regions. While this is good for EADS/Airbus it will not go down well at all with EU governments so we can expect some poor press in Europe as this story develops.

Meanwhile…….. Delta will invest $65 million in Aeromexico in exchange for ordinary shares. There will now be network-wide codesharing for all Delta and Aeromexico flights between the US and Mexico, expanded codeshare flights within the carriers’ domestic networks and to international destinations, and co-located airport facilities. The agreement will see an extension of the existing MRO agreement between the two that will see a new facility opening in the third quarter of 2013: “The MRO agreement will represent significant savings for our maintenance group while continuing the extremely high quality work we receive from Aeromexico.

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By TESTCustomwebLP TESTCustomwebLP August 12, 2011 08:32
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